The U.S.-Mexico relationship is extremely deep and complex. Proximity and an extensive shared border have encouraged strong trade and security ties between the two countries. Energy is arguably the most important component of their trade relationship, a fact that will likely remain unchanged in the face of the recent liberalization of Mexico’s energy sector. Meanwhile, the country’s cartels and organized crime groups continue to steal large amounts of oil to fund criminal enterprises. This threat has interfered with the development of shale gas in some parts of Mexico.
In 2013, Mexico ranked among the world’s top 10 oil producers, accounting for 2.9 million barrels of oil per day.1 The country also has tremendous energy potential: In 2014, Oil and Gas Journal estimated that Mexico had proven reserves of approximately 10 billion barrels of oil and 17 trillion cubic feet of natural gas,2 ranking it 18th in the world according to the EIA.3 Most of these reserves are heavy and located offshore, making the extraction and refining processes more difficult relative to onshore fields that produce lighter crude.4 Oil accounts for a significant portion of the Mexican government’s revenue stream; in 2013, the oil industry made up 32% of the government’s income.5
Though Mexico remains a significant contributor to the global supply of oil, its production has consistently declined over the past decade. While sizeable enough to secure Mexico’s status as a major oil producer, the country’s current production level of 2.9 million barrels per day represents a steep drop from the 3.8 million barrels per day produced in 2005.6 Declining production has been the direct result of insufficient operational capabilities, a lack of investment and the maturation of the Cantarell Field, Mexico’s most prominent hydrocarbon formation in operation.7 Decreasing output has prompted Mexico to reverse its 75-year-old ban on foreign ownership of hydrocarbon assets or foreign operation of production activities.
Mexico is struggling to control drug-trafficking cartels and their associated organized crime groups, which are responsible for tremendous levels of violence in the country. Analysts estimate that cartel violence led to the deaths of 70,000 people between December 2006 and December 2013. Aside from drug-related killings, the cartels have branched out into other criminal activities, including human trafficking, kidnapping, armed robbery and extortion. The United States and Mexico have a particularly robust relationship when it comes to security cooperation, given their 2,000-mile shared border and $500 billion annual trade, as well as the United States’ role as the primary market for drugs flowing through Mexico.8
Petroleos Mexicanos, Mexico’s state-owned oil company, has reported that the country’s drug cartels have stolen about $1.15 billion worth of oil through illegal syphoning. The Mexican government has made an effort to stop the theft of oil, but it has had difficulty catching the culprits. Concerns about oil theft and security threats have slowed the development of shale gas in areas like Tamaulipas state.9