Many will say that the chorus is growing… that it’s only a matter of time.
U.S. Representative Randy Weber puts it this way: “Let’s use all we can and sell the rest… A rising tide raises all ships.”
He’s talking about U.S. crude oil and exports. And personally, I think Mr. Weber and the mainstream media are completely wrong on this.
Now, I’m not saying it’ll never happen… rather, I think it’s already happening.
Even though most people don’t have a clue — many investors included — U.S. oil exports will move to the forefront of the news over the next few months… and I’m not talking about condensate or refined petroleum (although, that’s happening too).
Mexico Needs Our Oil
For 75 years, Mexico’s oil production was firmly in the grips of Pemex, the state-run oil company.
As happens without competition, Pemex slowly but surely underperformed its potential as an oil producer…
As you can see, Mexico has lost nearly 1 million barrels per day of its massive proved reserves in the last decade alone.
But in August, Mexican president Enrique Peña Nieto changed things…
First, he enacted new laws to allow foreign (a.k.a. U.S.) competition in northern Mexico’s oil-rich shale regions. Thus, the Boquillas — a shale field that is part of the much larger Burgos Basin — will soon be tapped by American companies.
Second, and more importantly, he’s quietly started importing crude oil from the United States.
With these two simple changes, he’s created vast investment opportunities for those of you interested in buying American drillers…
Crude, Not Condensate
“Condensate is not necessarily what Mexico needs. It needs crude,” says José Manuel Carrera, an executive for Pemex’s oil trading arm.
Although the U.S. has been publicly exporting condensate for the last couple of months, that’s not what’s going to Mexico.
Mexico needs light crude oil — the likes of which is found in shale plays — in order to boost output at its refineries. And since U.S. oil is much cheaper than Brent crude, Mexican refineries could use the extra savings to pad their bottom line.
Even though Mexico is the world’s 10th largest oil producer, it still imports half of its refined gasoline because its six refineries just can’t keep up. By cutting its crude with cheaper light oil from the U.S., its refineries can boost their output.
According to Carrera, imports may range from 35,000 to 70,000 barrels per day, and they mark a huge shift in the American energy space.
In July, Mexico exported 744,000 barrels a day to the United States. That figure represents 73% of the country’s total exports. But in the face of ever-growing U.S. production, Mexico needs to become more self-reliant.
Here’s why…
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Preparing for a Flood of Oil
Over the last decade, Mexican oil exports to the U.S. fell by a staggering 44%, and now that U.S. companies are allowed to venture into Mexican shale, big changes are on the horizon.
Drillers from the Eagle Ford — which has a similar geologic composition to the Boquillas — will see most of the action in Mexico’s shale.
On top of that, you can bet that most of the exports to Mexico are coming right from the Eagle Ford. Its proximity to Mexican refineries makes it the cheapest place for Pemex to buy oil…
And since the entire formation produces nearly 1.6 million barrels per day, there shouldn’t be any problems fulfilling those orders of 70,000 barrels per day.
As you can see above, McMullen County, Texas has been a hot spot for oil and gas drilling in the Eagle Ford over last few years.
And for investors, McMullen County is the best place to find undervalued companies harvesting thousands of barrels of oil every day.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
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