| Summary: | The basic design of the Mexican oil industry’s new architecture is now in place. Regulatory directives and resolutions, as well as a number of key policy decisions and new business strategies, will further define how the new structures come together. Within this context, it will be the behaviour of the incumbent monopoly, and of new players, that will determine industry dynamics. Public interest in Mexican energy reform has focused on the opening of the upstream to international industry. This is understandable given the expectation of important investment flows and the continuing decline of oil production. However, it is still too early to forecast the magnitude of capital flows associated with Round 1 upstream auctions and farmouts, or the time profile of incremental production and eventual government oil revenues. Recent government medium-term oil revenue projections to 2020 are based on questionable assumptions and unwarranted optimism, even if Round 1 is successful. On the other hand, mid and downstream investments in oil products, natural gas, and electricity could have greater short- and medium-term impacts on Mexico’s energy markets and manufacturing industry, and are a central feature of energy reform.
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