HOUSTON—When it comes to the North America Free Trade Agreement (NAFTA), some in the oil and gas industry are making it clear that they oppose actions that would impede the energy success story unfolding across the continent.
The topic surfaced this week during the North American Energy Forum in Houston that brought U.S. Energy Secretary Rick Perry, Mexico’s Energy Secretary Pedro Joaquin Coldwell and Canada’s Natural Resources Minister James Carr to the table. Signed in 1994, NAFTA eliminated most of the tariffs between Canada, Mexico and the U.S. to facilitate trade and boost economic activity. Talks to renegotiate the agreement are underway as the Trump administration seeks changes that aim to reduce trade deficits among other goals.
“I think it’s a healthy process to renegotiate a contract after 25-plus years,” Perry said during the forum Nov. 15. “We know that signing this North American Free Trade Agreement is in everyone’s best interest, and I’m quite comfortable that it will get done in an appropriate way [and] in a timely way.”
The negotiation talks come as the U.S. oil production hit weekly record-high levels thanks to innovative techniques and technologies that have enabled companies to pump more with fewer rigs. Data from the U.S. Energy Information Administration showed crude production reached 9.65 million barrels per day. It also comes as interest grows in Mexico’s energy sector following the country’s decision to open its doors to foreign investors.
NAFTA renegotiations could impact the success of the countries’ energy sectors as it relates to logistics, exports and costs. But the agreement has been a positive for the industry, company executives said.
“We look at NAFTA and see a success story,” said Andy Drummond, vice president of strategy and development for BHP Billiton.
He spoke of the flow of hydrocarbons between the three countries and how it has created an energy center. The benefits include having affordable energy and security of supply, Drummond said. The Melbourne, Australia-based company has conventional assets in the Gulf of Mexico and unconventional assets in the U.S.
“Coming from a free market capitalist country anything we can do to reduce the barriers to trade needs to be done,” added Loren Long, managing director (Mexico) for Houston-based Talos Energy. The independent E&P is adding pages to its success story in Mexico, having made in July a significant oil discovery with its Zama-1 well offshore Mexico with partners Sierra Oil and Gas and Premier Oil.
Working in Mexico, Long said you can sense people there wanted to work with Americans and Canadians. “I would hate for us as a country to do anything to erect barriers and cause friction between the companies,” he said. “Let’s keep working together. Things have been going pretty well.”
For the services sector, it comes down to making sure customers are successful, said Mark Salkeld, president and CEO of the Petroleum Services Association of Canada. He added that the association was paying attention to the developing negotiations, looking for any potential cost implications. If changes were to be had, he would like a smoother labor approval process for the three countries—changes that would perhaps make it easier for rig crews in the U.S. or Mexico, for example, to work in Canada during busy times when activity slow in their respective countries.
When asked whether their companies were prepared to convince the Trump administration not to withdraw from NAFTA, the answer was yes.
“If we really start to sense there’s some real potential for failure of NAFTA and breakdown of trade, we absolutely will jump in,” Long said.
In August, the American Petroleum Institute (API), Canadian Association of Petroleum Producers and the Mexican Association of Hydrocarbon Companies released a statement expressing their support for NAFTA and a joint paper backing market-oriented policies and opportunities for commercial growth and job creation. Together, the organizations represent more than 750 international oil and gas companies, according to the API.
“The natural gas and oil industry across North America is united in our support for NAFTA and the significant consumer, economic and security benefits it generates,” API President and CEO Jack Gerard said in the August statement. “As the energy flows between our countries continue to grow, it’s important to highlight the critical role NAFTA has played in facilitating cross-border trade and investment in energy.
Velda Addison can be reached at email@example.com.