The first oil blocks are set to open for bidding next year (Photo: Susana Gonzalez/Bloomberg)

The first oil blocks are set to open up for bidding next year (Photo: Susana Gonzalez/Bloomberg)

On the back of Mexico opening up its oil sector to foreign investors for the first time in 76 years, Colombia’s largest state-owned oil company, Pacific Rubiales (PRE:TSX) has decided to join in.

The company, which produced 149,011 boepd (net) in Q2, signed a 3-year memorandum of understanding (MOU) with Mexico’s state oil company Petróleos Mexicanos (Pemex) to partner on the development of oil and gas fields in Mexico.

Ronald Pantin, CEO of Pacific Rubiales, commented: “We are very pleased to be one of the first foreign independent oil and gas producers to sign an agreement with Pemex and look forward to working together to develop a sustainable energy sector in Mexico. This partnership combines the strengths and advantages of both companies to identify and pursue collaboration opportunities offered by the recent opening up of the Mexican oil and gas sector to foreign investment.”

One of Pacific Rubiales’ largest shareholders is Mexican auto parts and petrochemical company Alfa SAB which holds an 18% stake.

Pacific Rubiales says the MOU is a platform for cooperation with Pemex on exploration, deep-water projects, revitalization of mature fields, heavy and extra-heavy oil onshore and offshore fields, high water production fields and other upstream activities.

Pacific Rubiales has over $1 billion in available funds to invest in Mexico and plans to double production by 2020.  Mexico is estimated to hold 13.4 billion barrels of proven oil reserves and another 460 trillion cubic feet of shale gas resources.  Mexico’s energy industry is a $95 billion per year business.

The company wants to diversify and replace production being lost from maturing fields in Colombia.

Under President Enrique Pena Nieto, Mexico passed legislation allowing private foreign companies to partner with Pemex in the development of oil and gas fields across the country.  There are 169 oil blocks up for bid next year when the auction begins.

“We expect Mexico will be a significant driver of future growth for Pacific Rubiales and are committed to further advancing our plans in the country as we continue to build the leading Independent Latin American focused E&P Company,” Mr. Pantin says.

In late September, BHP Billiton announced they had signed a partnership agreement with Pemex in one of the first major agreements since the country opened up its oil industry.  The iron ore giant produces roughly 100,000 boepd from deep-water projects in the Gulf of Mexico (US-side).

Shares of Pacific Rubiales were up 4.1% ($0.67 per share) to $16.87 at the time of writing.

Read: Pacific Rubiales signs Memorandum of Understanding with Pemex to jointly explore oil & gas business opportunities in Mexico

Related: BHP to make first move into Mexico’s oilfields

Also: What Mexico’s move to end 75 year monopoly on oil industry means