The leaders of the United States, Canada, and Mexico meet in Toluca, Mexico, Wednesday at the North American Leaders Summit Meeting to discuss trade and travel procedures among the three North American Free Trade Agreement (NAFTA) countries. On energy, the "Three Amigos" will have a lot to talk about.
North America is the focus of a drilling technology revolution that has unlocked vast amounts of natural gas in the US and could do the same for Mexico. Canada's unconventional oil sands are a major contributor to recent growth in global oil output, and the country hopes to bring much of it through the US to refineries on the Gulf of Mexico via a controversial pipeline. Mexico's oil production has lagged in recent years, but it is opening its state-owned energy industry to foreign investors with the hopes it will stimulate a shale boom of its own.
"We may not hear any major pronouncements on energy from North America’s leaders in Toluca today, but as the region’s energy proﬁle continues to grow, trilateral energy cooperation will only make more sense, particularly in a global geopolitical context," reads a report from the California-based Institute of the Americas energy program. The report stresses joint development of unconventional energy resources, greater electric integration, and cross‐border renewable energy markets as key areas for collaboration between the US and Mexico.
Mexico passed major reforms to its constitution last December that included breaking up the monopoly of its state-owned energy firm Petróleos Mexicanos, and opening the industry up to foreign investment. Oil generates about 16 percent of the country's export earnings but production has steadily dropped since 2004. Mexico has the world's fourth-largest reserves of shale natural gas, according to an estimate by the US Energy Information Administration, but lacks the technology and expertise to develop those resources. It hopes the reforms passed last December will attract the outside capital and know-how it needs to boost energy production and revive its manufacturing sector.
The US has expressed interest in collaborating, particularly in the Gulf of Mexico. Last December, the US Congress approved the Transboundary Hydrocarbons Agreement, which opens up 1.5 million acres of the maritime boundary area for oil and gas exploration. Canada, too, feels it could play a role in upgrading Mexico's energy sector.
“Canada offers the technology and know-how in in the energy field, and the Mexicans are interested in partnering with companies with that expertise,” David Robillard, head of the Canadian Chamber of Commerce in Mexico, told the Wall Street Journal.
Relations between Canada and its neighbor directly to the south are somewhat chillier. Canadian Prime Minister Stephen Harper has been pressuring President Obama to approve Keystone XL, a controversial pipeline that would send 830,000 barrels per day of crude oil from Alberta, Canada, and the Bakken shale in Montana to Gulf Coast refineries. For five years, Obama has remained on the fence about approving the project but is expected to make a final decision later this year.
Mr. Harper met with executives from TransCanada, the energy firm behind the proposed pipeline, for a private meeting before the North American summit Wednesday. The Canadian head of government says the pipeline would be a boost for both economies and is expected to lobby Obama on Keystone again in Toluca.
"I'll raise the issue in private as I've done every time I've met him over the past couple of years," Harper said Tuesday, as reported by the CBC.
[Editor's note: A previous version of this article described Prime Minister Stephen Harper as Canada's head of state. He is Canada's head of government.]