All Eyes On Mexico: Energy Reform Creating Opportunities Across Oil And Gas Supply Chain

April 18, 2014

energy - oil pumpsForbes, 4/17/14

In the next two weeks, Mexico’s lawmakers are expected to release a series of laws, known as the secondary laws, that should begin to delineate how the revolutionary energy reforms approved last December will be implemented.

Prior to the reforms, Mexico had the most closed energy regime of any country in the world, save North Korea, some have quipped. This Latin perestroika is not going unnoticed in the US and abroad. It has become de rigeur at nearly every oil and gas conference to have at least one panel to discuss the changes, and with good reason.

Not only is Mexico close, the opportunity is huge. The country is prospective for 54.6 billion barrels of oil  equivalent in conventional resources, and 60.2 billion in unconventional, according to PEMEX figures. And don’t forget NAFTA.  Although Mexico’s energy industry had been excluded under Chapter 6 of NAFTA, that exclusion may no longer apply given the reforms, said Dallas Parker, a partner with Mayer Brown, during a presentation at Mergermarket’s 6th Annual Energy Forum last week in Houston.

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Energy Reform in Mexico Seen Extending Rally for Ienova

January 23, 2014

Energy -electricity_transmission_linesBloomberg, 01/23/2014

Infraestructura Energetica Nova (IENOVA*) SAB, the Mexican unit of Sempra Energy (SRE), is being forecast by analysts as a winner because of energy legislation that helps it extend last year’s growth and a 53 percent stock gain.

Ienova is expected to be an “early beneficiary” of the energy law enacted by Mexico’s President Enrique Pena Nieto last month that will allow foreign companies to produce crude in Mexico for the first time since 1938, Credit Suisse analysts led by Vanessa Quiroga said in a Dec. 16 note to clients. Opportunities to enter oil and natural gas transportation and storage as well as electricity transmission and distribution will probably keep driving Ienova shares, according to Curt Launer, an analyst at Deutsche Bank AG. He rates the shares a buy with a target price of 67 pesos.

The second part of Mexico’s energy law will be debated in congress next month. Secondary legislation will determine legal specifics for contracts of foreign oil companies entering Mexico such as Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX)

“Energy reform brings in new capital and new drilling and makes Mexico able to grow its own natural gas production,” Launer said in a Jan. 21 phone interview from New York. “Ienova is very well positioned to be the natural gas processor, to be the liquids processor, and the joint venture they already have with Pemex looks like it would be a big winner in any of those circumstances.”

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Op-Ed: Hello 2014: For Mexico, the hard work starts now

January 3, 2014

Mexican Flag XXLBy Duncan Wood and Christopher Wilson

FT Beyondbrics, 1/3/2014

We will look back on 2013 as a truly historic year for Mexico. The scale of the reform process that was undertaken and largely achieved by President Enrique Peña Nieto is astonishing by comparison not only with other countries around the world today, but also in the context of recent Mexican history. For 15 years Mexico had seemed condemned to endure one of the less palatable elements of democratic systems, legislative gridlock. However President Peña Nieto, through a combination of determination, hard bargaining and political skill, has managed to work with the congress to pass a series of major reforms that do much to put Mexico on the road to modernity and competitiveness.

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What Does Mexico’s Oil Industry Reform Mean For Investors?

December 16, 2013

Forbes, 12/16/2013

Ancient Mayan pyramid, KukulcanLast week Mexico’s Congress approved a bill to end a seven-decade long state oil monopoly. In coming years foreign companies could invest as much as $20 billion a year in Mexico’s oil sector, thanks to new rules that will allow production sharing.

Although the energy reform bill, spearheaded by Mexico’s President Enrique Peña Nieto during his first year in office, has been vociferously opposed by Mexico’s left, the bill has the backing of Peña’s centrist PRI party as well as the right-of-center party of former President Felipe Calderon. Together the PRI and the PAN had enough votes to push the bill through Congress, where it was approved 353-134.

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Asia Faces Competition in Mexico’s Energy Sector

December 16, 2013

The Wall Street Journal, 12/16/2013

Oil barrelsAsian energy groups are looking at opportunities in Mexico following a decision to break Petróleos Mexicanos’s oil and gas monopoly, but they could face tough competition from Western rivals for the right to exploit the country’s huge and lightly developed reserves.

Mexico’s relatively stable political environment and geographic proximity to the U.S. could attract investors from there, including companies that have been selling stakes in Asian and African energy projects to focus on exploiting shale gas and oil opportunities nearer to home. Attractive Mexico projects could also interest European companies such as Spain’s Repsol, which is 9.3% owned by Pemex, and others already active in the country.

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Mexico turns to the hard business of delivering energy reform

December 16, 2013

Financial Times, 12/15/2013

energy -drilling_platform_in_seaMexico’s historic vote  to open its oil and gas sector to private investment after 75 years yoked to  the state is a political coup for Enrique Peña Nieto, the reform-minded  president. Now for the hard part: delivering on it. Early next year, the government has to pass secondary legislation that will  spell out the terms and conditions for foreign oil majors eagerly eyeing  Mexico’s deepwater and shale riches and make them juicy enough to get the  investment dollars flowing.

In the first half, it is expected to organise a so-called “Round Zero” in which  Pemex, the state company , gets to cherry pick which  fields it wants to develop and for which ones it will be seeking partners. That  will mark a first opportunity for the likes of Chevron, BP, ExxonMobil and Royal Dutch Shell to stake their claims, even  before the first tender.

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North America to Drown in Oil as Mexico Ends Monopoly

December 16, 2013

Bloomberg, 12/16/2013

factoryThe flood of North American crude oil is set to become a deluge as Mexico dismantles a 75-year-old barrier to foreign investment in its oilfields. Plagued by almost a decade of slumping output that has degraded Mexico’s take from a $100-a-barrel oil market, President Enrique Pena Nieto is seeking an end to the state monopoly over one of the biggest crude resources in the Western Hemisphere. The doubling in Mexican oil output that Citigroup Inc. said may result from inviting international explorers to drill would be equivalent to adding another Nigeria to world supply, or about 2.5 million barrels a day.

That boom would augment a supply surge from U.S. and Canadian wells that Exxon Mobil Corp. predicts will vault North American production ahead of every OPEC member except Saudi Arabia within two years. With U.S. refineries already choking on more oil than they can process, producers from Exxon to ConocoPhillips are clamoring for repeal of the export restrictions that have outlawed most overseas sales of American crude for four decades.

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Mexico Reverses History And Allows Private Capital Into Lucrative Oil Industry

December 12, 2013

pemex2Forbes, 12/11/2013

The Mexican Senate approved the most far-reaching oil reform in 75 years on Tuesday, opening up Mexico’s $95 billion-a-year oil industry to private capital. In a building ringed by thousands of security forces, the ruling PRI party and the opposition PAN  voted to pass the politically controversial reform, overriding the strong opposition by the leftist PRD party lawmakers who displayed a gigantic banner in the center of the hall reading: “NO TO PEMEX’S PRIVATIZATION.” Pemex is Mexico’s state-own oil monopoly.

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Mexico Lower House Quickly Debates Energy Overhaul

December 12, 2013

Energy -electricity_transmission_linesThe New York Times, 12/11/2013

Just hours after Senate passage, Congress’ lower house on Wednesday began a floor debate on legislation that would open Mexico’s state-run oil industry to private investment, rejecting an effort by leftist opponents to first have committees review the bill.

The House of Deputies voted 354-134 to give general approval to the proposal late Wednesday, but continued in session for what was likely to be hours and hours of debate on hundreds of challenges to individual sections of the bill before a final vote.

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Despite reforms, Brazil and Mexico lack energy investment

December 6, 2013

Financial Post, 12/4/2013

Oil barrelsBoth Brazil and Mexico’s traditional and renewable energy sectors are expected to grow, if they can continue to make positive policy reforms and attract the necessary investment. In 2012, Latin America and the Caribbean claimed only 6% of the world’s investment in renewable energy – the majority of which went to Brazil and increasingly Chile – but analysts at the Inter-American Development Bank claim that the region is the “new frontier“ for clean energy investment.

If the region is to live up to these high expectations, its energy-rich countries must raise capital to the tune of $430 billion to fully develop its clean energy resources. They must continue to pass reforms that will make private investment more lucrative, and thus more attractive, to hesitant energy companies – who have the capital and the expertise the region needed to develop their shale and deep-sea reserves, as well as their green energy.

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