Mexico’s Pemex to add 30,000 bpd capacity to top refinery

Reuters, 5/22/2013

State oil monopoly Pemex will boost capacity at its biggest refinery, Salinas Cruz, by 9 percent in a $4 billion expansion, its head of refining said, part of Mexico’s aim to wean itself off supplies of refined production from the United States. The Mexican government will seek a major overhaul of the domestic industry later this year, and Pemex is under pressure to boost output and efficiency in the country’s lumbering energy sector.

Miguel Tame, Director General of Pemex’s PEMX.UL refining arm, told the Reuters Latin American Investment Summit that the company was about to begin the overhaul at Salinas Cruz, which would increase production by 30,000 barrels per day (bpd) when completed in 3-4 years. “That is where I have space, where I have storage tanks and pipelines to bring as much crude as possible,” Tame said in an interview. “I can still boost daily processing at Salinas Cruz by 30,000 barrels if I undertake the reconfiguration.”

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Pena Nieto’s Mexico Energy Reform Faces Delay in PAN Shakeup

Bloomberg, 5/21/2013

Mexico President Enrique Pena Nieto’s reform agenda that includes legislation to end the monopoly of state-owned Petroleos Mexicanos faces delays due to a shake-up in the former ruling party’s leadership.

Former President Felipe Calderon’s National Action Party, or PAN, yesterday ousted former Finance Minister Ernesto Cordero from the Senate party leadership. The decision erodes the political consensus parties have built in congress, complicating the economic reform agenda, according to IdeaGlobal and Javier Oliva, a political scientist at Mexico’s National Autonomous University.

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Mexico debates opening its doors for shale development

FuelFix, 5/15/2013

Energy reform is likely to be one of the most important sweeping legislative changes that an incoming Mexican government will address, experts said Wednesday at a Houston conference on energy issues. The PRI government, which led the government for most of last century and who won the 2012 election, has indicated that it may consider expanding opportunities for private and international companies to help it expand needed infrastructure to develop its natural resources, including a wealth of natural gas.

One of the key issues is whether any reforms will focus on Mexico’s state-owned energy company, PEMEX, or will make more sweeping, fundamental changes. Either way will open up additional energy supply, said Duncan Wood, the director of the Mexico Institute at the Woodrow Wilson International Center “That is a crazy situation for a country that has the fourth largest share of natural gas in the world,” Duncan said. “PEMEX can’t do it alone. It doesn’t have the know-how and technological experience to work in deeper waters and on shale.”

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Mexico: Uphill battle joined in effort to restructure oil industry

Financial Times, 5/15/2013

When Mexico in the 1950s reinforced laws making it illegal for Pemex to enter into joint ventures with third parties, it closed Mexican oil to private capital, foreign or national. Experts say the apparent determination of Mr Peña Nieto and his centrist Institutional Revolutionary party to open up the country’s oil industry could prompt tens of billions of dollars of investment a year. Developing the potentially huge reserves of shale gas could also lower energy costs, cementing Mexico’s new-found competitiveness as a manufacturing centre for the Americas.

Yet at least two big obstacles to their development remain. The first is Pemex itself. Created in 1938 in the aftermath of the 1910 revolution, the once-shining symbol of Mexico’s 20th-century confidence is a shadow of what it was. It is better known today for its inefficiency, corruption and huge losses. Only its exploration and production arm, one of its four subsidiaries, regularly turns a profit – about 95.5bn pesos ($7.9bn) last year, according to preliminary results. Its other three subsidiaries produced a combined net loss of 111.6bn pesos (roughly the same as the annual state budget of Bolivia). All this was against Pemex’s reported sales last year of about 1.6tn pesos.

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To power Mexico forward, Peña Nieto looks to energy reform

The Washington Post, 5/7/2013

It has been 75 years since President Lázaro Cárdenas seized the country’s foreign-dominated petroleum industry and placed every drop of oil under the everlasting domain of the Mexican people. But while it once was a source of national pride, the state-run monopoly he created — known as Pemex — has become a dinosaur, sapped by debt, sagging output and dated technology. The Mexican government siphons off the company’s revenue to cover about one-third of the federal budget, leaving insufficient funds for what has become a critical task: finding more oil.

Mexico remains the third-largest source of foreign oil for the United States after Canada and Saudi Arabia. But the country’s easy-pump crude is quickly running dry, and the company lacks the technology and know-how to drill for the vast stores of tougher-to-reach deposits that are thought to exist beneath Mexico’s deserts and seas. Fixing the company, Petroleos de Mexico, has become a top priority for Mexico’s new president, Enrique Peña Nieto. With an overhaul plan expected by late summer, U.S. and other global energy companies are waiting to see whether Mexico will once more give outsiders a crack at the country’s hydrocarbon treasures, including the massive, virtually untapped beds of shale gas south of the Texas border.

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No talks on key Mexico reforms until spat resolved: opposition

Reuters, 4/30/13

A multi-party alliance to modernize Mexico’s economy will not discuss pending energy and tax reforms until an electoral spat between the opposition and the government is resolved, the head of the main leftist party said on Tuesday. Jesus Zambrano, chairman of the opposition Party of the Democratic Revolution (PRD), said there could be no talks on these reforms until the government had taken clear steps to punish those responsible for a vote-buying scandal in the Gulf state of Veracruz that was exposed this month.

“There won’t be (talks) about anything that is not to do with the political and legal … structure that will enable us to get out of this impasse,” he told Reuters in an interview. President Enrique Pena Nieto’s ruling Institutional Revolutionary Party, or PRI, has been forced on the defensive since the conservative National Action Party (PAN) put out recordings of PRI officials advocating the use of government funds to secure votes in Veracruz in elections due on July 7.

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Foreign wind farms cause uproar in Mexico

AFP, 4/7/13

Foreign energy firms have flocked to a narrow region of southern Mexico, known as one of the world’s windiest places, to build towering wind turbines, but some projects have angered and torn indigenous villages. The construction of wind farms has soared across Mexico, with the gusty Isthmus of Tehuantepec in the state of Oaxaca attracting investors from as far as Europe, Japan and Australia.

The projects are a key part of Mexico’s efforts to combat climate change, one of the priorities of former president Felipe Calderon that has been picked up by his successor, Enrique Pena Nieto, who took office in December.

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Mexico’s new president: Working through a reform agenda

To learn more about Mexico’s structural reform agenda and new security strategy, don’t miss next week’s event at the Mexico Institute.

The Economist, 4/4/13

Until recently a good place to catch forty winks amid the din of Mexico City was in one of the country’s somnolent legislative palaces. Cameras have often caught congressmen snoozing on the job, between games of Angry Birds on their taxpayer-funded iPads. But the past few months have seen Mexico’s legislators jolted awake. Enrique Peña Nieto, who became president on December 1st, has set a furious pace, pushing through reforms designed to correct some of his country’s long-standing structural weaknesses.

Out of government, Mr Peña’s Institutional Revolutionary Party (PRI), which ran Mexico for seven uninterrupted decades until 2000, had acted as an obstacle to reform rather than an instigator. Before last July’s presidential election the party did its best to block the proposals of Felipe Calderón (who in any case proved to be inept at constructing consensus). After Mr Peña’s victory this changed, with the passage of a labour reform that the PRI had previously blocked. An education law in February claws back control of teachers’ hiring and firing, previously the preserve of the teachers’ union. The new president sent a powerful signal to dissenters when the union’s leader, Elba Esther Gordillo, once a leader of the PRI, was arrested on charges of embezzling more than $150m of union funds (an allegation she denies).

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Mexico: where to put the dinero?

Financial Times, 4/3/2013

You have to read to the end of a JPMorgan report published this week to find out what the bank thinks are the most promising investment opportunities in Mexico over the coming months and years. But when you get there, it makes a lot of sense. The bottom line (literally, in this case) of the report is that investors should look to invest in new stock-market listings and non-dominant companies operating in areas that the new government wants to make more competitive.

In Mexico, that undoubtedly means the energy sector, where the four-month-old administration of Enrique Peña Nieto, president for the centrist Institutional Revolutionary Party (PRI), has promised to create a bigger role for the private sector alongside, or together with, Pemex, the state oil monopoly. But it also means sectors such as telecommunications, where the companies controlled by Carlos Slim, the world’s richest man, have long dominated but where the government is trying to introduce more competition and appears determined to attract foreign companies.

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New Resources: Immigration and Border Realities, Regional Competitiveness, Transboundary Hydrocarbons Agreement

The Mexico Institute is pleased to share with you the following new resources:

The New Reality at the Border

Andrew Selee, Vice President for Programs at the Wilson Center and Senior Advisor to the Mexico Institute, wrote an op-ed for the Los Angeles Times, titled “The New Reality at the Border.” Selee asserts that in the future, illegal immigration flows to the U.S. are likely to come from places farther away than Mexico, due to the deterrent effect of increased border security, the well-performing Mexican economy, and Mexico’s changing demographic profile.

Subcommittee Hearing: U.S. Energy Security: Enhancing Partnerships with Mexico and Canada

To read Duncan Wood’s statement from the hearing click here

Duncan Wood, Director of the Wilson Center’s Mexico Institute, testified before the House Committee on Foreign Affairs’ Subcommittee on the Western Hemisphere on March 14, 2013. The hearing, titled “U.S. Energy Security: Enhancing Partnerships with Mexico and Canada,” included a discussion of the Keystone XL pipeline and the Transboundary Hydrocarbons Agreement.

Towards a Regional Competitiveness Agenda

Christopher Wilson, Associate at the Mexico Institute, wrote an opinion piece for Animal Politico, a news site on Mexican politics. The op-ed encourages Mexico and the United States to develop a regional competitiveness agenda that envisions North America as the most competitive region in the world, addressing issues such as efficient border management, bilateral cooperation on international trade negotiations, regulatory harmonization, trade liberalization in services such as transportation and healthcare, and the simplification of customs procedures.

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