Congressional testimony: Mexican energy reform

July 24, 2015

7/24/15 Energy Global

via Flickr - Dave Parker

via Flickr – Dave Parker

Below are highlights from the testimony given by Ambassador Carlos Pascual, Senior Vice President, IHS Inc. before the House Foreign Affairs Committee, Subcommittee on the Western Hemisphere regarding recent reforms to the energy sector in Mexico in the context of greater North American energy independence.

“Since 2012, Mexico has embarked on an historic opening of its energy sector to allow private investment and competition in the production, transit and sale of oil, gas and electricity, and in the coming years in retail markets as well. On July 15, Mexico completed the first tender since 1938 for the sale of hydrocarbon assets. Even though the results did not meet expectations, it formalised a process of opening the energy sector to private investment, and with that, the benefits that will eventually ensure from infusions of capital and technology. Mexico will benefit from these reforms, but so will American businesses and workers. North America can improve its energy security and play a more profound role in stabilising energy markets regionally and globally.”

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Mexico’s Energy Reform: A Look From Inside the Learning Curve

July 22, 2015

7/21/15 Texas Lawyer

energy -wind_energyThe opening process of Mexico’s energy sector has been well documented. Local and foreign media have extensively reported on how a country that had been closed to private oil and gas investment for close to 76 years, has, in the span of only 18 months, reformed its Constitution, passed implementing regulations, created and strengthened new and existing regulatory bodies, conducted a Round Zero process with its state-owned oil company (Pemex), begun three public bid processes and awarded the first two production sharing agreements in its history.

However, this fast-moving train (in many ways politically fueled) is now facing its most serious challenge to date: attracting oil and gas companies to invest in Mexico. Recent developments in the opening process have shown once again that the oil and gas industry continues to run deep in Mexico’s political, social and economic life and that the country cannot afford a long and prolonged learning curve.
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Mexico’s Oil Auction: short-term disappointment v long-term progress

July 16, 2015

7/16/2015 Beyond Brics, The Financial Times

By Duncan Wood, Director, Mexico Institute

Oil Rig 2 by Flickr user tsuda Photo by Flickr user tsudaOn Wednesday July 15, Juan Carlos Zepeda, the president of Mexico’s National Hydrocarbons Commission (CNH), announced the results of bidding for exploration contracts in 14 shallow water blocks in the Gulf of Mexico, the first time in over 75 years that production-sharing contracts have been awarded in the country. The results were eagerly awaited by energy industry analysts the world over. As the envelopes began to be opened, the president’s office and the CNH tweeted an inforgraphic stating that the process would be deemed a success if four to seven contracts were successfully awarded.

In the end, only two blocks were awarded, both to a consortium formed by Sierra Oil of Mexico, Talos Energy of the US and Premier Oil of the UK. The government received offers from just nine bidders (five individual companies and four consortia), a pitiful tally given that 49 companies each paid $365,000 to enter the data rooms and 25 of those companies pre-qualified to bid. Of the majors, only ENI and Statoil made bids, leaving most of the big names on the sidelines.

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Mexico Energy Reform Starts with Thud in Offshore Oil Auction

July 16, 2015

7/15/2015 BloombergBusiness

Oil Rig 2 by Flickr user tsuda Photo by Flickr user tsudaMexico’s first auction of offshore oil leases fell short of the country’s expectations as several majors decided not to participate.

Only two of the 14 shallow-water blocks released on Wednesday received qualifying bids. Exxon Mobil Corp., Chevron Corp. and Total SA passed on the country’s sale of territory in the Gulf of Mexico, 77 years after the country nationalized crude. The 14 percent success rate was less than half the 30 percent to 50 percent goal that the government said would be its minimum for judging the event a success…

“This has to be crushingly disappointing for the government,” Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington, said Wednesday. “It has to be seen as a very clear message that they need to do a lot more to make the oil and gas opening a success.”

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Historic Mexican Oil Tender Fails to Attract Investors

July 16, 2015

7/16/2015 Financial Times

oil rigsCrestfallen Mexican officials admitted that the historic tender to open the country’s oil sector to private investors for the first time in 80 years had fallen well short of expectations after only two of the 14 exploration blocks on offer were awarded.

In spite of government hopes of attracting an array of companies and netting some $18bn in investment if all blocks had been awarded on Wednesday, the same consortium comprising Mexican group Sierra Oil & Gas — Talos Energy of the US and Premier Oil of the UK — scooped both of the blocks…

….But as Duncan Wood, director of the Mexico Institute at the Wilson Center, noted, officials had been stressing all along that the only tenders likely to be impacted by the price fall were those for shale prospects, not those in cheap-to-develop shallow waters. “I think that has to be seen as an excuse,” he said. “The blocks on offer just weren’t particularly attractive.”

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MEXICO ENERGY REFORM: WITH ECONOMIC PROMISES COMES UNPRECEDENTED RISK

June 25, 2015

6/23/15 Oil and Gas Financial Journal

energy- oil pumps 2Mexico’s energy reforms provide an historic opportunity to revitalize its energy sector and bolster its overall economy, but a whole new crop of assets will have to be protected and attendant risks sensibly managed, says Cooper Gay Swett & Crawford, a Miami-based independent global wholesale, underwriting management and reinsurance broker group.

Last year, Mexico’s Congress gave final approval to energy reforms intended to open up the country’s upstream oil and gas sector to badly needed private investments. Such industry participation by other nations had been outlawed in Mexico since the 1930s. However, despite abundant oil and gas reserves, Mexico’s energy sector is underdeveloped and sorely in need of technological assistance and investment capital to bring it into the 21st century. Mexico already imports large volumes of natural gas by pipeline from Texas, and is in danger of becoming a net importer of oil as well.

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Report: How to make business sense of Mexico’s energy reform

June 3, 2015

6/1/2015 Fuel Fix

energy- oil pumps 2Mexico is opening its oil and gas fields to foreign investment for the first time in decades – a potential business bonanza for companies that can navigate the changes.

A preliminary report released last week on Mexican energy reform was prepared by the University of Texas at San Antonio Institute for Economic Development, the Universidad Autonoma de Nuevo Leon, the Asociacion de Empresarios Mexicanos and the Woodrow Wilson Center.

The report is aimed at companies on both sides of the border trying to figure out how to get a toehold in the new energy market in Mexico.

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Download the report here.


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