Seeking to improve understanding, communication, and cooperation between Mexico and the United States by promoting original research, encouraging public discussion, and proposing policy options for enhancing the bilateral relationship.
Ongoing efforts to drive down the costs of energy in Mexico may hurt the competitiveness of the industrial sector in southwestern Ontario, warns an energy policy expert.
Over the past two years, Mexico has brought forward legislative changes to allow greater private and foreign investment in its oil, gas and electricity sectors, said Duncan Wood, the director of the Mexico Institute in Washington, D.C.
Just as Space X rockets may be taking off from the beaches at Boca Chica near Brownsville, natural gas exports to Mexico look to also sky rocket in the coming years. Due to changes in Mexican law in 2013 opening the electricity market to private investment, billions of dollars in contracts have been let to build power plants, electrical distribution facilities and natural gas pipelines. In turn U.S. pipeline companies and gas producers have moved to capture the lion’s share of that market. Given the fact that Texas and Gulf Coast producers have been rapidly losing their old Northeast and Midwest markets to Marcellus producers this has proven to be a timely and vital new market. The Energy Information Agency (EIA) estimates that natural gas exports to Mexico were 3% of production in April 2015 and are expected to grow to 5% by 2030.
On 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.
Mexico’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.”
Crestfallen 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.”
Day 5 of our on-going article excerpts. Check out the blog again tomorrow for more, or head straight to our website for the remainder of the article.
Water Scarcity Could Deter Energy Developers From Crossing Border Into Northern Mexico
by Keith Schneider
A Desert Oasis That is Drying
There is virtually no surface water available in this part of the Chihuahuan Desert, an expanse of thin pads of grama grass and stands of creosote bushes and mesquite. Coahuila receives little more than 300 millimeters of rain annually (12 inches), according to Conagua. It is the second driest place in Mexico and ranks with Egypt and the Arabian Gulf as among the driest places on Earth.
That is what makes the running streams and desert marshes of Cuatro Ciénegas, a half days’ drive south of Piedras Negras, so rare and such a valuable reference for the ecological disruption and economic dislocation that can occur with mistakes in water supply and use. Until three decades ago the 215-year-old farming community was a farm and business hub set amid a thriving oasis where vineyards and orchards of pomegranate, walnuts, and peaches were irrigated with water drawn from clear, spring-fed streams and pools.
Outside town, thick stands of marsh grasses grew as tall as a man. In the 1960s, Mexican and American biologists and ecologists began to swarm across the 150,000 hectares (370,000 acres) of desert pools and wetlands, discovering a biological treasure of plants and animals so abundant and distinctive they likened Cuatro Ciénegas to the Galapagos Islands.
Today, despite management oversight since the mid-1990s by Mexico’s national parks agency and designation as an international biosphere reserve, Cuatro Ciénegas is steadily drying up. Vinos Vitali, a winemaker and lifelong resident, told a University of Texas video team, “There used to be a lot of water here and a lot of fruit. Now there’s no water and nothing is left.”
Alfonso Gonzalez, a rancher in town, added, “You’re seeing a crisis now because the water has not been sustainably managed.”
A proposed pipeline project to supply Mexico with natural gas from Texas would pass through Brownsville, though the exact route appears yet to be determined.The Federal Electricity Commission (CFE), Mexico’s state-owned electric utility, recently issued a request for proposals for construction of a $1.5 billion, 155-mile pipeline from Nueces County to Brownsville, where it would connect with a $3.1 billion, 500-mile underwater pipeline to the Port of Tuxpan in the state of Veracruz, Mexico.The South Texas-Tuxpan pipeline would cross the border into Matamoros before turning toward the Gulf of Mexico.