Mexico is a leading oil and gas producer, ranking as 10th largest producer globally and 18th in terms of proven reserves. Three quarters of the production is offshore in shallow waters. The federal republic of Mexico is the world’s 15th largest economy by GDP and the 11th by population, with 120m inhabitants.
In 2012 the president Peña Nieto was able to bridge a long endless political gridlock and create a multi-party ‘Pacto de Mexico’, the starting point for significant constitutional reforms in education, energy, banking and telecom. The Energy Reform of 2014 marked the end of several decades of state-monopolies, opening all energy markets to international operators. The aim of this Energy Reform is to increase the national production and export of oil and gas, and to lower the cost of electrical power.
OIL & GAS PRODUCTION
In respect of hydrocarbons, the increase in production will be achieved by selling exploration and production rights for 85% of Mexico’s prospective reserves to international and local oil companies, mobilizing far more exploration capacity than the national oil company could mobilize. A transparent public tendering system in introduced. which is well regulated and very transparent: all relevant documents are placed online. The Energy Reform regulations are based on best practices borrowed from oil producing countries around the world, and applied transparently. Several autonomous federal agencies, such as CNH and CRE, are put in charge of overseeing a transparent and neutral regulatory environment.
The energy markets are converted into a hybrid system of public and private producers.
In December 2016, the first deepwater blocks were auctioned, which attracted interest from around the globe. The auction became far more successful than predicted, with almost all of the global oil producers, including BP, Chevron, CNOOC, ENI, Exxon, Statoil and Total, acquiring Mexican deepwater production rights.
Lowering the cost of electricity is a secondary aim of the Energy Reform, and this decrease will be achieved by expanding and liberalising upstream production and by adding pipeline infrastructure for the import of shale gas from the US, run by independent operators. Gas transport expansion projects with an aggregate value of USD 10bn over 5 years have been committed, aimed at doubling the import of cheap shale gas from the USA. The main pipeline project is the 800km, USD 2bn offshore subsea gas pipeline from Texas to Tuxpan, which will be constructed by Allseas from mid 2017 onwards.
Beyond the Energy Reform , an ambitious, multi-year National Infrastructure Plan is implemented, which includes a USD 5bn port modernization and expansion strategy, aimed at facilitating trade by creating better deepsea cargo terminals. A secondary aim of this plan is to create new logistic hubs for the energy industry on the central and northern stretches of the Mexican Gulf coast, in ports such as Coatzacoalcos, Veracruz, Tuxpan and Altamira and – potentially – Matamoros. Some of these ports may in future benefit from obtaining a Special Economic Zone status.
The Energy Reforms have placed Mexico in a good position for future growth. Although the all-important relationship with the USA is under starin, Mexico’s 80% wage differential will keep it compatible. The local supply chain has decent capabilities for shallow water production, but is not competitive with international markets. The entire Mexican energy value chain requires more assets, technology and know-how.
Mexico is open for business and partnership opportunities, and welcomes cooperation with the Dutch industry. Marstrat is actively involved with the Mexican energy markets, by providing tailor-made advice to the industry and to the Dutch government. Already in 2015, Marstrat organised the Mexico-Netherlands Offshore Energy Forum, and the incoming mission for Mexican energy executives. This year Marstrat will organise, together with partners GGNI and EDI, a 2-week Executive Training Course of for Mexican managers in the energy sector. The training will take place early July in Mexico City, and early October in the Netherlands.