Interview : Iván Sandrea Silva
To what extent has energy reform positively impacted levels of oil and gas investment?
IVÁN SANDREA: Reforms take time to materialise, especially in the energy sector, where progress is slow. However, Mexico has achieved tremendous results in the last two years. There are more than 70 companies active and registered in the country, there have been over 100 blocks awarded, there are new exploration areas and, above all, the best news is that private operators are starting to drill wells. In the period between 2018 and 2024 the private sector could be as active as Petroleos Mexicanos (Pemex) in terms of exploration and drilling. This shows how in a relatively short time, energy reform has enabled the private sector to be as active and committed as the national oil company.
The activity is slower in midstream than in exploration activities. Aside from this, the sector has several storage projects at the construction or approval stage; there are pipelines being built in different areas of the country and new brands of petrol stations are beginning to open in the major cities.
In terms of infrastructure projects, there is potential in the development of new facilities for oil and gas production. These projects will attract capital, help to develop infrastructure and eventually boost production. The association between companies in the sector to develop these types of projects should create opportunities along the value chain. The openness of the market will bring more competition, employment, new technologies, and new and efficient processes. That will allow for the development of fresh opportunities for direct investment in the sector.
What is being done in the medium term to address increasing demand for gas in Mexico?
SANDREA: Mexico has non-associated gas in the north, which is expensive to extract given its deepness and structural complexity. Natural gas production is declining, but the government and institutions managing the expansion of the gas pipelines have been successful, and the midstream infrastructure capacity has doubled in size in just six years. Gas transportation has improved by delivering to towns and rural areas via liquefied petroleum gas trucks or pipelines. However, the expansion of new energy sources, together with the increase in energy efficiency, will allow the country to be non-dependent on natural gas imports in the future.
How can private companies and industry regulators improve the tender process?
SANDREA: Regulatory authorities are constantly interacting with industry associations, Pemex and international firms, as they collect data and learn best practices in order to modify processes and adapt them to current conditions. In addition, the internet is the most efficient and effective way to interact and create greater transparency. Through this channel, information can be more effectively managed. Access to data, contracts and guidelines is now faster, which fosters a closer collaboration between participants.
What infrastructure developments are under way to support the future needs of the industry?
SANDREA: The energy sector today is more complex and sophisticated than in the past, and infrastructure is being built all across the production chain. Pipelines are being constructed in different regions, connecting the country both internally and to the US. There are several power and cogeneration plants under construction, with 77 existing terminals for refined oil products and more than 10 being built. We are also observing a conversion of railway infrastructure to accommodate the transportation of refined products. A significant expansion of refined product storage capacity is needed for several reasons, including energy security, market development and competition. In 2018 a number of new energy projects will be announced, while external threats are unlikely to hinder the sector’s growth.
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