Pedro Joaquín Coldwell, Minister of Energy: Viewpoint

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Pedro Joaquín Coldwell, Minister of Energy, on the new model for the sector

The initial phase of the energy reform’s legal and institutional framework has been concluded. During this process, the Federal Executive Council, Congress, political parties and the media, as well as academic, social and business sectors, have had a dialogue on how to transform the industry in order to allow technical, financial and human elements to take advantage of all the energy resources Mexico has. The legal changes occurred in three stages, and each one was accomplished quickly and effectively before the deadline.

The first step was the amendment of the Mexican Constitution, which reaffirmed the nation’s ownership of subsoil hydrocarbons, and established the basis for strengthening public enterprises and opening new spaces up to private investment in the electricity and hydrocarbons industries. Subsequently, nine laws were published and 12 existing ones modified, by which the sector regulatory organs were strengthened and equitable conditions were promoted for the increased participation and access of new operators. Under this new arrangement of weights and counterweights, all the involved agencies will be regulated in accordance with the highest international standards of transparency and accountability. Similarly, protections for the environment and respect for the rights of indigenous communities were included, simultaneously promoting research, technological development and the training of specialised human resources.

Moreover, in October 2014, 24 regulations were published, as well as reform of the Mexican Institute of Petroleum and guidelines for Clean Energy Certificates. With these arrangements the regulatory stage was concluded. Now, the time has come to implement and attract the capital and technology needed to gain access to more complex deposits in deep and unconventional fields, which will put an end to the recent decline of oil and gas production in Mexico.

With the energy reform, Petróleos Mexicanos (PEMEX) will be able to specialise in areas where it has better conditions for the processes of exploration and extraction. During round zero PEMEX was assigned 83% of proven and probable reserves and 21% of the country’s prospective resources, amounting to an area of nearly 90,000 sq km, where it might obtain an estimated production of 2.5m barrels per day of crude oil equivalent for the next 20 years. Furthermore, in December 2014 we presented the first invitation for tenders in round one. During 2015 invitations will be published to tender 169 blocks, where licences, production contracts and shared utilities will be granted to the companies that offer the most substantial benefit to the state. With this new model, it is estimated that investments in our country will reach around $50bn during the period between 2015 and 2018.

In July we signed the first production-sharing contracts and in September three further contracts for shallow waters were awarded. This is something unprecedented in the recent history of our country. With these two first tenders we are clearly moving towards a diversified industrial system, in which several companies with different characteristics and sizes will now have a significant presence in Mexico. It should also be noted that the Mexican bidding model has been internationally recognised for promoting greater transparency and guaranteeing free competition to all participants. Investors see the extent of our efforts.

Current international oil prices, driven by an oversupply of crude oil and the paralysis of the European and Asian markets, have emphasised the importance of our energy reform. Facing the currently depressed global market, Mexico has created multiple opportunities for national and foreign investors in conventional and non-conventional areas, including onshore, deepwater, shallow water and shale, which makes hydrocarbons a wholesale market for electric power generation. The expectation is that in the years to come, energy operators throughout the world will be forced to develop new technological tools and introduce more efficient and productive labour standards. Mexico will be at the forefront of this revolution.

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The Report: Mexico 2015

Energy chapter from The Report: Mexico 2015

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