More than two years have passed since the Mexican Constitution was amended to set the foundation for opening the Mexican energy sector, which, investmentwise, was considered as one of the most closed regimes in the world. As the Energy Reform fosters private participation, opportunities in the sector have emerged and show a considerable growth
Hydrocarbons
sector
opportunities
The hydrocarbons sector entails
many different avenues of opportunities.
In upstream, private
parties may now conduct exploration
and production (E&P) activities
by executing a contract
with the National Hydrocarbons
30 contracts have been awarded
under 3 different public tenders
for a total expected investment of
6 billion USD. There is an ongoing
bidding process considered
by upstream players as the most
exciting of all, comprising 10
deep water E&P areas located at
the Gulf of Mexico with a water
depth from 500 to 3,600 km and
10,537 MMboe of total prospective
resources. The contractual
modality for such bidding is a license
contract, allowing private
parties to own 100% of the extracted
resources upon payment
of certain fees and royalties to
the Mexican State.
Commission (CNH), acting on
behalf of the Mexican State. E&P
contracts are awarded by CNH
through public tenders under
which any foreign or Mexican
company may participate. However,
only Mexican companies
that are tax residents in Mexico
and having an exclusive corporate
purpose of E&P may enter into
contracts with CNH. Currently,
Midstream and downstream opportunities are
also expected to attract investment. The National
Center for Natural Gas Control (CENAGAS) anticipates
a 5,159 km increase of transportation pipelines
by 2019, requiring an estimated investment of
10.19 billion USD. Among the relevant projects to
be tendered in 2016 is the construction of the “Los
Ramones-Cempoala” pipeline which will go from
north to central Mexico with a length of 855 km and
an estimated investment of 1.6 billion USD. Moreover,
fuel markets (i.e. gasolines and diesel) were finally
opened on January 2016 and now other brands
different from Petróleos Mexicanos (PEMEX) may
sell fuels to the public. Also, gasolines and diesel
may be imported into Mexico as of April 2016, an
activity previously reserved exclusively to PEMEX.
Power sector opportunities
For the power sector, the main opportunity for private
investment is in the power generation industry
which has been broadly liberalized. Private parties
may now freely generate power for self-purposes or
for selling it into the newly introduced Wholesale
Power Market. Only Mexican companies or individuals
may request and obtain a generation permit
from Energy Regulatory Commission (CRE). The average
time to obtain a permit is of 4 to 6 months and
companies do not necessarily require to have power
generation activities in their corporate purpose.
Although transmission and distribution activities
remain reserved to the Mexican State, private
parties could form associations or enter into agreements
related to these activities. It is expected
that by the 3rd quarter of this year a tender will be
launched to invite privates to participate in the installment
of transmission lines. The Mexican Government
estimates a total investment of 127 billion
USD in the power sector during the following 15
years, by increasing the generation capacity to 60
GW and to extend the transmission infrastructure
into an additional 25,000 km.
How to react to the new opportunities?
The Mexican Energy Reform is a complete game
changer. Interested parties shall exploit the opportunities
proactively but with a dose of caution.
Investors, consultants and even the Mexican
authorities will naturally experience a learning
curve prior to dominate the rules for the game.
But exploring them now can turn into benefits
such as acquiring experience, market knowledge,
developing a network and clarifying uncertainties
and questions for any particular process.