• The new energy
  • Juan Carlos Serra and Jorge Eduardo Escobedo Montaño
    Partner and Associate at Basham, Ringe y Correa
  • 2013 Mexican energy reform. Constitutional amendments

    The Mexican Energy Reform opens and allows participation of private companies in hydrocarbon and electricity projects, which prior to 2013 where completely banned to private investment and where carried out only by the Mexican State. Mexican government goal is to attract private companies to invest in the Mexican energy industry. As of today, Mexican government has already called for Round One, the first one out of a series of Rounds aimed to attract private investments in hydrocarbon exploration and extraction matters. Additionally, the National Power Control Center (CENACE) has call for the first long term electric auction, which purpose is to award contracts for the purchase and selling of power, cumulative electric power and clean energy certificates.

    Mexico´s potential. Oil and gas resources. Investment opportunities
    All tenders included so far in Round One have as main goal to attract potential investors and increase oil production in 500 thousand barrels for 2018 and 1 million barrels for 2025. According to evaluations made, up to January 1, 2015, Mexican oil resources that have not been discovered, but may be potentially recovered are estimated in 112,834 MMbpce (billions barrels) of crude oil equivalent, out of which 52,629 MMbpce (47%) are conventional resources and 60,205 MMbpce (53%) are non-conventional resources.

    » Exploration and Extraction Plan
    The Plan contemplates an exploration and extraction surface of 235, 070. 0 km2 and establishes four bidding rounds for exploration and extraction fields and areas to be executed from 2015 - 2019 with an average of an equivalent of 104,778.6 Billion Barrels of Crude oil.

    » Exploration & Extraction Plan / Round One
    • 109 exploration blocks and 60 extraction fields covering a surfac e of 28,500 km2.
    Prospective resources of an equivalent of 70,095.3 billion barrels of crude oil.
    • Fourth tender under process .

    » Exploration and Extraction Plan / Round One / Fourth tender
    Ann ounc ed by CNH on December 17, 2015.
    Includes 10 contractual areas for offshore exploration and extraction contrac ts in deep waters.
    Prospective resources of 10,537.3 billion barrels.

    » Coming Rounds / Two, Three and Fourth
    Three additional Rounds are pending to be called. These Rounds will include total resources of approximately 34,693.3 billion barrels which will be tendered as follows:

    » PEMEX assignments
    Petróleos Mexicanos (PEMEX) was given preference over certain exploration and extraction fields in which it had technical, performance and financial skills for operation.
    • 489 allocation’s
    given to PEMEX.
    • 20,589 billion barrels
    of crude oil equiva lent of 2P reserves.
    • 23,447 billion barrels
    of crude oil equiva lent of prospective resources.

    Hydrocarbon Law allows PEMEX to migrate those assigned fields, prior approval of National Hydrocarbons Commission (CNH), to the new exploration and extraction contracts. In 2015, CNH has already approved to migrate some developed onshore and offshore fields with 2P reserves of approximately 2,211 billion barrels. Additional undeveloped fields are expected to be farmed out by PEMEX with 2P reserves of approximately 296 million barrels and 3P reserves of 1,007 billion barrels: CNH will publish an invitation to tender in which private investors will be able to compete to associate with PEMEX for those areas.

    » Midstream and Downstream
    Private investment will be required for: (i) storage terminals; (ii) railroads lines; (iii) pipelines; (iv) highways; (v) ports; (vi) service stations.

    » Natural Gas / Current infrastructure
    Natural gas demand has increased since 2004 and is expected to reach 10,390.3 million of cubic feet per day by 2029.

    » Natural Gas / Transportation and Storage System Plan
    Which includes 12 different pipeline projects for more than 5,150 km of gas pipelines and investments of approximately 9,056 billion USD. The above mentioned projects will be reflected as follows once executed. Additionally, 8 projects are to be executed by the Federal Electricity Commission (CFE) in order to supply natural gas to new power generation plants in other Mexican regions.

    A complete legal framework has been issued and is fully in force to strength the legal certainty for companies so they might come and participate in the tender and auction procedures

  • Mexico´s potential. Electric energy investment opportunities
    Between 2004 - 2014 the gross consumption of electric energy increased 2.9% while the forecast for the period 2015 - 2029 presents an annual increase of 3.5%. Maximum demand forecast is expected to increase for the period 2015 - 2029 in an annual rate of 3.8%, meaning 69.846.9 MWh.
    In order to attend national consumption and the demand of electric energy the Federal Government intends to expand the National Electric System to meet a requirement of 59,985.6 MW for the period 2015 - 2029 (56.9% with new projects). In addition, the Federal Government expects to increase the electric transmission system. Between 2015 - 2029 construction of 24,599 km of electric lines is expected as well as 410 km of transmission works.
    The electric sector prospective program contains approximately 21 projects to be tendered between 2016 - 2019.
    Mexico has a great potential for investment in the oil, gas and electric energy industries having a considerable amount of resources. Activities related to the hydrocarbons and electric energy sectors have been completely open for investment and private participation. A complete legal framework has been issued and is fully in force to strength the legal certainty for companies so they might come and participate in the tender and auction procedures.