• The other side
    of the coin
  • Arturo Garcia Bello
    Partner at Deloitte Mexico
  • Today’s global context of low oil prices does not represent a threat to energy investments in Mexico, though, a resources assignment strategy change is implied.

    A new timeline in this economic turmoil sets investments developments to be focalized on updating and scaling the infrastructure network, while oil prices recover.
    Round One bid winners, as of today, have not withdrawn from the process, holding their investment position plans and interest in Mexico. The current situation could be seen as an opportunity to detonate investments in some enterprises with infrastructure developments, to anticipate and take advantage of a better pricing framework. Many project developments are on construction nowadays. On the gas sector, pipeline network expansions are well on their way. The second phase of “Los Ramones” is about to go live, which will supply to industrial and commercial parks in San Luis Potosí, Guanajuato and Querétaro States. The third phase of this mega-project is under construction.
    Also, the North-Northwest gas pipeline is in progress, this one runs from the border line through the state of Sinaloa, promoting not only the energy sector, but will also detonate production of added value products mainly in the agroindustry of Sinaloa.
    President Enrique Peña Nieto announced that since April 1st. the private sector will be able to import gasoline & diesel for local distribution. It was meant to go in force until 2017 in accordance with the guidelines of the Mexican Energy Reform. Situation that allows for anticipated investments on pipelines and storage segment, maximizing economic benefits for petroleum products importing enterprises.
    Why does Mexico’s gasoline price exceeds 13 pesos/lt today? Net cost per litter of imported gasoline is, on average, 11 pesos, depending on its transportation mode. If carried by pipelines it could decrease to around 9 pesos/lt., giving as much as 4 pesos margin to importers. Unfortunately, Petróleos Mexicanos’s (PEMEX) pipelines are up to their limit capacity, compelling reason to make investments in pipelines and storage tanks On the other hand, delayed infrastructure developments must be overcome in the near future. For example, in Cantarell and another oil fields, short term investments are required for oil & gas extraction, including fracking technique that consumes great amounts of water, for which treatment plants are also required.

  • Another area where important investments are taking place is the Power sector, with new transmission line projects, wind and solar cell farms for sustainable energy production.
    Infrastructure investments represent the other side of the coin for the oil sector. Its execution will generate an adequate environment to take advantage of future bonanza times of high oil prices, which will surely be seen again, although, not in the short term.