Mexico received an energy boost with the 2013 structural and legal reform (Energy Reform) that ended State monopolies in oil, gas and power industries, opened opportunities for new business ventures and attracted the attention of local and foreign investment. Two years after implementation, the Energy Reform has already resulted in new projects, despite the volatile market conditions.
New upstream paradigm
• After nearly 80 years, the oil and gas exploration
and production (E&P) market reopened to private
investment.
• Petróleos Mexicanos (PEMEX) retained fields
representing 83% of proven and probable reserves
and 21% of prospective resources.
• The government has already held three Round 1
international bids for E&P contracts, with an allocation
of 30 fields.
• The auction for 10 deep-water fields will take
place this year with the participation of largescale
international oil companies as ExxonMobil,
Chevron, Shell and BP, among others.
• Farmouts for E&P between PEMEX and private
entities will allow increased productivity and longterm
investments of new players.
Midstream & downstream
opportunities
• A sustained expansion in the oil and gas business and
the opening of fuel distribution markets call for massive
investments in pipeline, storage and port capacities.
• The government opened the gasoline and diesel
market of 800,000 barrels per day (bdp); any company
with a permit may import fuel as of April 2016.
• Private companies can operate all kinds of midstream
facilities, which are available to all interested
users through open/non-discriminatory access.
• A newly created Independent System Operator
(ISO) -National Natural Gas Control Center- will
manage the national gas pipeline system.
• Comisión Federal de Electricidad (CFE) plans to
add more than 7,500 kms to the gas pipeline system.
Electric industry
• New wholesale electricity market, comprising timebased
markets for energy purchase, clean energy certificates
and auctions for transmission rights.
• New ISO -National Power Control Center- for the
entire electric grid.
• Open/non-discriminatory access to the electric
grid and distribution networks.
• Target of 35% production from non-fossil fuels by
2024 and 60% by 2050.
• CFE to convert diesel power plants into natural
gas generation.
Financing energy projects
• Inspired in Master Limited Partnerships’s (MLP)
structures, the new “Fibra E” vehicle allows public
to invest in tax efficient energy and infrastructure
asset-owning entities.
• Recent Public-Private Partnership (PPP) schemes are
triggering innovative financing structures attracting
participation of local and international institutions.
• PEMEX and CFE as state-owned productive companies,
using alternative financing options, such as
asset monetization and financial leasing.
• Although the Energy Reform implies opening the
sector to private players, the new legal framework also provides regulatory boundaries to assure the
establishment of a competitive new market:
• E&P contracts in general require an average of
25% of minimum local content ( 35% by 2025)
•Farmouts will be subject to international and
transparent bidding processes that maximize financial
returns to the State
• Prior E&P services agreements executed by PEMEX
will migrate into new E&P contracts
• Governmental approval will be typically required to
create securities over licenses, permits and regulated assets
(e.g., pipelines, water treatment and power plants)
• New financing subject to comply with Principles
of Ecuador (e.g., environmental impact assessment,
waste management, air and water emissions, and
preventive/mitigation measures with local ethnic
or indigenous groups)
• Additional environmental/social procedures required
for infrastructure projects
• Antitrust limits in vertical-integration and crossedownership
in regulated activities, such as commercialization
of oil products and midstream activities
With this new framework, it is clear that Mexico
passed the critical milestone of implementing
the Energy Reform. The ambitious package of legal,
social, political and economic improvements
offer remarkable business opportunities in all areas
of the energy field.