四年了 墨西哥油气改革悄然进入全面爆发期

The Mexican energy market’s four year evolution

Written by Enrique Garza-Tello

Since 1935 the Mexican energy sector had been closed to all private investment but in 2013 the Mexican Constitution was reformed in order to open the energy sector to private investors. The reforms included both the oil and gas sector and electric generation.

Here I analyse the changes that the Mexican oil and gas sector has experienced as a consequence of the reform.

In order to fully understand the effects of the reform on the Mexican energy market, it is important to analyse the effects of these constitutional changes on the upstream, midstream and downstream sector.

Upstream Sector

As a way of incentivising foreign investment, the Mexican government carried out four rounds of bidding on onshore and offshore fields. The results of the first bid rounds were mixed but the fourth round (Round 1.4.), carried out in December 2016, showed that the major players in the oil & gas sector were willing to invest in Mexico, with companies such as Statoil, BP, Chevron and Total being awarded fields. Of the 10 fields that were offered, 8 were awarded. Additionally, Pemex successfully farmed-out one of its offshore fields on the Perdido basin entering into a Joint Operating Agreement with BHP Billiton.

Due to the interest of these global oil and gas companies, the outlook for offshore service companies in the country has improved after a couple of difficult years.

2014-2016 were incredibly hard years for the offshore service industry in Mexico. First with the Oceanografia scandal and secondly with the fall of oil prices and the limited cash flow of Pemex. However, the perspective of having new operators in the country has increased the appetite of the services companies in the country, with new players getting ready to start operations in Mexico and offer their services to the incoming foreign operators.

In addition, PEMEX has started the process of farming out out three more fields, two onshore and one offshore. The tenders will be carried out on the October 4th 2017. The company’s financial results have shown that this “Productive Enterprise of the State” is recuperating its financial stability; therefore Pemex will continue to be one of the most important players in the Mexican Energy industry. Three more bidding rounds will take place on July 12, 2017. Round 2.1., consists of 15 shallow water contractual areas awarded under PSA contracts, Round 2.2., consists of 12 inland contractual areas awarded under License contracts and Round 2.3 consists of 14 inland contractual areas also awarded under License contracts. It is important to mention that Mexico has incredible potential with unconventional reserves that have not yet been exploited. We could, therefore, see some interesting developments with unconventionals in the next couple of years.

Midstream Sector

On July 9th 2016, Pemex announced the first open access season in order to grant access to its pipelines. However, the tender process was delayed and was effectively carried out in the first week of May 2017. Results are still pending. Several natural gas pipelines are under construction in order to meet the natural gas demand from Mexico. The most publicized project is the TransCanada pipeline from Brownsville, Texas to the Mexican Port of Tuxpan.

In refining sector the efforts of Pemex in order to find partners for operating its refineries in the country have so far proved fruitless. The potential investors were discouraged by a powerful labor union and by equipment that dates back as far as the 1970’s.

These setbacks in the refining sector have opened up an opportunity to import and export gasoline. The Ministry of Energy granted over 200 permits to import gasoline up until May 2017. This has created an increasing need for infrastructure for storage and transport, especially considering that the pre-energy reform infrastructure (owned by Pemex) consists of just 5 marine storage terminals and 73 land storage terminals.

Downstream Sector

The first privately owned petrol stations have opened in Mexico, with BP opening its first of the 1,500 planed gas stations in Mexico and Exxon planning to open its first station in the second half of 2017. The opening of the downstream sector to foreign investment is expected to create fierce competition in the country between the Pemex concession gas stations. Perhaps the most significant change in the downsteam sector is the complete liberalisation of the price of gasoline, which will be carried out in 2018, which will generate a completely new landscape of the Mexican energy market. The price of gasoline has been determined by the government for 78 years, the liberalisation of the price of gasoline will be a landmark change for Mexico.

Conclusion

Even though the implementation of energy reform has taken its time, the Mexican energy sector is now starting to feel the effects of liberalisation of the whole sector. It is expected that 2018 will be the year that the full effects of the energy reform will be felt, with the complete liberalisation of the price of gasoline and with the increasingly intense exploration activities carried out by the operators that have been awarded fields on the four tenders of round one. Nevertheless, the success of the energy reform could still be affected by a new drastic fall of oil prices or by political unrest. The next 5 years will therefore be critical in order to consolidate the energy reform and ensure its complete success.