Mexico's top energy stories of 2013

<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEje3VaNsaldPesHSt_gHPq8MsazdgV6MvQQxCEJa4NvrIQPA0_tw9V6WCdKu755YZLN0mZdTjYTgQrEQbJAYrNtRT6owX9xD5b34MEYquoySuMtx7SfVuboG8LXCrGadJ9ZD_4-Clr86O-w/s1600/la-afp-getty-mexico-reform-energy-pemex-pena-20130813.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEje3VaNsaldPesHSt_gHPq8MsazdgV6MvQQxCEJa4NvrIQPA0_tw9V6WCdKu755YZLN0mZdTjYTgQrEQbJAYrNtRT6owX9xD5b34MEYquoySuMtx7SfVuboG8LXCrGadJ9ZD_4-Clr86O-w/s320/la-afp-getty-mexico-reform-energy-pemex-pena-20130813.jpg" width="233" /></a></div><br /><span style="clear: left; float: left; font-size: small; margin-bottom: 1em; margin-right: 1em;"></span><br /><br /><div class="text-contenido" style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; margin: 0px 10px 0px 0px;"><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"><b>1) Congress passes landmark energy reform</b></div><div style="line-height: 18px; margin-bottom: 20px;">This one was big and may fit better into other categories like "Top Mexico stories of 2013" or "Top Mexico energy stories of the decade."</div><div style="line-height: 18px; margin-bottom: 20px;">After months of expectation, congress brought a bill forward December 7 and passed it within six days. The legislation brings unprecedented openness to both the oil and gas and electric power sectors.</div><div style="line-height: 18px; margin-bottom: 20px;">In oil, the Mexican state will be allowed to contract with private companies across the value chain, including production sharing and licensing agreements in E&P. National oil company Pemex is being transformed into a "productive public enterprise," whose first goal will be maximizing profit.</div><div style="line-height: 18px; margin-bottom: 20px;">In electric power, a competitive generation market will be created and administered by an ISO called Cenace. While transmission and distribution infrastructure remain property of the state, power retail will also be open to privates. Likewise, state-owned power utility CFE will become a "productive public enterprise" and seek profit first.</div><div style="line-height: 18px; margin-bottom: 20px;"><b>2) Pemex tenders integrated service contracts at Chicontepec</b></div><div style="line-height: 18px; margin-bottom: 20px;">Pemex's third round of integrated service contracting took place at the unconventional Chicontepec basin with surprising results.</div><div style="line-height: 18px; margin-bottom: 20px;">Three of the six blocks on offer were snatched up, with the other three blocks receiving no bids. Halliburton, Operadora de Campos DWF and Baker Hughes' Petrolite each won a block, but with surprisingly low bids of US$0.01/b, US$0.98/b and US$0.49/b, respectively.</div><div style="line-height: 18px; margin-bottom: 20px;">The services companies expect to have the cost recovery mechanism be profitable on its own. Pemex is retendering the three failed blocks, expected for awarding in January.</div><div style="line-height: 18px; margin-bottom: 20px;"><b>3) CFE blames losses on fuel costs</b></div><div style="line-height: 18px; margin-bottom: 20px;">CFE said its US$1.50bn net loss in 2012 could be attributed almost entirely to higher consumption of heavy fuel oil. The trend continued through 2013, with CFE saying its US$474mn loss in Q3 was also caused by fuel oil costs.</div><div style="line-height: 18px; margin-bottom: 20px;">While the continued losses for the firm are concerning in themselves, they were indicative of a larger problem in Mexico: the country does not have enough natural gas.</div><div style="line-height: 18px; margin-bottom: 20px;">CFE, which had to rely more heavily on old, fuel oil generators, is only one of the firms in Mexico to suffer from insufficient natural gas transportation capacity.</div><div style="line-height: 18px; margin-bottom: 20px;"><b>4) Pemex Los Ramones tender flops, takes control of project</b></div><div style="line-height: 18px; margin-bottom: 20px;">In 2013, Pemex issued a call for bidders on the 740km, 1.43Bf3/d (40.5Mm3/d) Los Ramones II pipeline, said to be the backbone of the natural gas transportation system.</div><div style="line-height: 18px; margin-bottom: 20px;">The long-awaited project is expected to guarantee long-term gas imports from the US. But when bids were due, only one group, a consortium between France's GDF Suez and Spain's Enagás, tabled a bid.</div><div style="line-height: 18px; margin-bottom: 20px;">Pemex rejected the bid and took control of the project, promptly announcing it would be forming JVs withSempra's Mexico unit IEnova and GDF Suez to build the project in two phases.</div><div style="line-height: 18px; margin-bottom: 20px;">Some experts say Pemex had always wanted to build the project on its own and had designed the tender fail.</div><div style="line-height: 18px; margin-bottom: 20px;"><b>5) Mexico launches first large-scale solar plant</b></div><div style="line-height: 18px; margin-bottom: 20px;">In September, Mexico's first large-scale solar PV plant, the 30MW Aura Solar I, started generating power and it was not CFE who built it.</div><div style="line-height: 18px; margin-bottom: 20px;">The 100 hectare project was built by Gauss Energía, with Martifer Solar on EPC and Suntech providing panels, and was financed by private capital and the International Finance Corporation (IFC).</div><div style="line-height: 18px; margin-bottom: 20px;">The project was a huge step forward for solar in Mexico as IFC saw profitability in Mexico's small producer private generation model.</div><div style="line-height: 18px; margin-bottom: 20px;">Gauss expects this to be the first of many stages at the Aura Solar complex.</div></div>

Mexico's top energy stories of 2013

1) Congress passes landmark energy reform This one was big and may fit better into other categories like "Top Mexico stories of 2013...

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Mexico poised to enter major leagues as oil producer - analysts

<div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEggXCtknpQWHTU_9hV1wZrf8NlKbJ81nszsD_qKWKjknB7ukDmHdo2jUjnop7EAU7kFMaVrlat0DXboq9HNj5Yb4bYkJBXScuaXqrShzw_T0k_9LFCXDtZsstS6l4SoKdoRuSGpsZbgHKeX/s1600/Mexico-Oil-Petroleo.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEggXCtknpQWHTU_9hV1wZrf8NlKbJ81nszsD_qKWKjknB7ukDmHdo2jUjnop7EAU7kFMaVrlat0DXboq9HNj5Yb4bYkJBXScuaXqrShzw_T0k_9LFCXDtZsstS6l4SoKdoRuSGpsZbgHKeX/s1600/Mexico-Oil-Petroleo.jpg" /></a></div><span style="font-size: small;">Having reformed its energy sector to allow for greater private investment, Mexico is poised to become a global oil producer by 2025 and take "pole position" in energy investment in the Americas, according to analysts.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">"By 2025, Mexico will have gone from being a major supplier to a strategic supplier," according to David Goldwyn, a former US special envoy and coordinator for international energy affairs.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">"If International Energy Agency predictions of non-OPEC oil peaking around 2020 are true, Mexico will be a big producer and hugely important for global oil markets."</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">Mexico has the chance to be in pole position for investment in the sector in the hemisphere, he told the press.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">However, with pressure on international oil prices, Mexico will have to ensure that the terms it offers oil companies are attractive enough to lure them to the country amid attractive prospects worldwide, he said.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">The Energy Information Administration (EIA) predicts oil prices of around US$109/b in 2015, with a worst-case scenario of US$70/b</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">But with oil from Mexico's vast deep-water potential unlikely to start flowing for a decade, "we could be dealing in a world with US$80 [a barrel] oil," Goldwyn said.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">Oil prices will dictate worldwide investment choices, he said, pointing out that Britain and Norway have offered tax breaks to attract investors to marginal fields.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">Mexico has estimated resources of 160Bb of oil equivalent, which includes a potential 55Bb in deep waters and about 60Bb in shale.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">Mexico's undersecretary for oil Enrique Ochoa forecasts that the country's oil output, which has dropped by almost 1Mb/d since 2004, will increase from the current 2.5Mb/d to 3Mb/d by 2018 and to 3.5Mb/d by 2025. Mexico is the world's 10th largest crude producer but imports a third of its natural gas and half of its gasoline.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">In the wake of Mexico's energy reforms, annual investment in the sector is expected to rise to up to US$50bn a year, according to analysts.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="background-repeat: no-repeat no-repeat; border: medium none; font-size: small; line-height: 1.6em; list-style-type: none; margin: 0px 0px 10px; padding: 0px 0px 7px 12px;">"Mexico has the potential to become a serious player. Very few countries can produce more than </span><span style="font-size: small;">3Mb/d<span style="background-repeat: no-repeat no-repeat; border: medium none; line-height: 1.6em; list-style-type: none; margin: 0px 0px 10px; padding: 0px 0px 7px 12px;">, and Mexico is one. If they add another </span>1Mb/d<span style="background-repeat: no-repeat no-repeat; border: medium none; line-height: 1.6em; list-style-type: none; margin: 0px 0px 10px; padding: 0px 0px 7px 12px;"> of oil production or even double output, that may put them among the top five or six in the world," according to Jed Bailey at consultancy Energy Narrative in a report on Mexico's energy reforms.</span></span></div>

Mexico poised to enter major leagues as oil producer - analysts

Having reformed its energy sector to allow for greater private investment, Mexico is poised to become a global oil producer by 2025 and take...

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North America to Drown in Oil as Mexico Ends Monopoly

The flood of North American crude oil is set to become a deluge as Mexico dismantles a 75-year-old barrier to foreign investment in its oil fields.<br /><div id="lead_graphic"><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgS0joW2RJFSyWduhLMGXEAisqMBNAxZ1PDVu9snPFlG4WczT4YPdcVAn0Ps5lyfK4eOqysJAF-TS-gUaXV4a_TXLBdTlzLo0ZUqULjsFPhzGqyI7AExw7P5K52ApB-0tfXYZywHLeUimL0/s1600/iRvYObLYbSOI.jpg" /></div><br /><div class="photo_caption"><span style="font-size: x-small;">The Petroleos Mexicanos (Pemex) La Muralla IV deep sea crude oil platform in the waters off Veracruz, Mexico, on Aug. 30, 2013. Photographer: Susana Gonzalez/Bloomberg</span></div><div class="photo_caption"><br /></div></div><div class="page current" id="_page1"><div class=""><div id="authorial"><span class="byline"><span class="byline-text">Joe Carroll and Bradley - BB</span></span><br /><span class="byline"><span class="byline-text"><br /></span></span></div></div>Plagued by almost a decade of slumping output that has degraded Mexico’s take from a $100-a-barrel oil market, President Enrique Pena Nieto is seeking an end to the state monopoly over one of the biggest crude resources in the Western Hemisphere. The doubling in Mexican oil output that Citigroup Inc. said may result from inviting international explorers to drill would be equivalent to adding another Nigeria to world supply, or about 2.5 million barrels a day.<br /><br />That boom would augment a supply surge from U.S. and Canadian wells that <span class="ticker_wrap"><span itemscope="" itemtype="http://schema.org/Corporation"><span itemprop="name">Exxon Mobil Corp.</span></span> (<a class="ticker" data-symbol="XOM:US" href="http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=XOM:US">XOM:US</a>)</span> predicts will vault North American production ahead of every OPEC member except Saudi Arabia within two years. With U.S. refineries already choking on more oil than they can process, producers from Exxon to ConocoPhillips are clamoring for repeal of the export restrictions that have outlawed most overseas sales of American crude for four decades. <br /><div class="related_item tracked" data-action-type="Feature Template" data-actions="click" data-category="Inline Related Links" data-label="Position: 1"><br /></div>“This is going to be a huge opportunity for any kind of player” in the energy sector, said Pablo Medina, a Latin American upstream analyst at Wood Mackenzie Ltd. in Houston. “All the companies are going to have to turn their heads and start analyzing Mexico.” <br /><h2>Unprecedented Output </h2>An influx of Mexican oil would contribute to a glut that is expected to lower the price of Brent crude, the benchmark for more than half the world’s crude that has averaged $108.62 a barrel this year, to as low as $88 a barrel in 2017, based on estimates from analysts in a Bloomberg survey. Five of the seven analysts who provided 2017 forecasts said prices would be lower than this year.<br /><br />The revolution in shale drilling that boosted U.S. oil output to a 25-year high this month will allow North America to join the ranks of the world’s crude-exporting continents by 2040, Exxon said in its annual global energy forecast on Dec. 12. Europe and the Asia-Pacific region will be the sole crude import markets by that date, the Irving, Texas-based energy producer said. <br /><div class="related_item tracked" data-action-type="Feature Template" data-actions="click" data-category="Inline Related Links" data-label="Position: 0"><br /></div>Exxon’s forecast, compiled annually by a team of company economists, scientists and engineers, didn’t take into account any changes in Mexico, William Colton, the company’s vice president of strategic planning, said during a presentation at the Center for Strategic and International Studies in Washington on Dec. 12.<br /><br />Opening Mexico’s oilfields to foreign investment would be “a win-win if ever there was one,” said Colton, who described the move as “very good for the people of Mexico and people everywhere in the world who use energy.” <br /><h2>$15 Billion Boost </h2>The bill ending the state monopoly was approved by the Mexican Congress Dec. 12. Before becoming law, the proposal must be ratified by state assemblies, most of which are controlled by proponents of the reform. Oil companies will be offered production-sharing contracts, or licenses where they get ownership of the pumped oil and authority to book crude reserves for accounting purposes. The contracts will be overseen by government regulators.<br /><br />Though some foreign companies already operate in Mexico under service contracts with Petroleos Mexicanos, or Pemex, the reform could increase foreign investment by as much as $15 billion annually and boost potential economic growth by half a percentage point, JPMorgan Chase & Co. said in a Nov. 28 report. <br /><h2>Potential Delays </h2>A doubling in production as suggested by Citigroup’s Ed Morse would put Mexican output at 5 million barrels a day, an unprecedented level for Pemex, the state oil company created during nationalization in 1938.<br />  <br />U.S. crude production will expand to 9.5 million barrels a day in 2016, the highest since the nation’s peak in 1970, the U.S. Energy Information Administration said today. That contrasts with last year’s EIA forecast that production would reach 7.5 million in 2019 before gradually declining to 6.1 million in 2040. U.S. output reached an all-time high 9.6 million in 1970.<br /><br />A doubling of Mexico’s output maybe be slower to realize than the most bullish predictions as companies confront barriers in accessing capital and human resources needed for development, Riccardo Bertocco, a partner at Bain & Co. in Dallas.<br /><br /><div class="">An increase of 1 million barrels a day in output is the most realistic upper limit of what Mexico could achieve by 2025 based on the cost for new infrastructure, competition for new fields and opportunities all over the U.S., Bertocco said in a telephone interview Dec. 12. </div><div class="related_item tracked" data-action-type="Feature Template" data-actions="click" data-category="Inline Related Links" data-label="Position: 0"><br /></div><div class="">“The opportunities are there, but they are still far from being materialized,” he said.<br /><br /><h2 class="">Regulator Inexperience </h2>Drilling in Mexico will be held back by a lack of infrastructure, such as pipelines, in some of the potential shale developments. The government will need to decide on details for development such as tax rates, royalty structures and standards for booking reserves, Kurt Hallead, an analyst at RBC Capital Markets, wrote in a Dec. 12 note to clients.<br /><br />It will take time to organize and conduct bidding rounds for licenses, and additional exploration, such as seismic tests, will need to be done, Hallead said.<br /><br />“We are not expecting any significant impact from the reform to be felt in the next two years,” he wrote.<br /><br />Foreign oil companies will face a backlash from Mexicans opposed to sharing the nation’s oil wealth, said Ricardo Monreal Avila of Movimiento Ciudadano Party, who sees the reform as violating Mexico’s constitution. <br /><h2>Local Opposition </h2>“We are going to see serious problems in the operations of these reforms. Indigenous communities and places chosen by foreign companies for extraction will not allow them on their property. There are going to be serious operational problems.”<br /><br />Brent crude futures, the benchmark for more than half the world’s oil, rose as much as 1.8 percent to $110.80 a barrel in London today, the biggest intraday gain in two weeks, after Libyan rebels refused to relinquish control over oil ports to the central government. Libya, home to Africa’s largest proven reserves, has seen output tumble to the lowest since 2011 amid civil strife.<br /><br />The first assets that will attract foreign investment will be mature oil fields drilled decades ago and reservoirs that need injections of steam or carbon dioxide to coax more crude out of the ground, Medina said. Deep-water prospects, shale and other technically challenging endeavors will follow later, he said.<br /><br />The level of investor interest will be partly determined by which assets Pemex chooses to keep and which it will put up for auction, Medina said. <br /><h2>Chicontepec Price </h2>The Chicontepec field northeast of Mexico City may be among the richest prizes Pemex surrenders after its problems overcoming low pressure and disconnected crude deposits that have limited output, Medina said. Production that has averaged about 60,000 barrels a day may be increased to more than 100,000 by an international producer experienced in handling such fields, he said. <br />Chicontepec is just one of the over-budget, long-delayed projects for which Pemex will be eager to find partners, said Jose Antonio Prado, a former general counsel of Mexico’s energy ministry and Pemex official.<br /><br />“The Mexican state will be able to incorporate private participants in projects that are already in force as well as new opportunities,” said Prado, now a partner at the law firm Holland & Knight LLP in Mexico City. <br /><h2>Deep Water </h2>The reforms are especially important to open up exploration in Mexico’s deep-water fields, where additional capital, as well as better technology and expertise are needed, Carlos Solé, a Houston-based partner at Baker Botts LLP, said in a telephone interview. Pemex estimated the country’s deep-water Gulf of Mexico prospects may hold the equivalent of 26.6 billion barrels of crude.<br /><br />Onshore, the potential is even greater with more than 60 billion untapped barrels, according to a Pemex presentation last month.<br /><br />Some of the potential shale production sits across the border from Texas’s prolific Eagle Ford formation. The most resource-rich area studied so far is around the city of Tampico, a coastal city about 300 miles (480 kilometers) south of the bottom tip of the Texas border.<br /><br />“I can’t tell you the amount of banks and investment funds coming from the U.S. and Europe that have been talking to us and are trying to have an expectation of what’s going to happen with the energy reform,” Prado said. “All those guys are going to be in Mexico next year in various forms trying to seek new opportunities.” </div></div>

North America to Drown in Oil as Mexico Ends Monopoly

The flood of North American crude oil is set to become a deluge as Mexico dismantles a 75-year-old barrier to foreign investment in its oil ...

Read more »