The Rise of North America: A Global
Energy Powerhouse
Energy Reform in Mexico
Jesus Serrano Landeros
Comisión Reguladora de Energía, México
INTRODUCTION
At the end of 2013, Mexican Constitution was amended allowing
private participation throughout the entire energy sector.
The motivation and objectives of the reform are economic. It
opens to the private sector investments estimated, for the next
three years, in:
•
•
34.3 billion USD for oil and gas (upstream and transport)
31.6 billion USD for electricity.
In July the first oil and gas production sharing contract will be
awarded.
In January 2016 wholesale electricity market will start.
2
THE REFORM WAS URGENT
No more cheap and easy oil for Mexico.
Natural gas self sufficiency lost after 2000.
Natural Gas Demand
(million cubic feet per day)
2000- 2014
Oil Production
2002 - 2013
3,500
7,000
Demand *
6,000
5,000
Production
Imports (right)
3,000
2,500
4,000
2,000
3,000
1,500
2,000
1,000
1,000
500
0
0
*Without oil industry consumption
Source: SIE
3
THE TREND WAS TO BECOME A NET
IMPORTER
Petroleum products monthly balance
2012 - 2014
25
2,000
20
1,500
4
-971.1
-463.2
oct.
jul.
abr.
ene.
oct.
jul.
abr.
-1,000
ene.
0
oct.
-500
-50.8
0
5
2000 2002 2004 2006 2008 2010 2012 2014
2014
500
jul.
10
2013
1,000
abr.
15
2012
ene.
Millions USD
Billions USD
Petroleum products balance
2000 - 2014
ELECTRICITY PRICES WERE HAMPERING
COMPETITIVENESS AND PUBLIC FINANCES
Getting Electricity Ranking
Country
Korea, Rep.
Guatemala
Brazil *
Turkey
Chile
Ranking
1°
18°
19°
34°
49°
Country
Ranking
United States
61°
Argentina
104°
Mexico
116°
China
124°
Russian Federation 143°
Source: World Bank, http://www.doingbusiness.org/rankings
Average Tariff, 2013 1st Quarter
(MX$/KWh)
USA
Mexico
Subsidy
+123%
Real Tariff
+73%
Nominal
Tariff
-25%
Domestic High
Consumption
Commercial
Services
Industrial
Domestic
Source: Sener. SIE. DOE, EIA.
Rates converted to Mexican pesos with an exchange rate of 12.64 pesos/dollar, 1Q2013
Overall
5
OBJECTIVES OF THE REFORM
Oil and Gas
• Materializing
the maximum possible wealth from
natural resources
• Price reduction
• Improving supply
Electricity
• Price reduction
• Improving supply
6
ENERGY REFORM PRINCIPLES
Don not reinvent the wheel.
Legal certainty for new and
previous participants.
Reduce
costs
through
efficiency and competition.
7
ENERGY REFORM PRINCIPLES
Working along
markets rather
against them.


with
than
Potential competition

Free entry
Natural monopoly

Regulated tariffs
Investments promotion and not stopping ongoing
projects
8
PEMEX AND CFE WILL BE JUST TWO
PLAYERS MORE
Private investment across oil, gas and power sector.
Previous to the reform Mexico and North Korea were the
only countries in the world whose energy industries were
state monopolies.
PEMEX and CFE migrate from
public entities to State Productive
Enterprises, with
 modern corporate government
 mandate of value creation
It’s a matter of incentives.
9
OIL AND GAS:
NEW INSTITUTIONAL SET UP
Oil and Gas
Reserves
Exploration and
Production
Refining and Natural
Gas Processing
Transportation,
Storage, Distribution
and Commercialization
The Mexican State,
through SENER,
manages the country’s
oil and gas reserves
(selection of bidding
areas)
Entitlements granted by
SENER to Pemex
(Round Zero)
Permits for refining and
natural gas processing
(including
petrochemicals),
granted by SENER to
Pemex and/or the
private sector
Permits for all
transportation, storage,
distribution and
commercialization
activities through
pipelines, granted by
the Energy Regulatory
Commission (CRE) to
Pemex and/or the
private sector
Service,
profit/production
sharing and license
contracts, awarded by
the National
Hydrocarbons
Commission (CNH) to
Pemex and/or the
private sector
10
NEW ELECTRICITY INDUSTRY STRUCTURE
Generation
System and Market
Operation
Retail
Consumption
Qualified
Users
Cogeneración
Basic
Users
Spot Market
Auctions
PIEs
Long Run
contracts
Private
Supply to
regulated tariffs
and contracts
Transmission
Distribution
11
NEW INSTITUTIONAL ELECTRICITY SETUP
• Independent Operator for
the system and the market
• Network open access
• Especializad bodies
• Clear rules
• Market surveillance
• Impartial planning
• Transparency
A level playing field
12
NATIONAL INFRASTRUCTURE PROGRAM
(NIP) 2014 - 2018
Now
2018
LNG re gasification
terminals in 2014
Pipelines 2014
Pipelines 2018
proposal for natural gas liquefaction /
compression plant
proposal for natural gas re gasification /
decompression plant
Sea route for natural gas supply
New
 18 natural gas transportation projects
 10,000 kilometers of new pipelines
 13.1 billions USD investment
13
MEXICO AND USA ECONOMIES
Improvements in Mexico’s productivity may mean improvements all
over the region because of their economic ties.
US imports
2013
Rest of
the
World,
38.13%
Mexico’s imports
2013
China,
18.02%
Rest of the
World, 16.8%
Canada, 1.5%
Japan, 2.8%
Korea, 2.8
Canada,
Germany, 3.5%
16.88%
Mexico,
14.64%
Germany,
Japan,
5.75%
6.57%
China, 8.4%
, 65.7%
Value of US content in
US imports from
selected Economies
Mexico
40%
Canada
25%
Malaysia
8%
China
4%
European
Union
2%
Japan
2%
Source: Working Together,
Christopher E. Wilson, U.S. 2011.
Source: United Nations Commodity
Trade Statistics Database
14
OIL AND GAS PROVED RESERVES
Crude Oil Proved Reserves
(Billion Barrels)
Proved Reserves of Natural Gas
(Trillion Cubic Feet)
5.2%
14.4% 400
0
175.2
0
173.6
173.2
173.1
308.0
304.6
14.0% 300
0
338.3
334.1
350
5.1%
5.0%
0
250
4.9%
0
200
4.8%
0
13.2% 150
4.7%
100
4.6%
13.6%
0
0
0
0
25.2
10.4
10.4
36.5
33.4
29.0
10.1
10.3
12.8%
50
12.0
17.3
17.2
17.1
4.4%
12.4% 0
0
2011
2012
2013
2014
Mexico
United States
Canada
% World Reserves
4.5%
2011
2012
2013
Mexico
United States
2014
% World Reserves
15
NORTH AMERICA OIL AND GAS FIELDS
Analysis shows that Mexican geological formations are highly
correlated with commercially productive U.S. equivalents. Adding
proximity the most valuable experience for Mexico is that of U.S.
16
INVESTMENT IN OIL AND GAS
Oil and Gas
First invitation to bid
Next 5 years
16.7 billions USD
Second invitation to bid
Next 3 years
4.5 billions USD
Round 1
Pipelines
13.1 billions USD
17
POWER INDUSTRY NORTH AMERICA
OPPORTUNITIES
Clean Energy Certificates could be marketable between
U.S. and Mexico.
Private investors are able to participate in generation,
transmission contracts, distribution contracts, and retail
activities.
There is no power import / export restrictions. It’s possible
to generate energy in U.S. and export it to Mexico.
Last month the first power import authorization from a
plant located in the U.S. and connected exclusively to
Mexican grid was given.
18
INVESTMENT IN ELECTRICITY MARKET
2014 - 2028
Generation
Electricity
Transmission
Distribution
Total
27.1 billions USD
Next 3 years
4.5 billions USD
Next 4 years
92.8 billions USD
19.9 billions USD
10.4 billions USD
34.4 billions USD
42 billions USD
147.1 billions USD
19
REFORM: PROGRESS AND NEXT STEPS IN
ELECTRICITY
2014
2015
October
November
December
February
Guidelines for Clean
Energy Certificates
Assets transfer from
CFE to CENACE
Interconnection
criteria
Wholesale Electricity
Market Rules
2015
March
Clean Energy
requirements for
2018
July
Assets transfer
from CFE to
CENACE
Wholesale
Electricity Market
Operating Rules
2016
October
January
Electricity Market
Software Test
Wholesale
Electricity Market
Starts
20
The Rise of North America: A Global
Energy Powerhouse
Energy Reform in Mexico
Jesus Serrano Landeros
Comisión Reguladora de Energía, México