Page 132 - STRATEGY Magazine

SPECIAL INSIGHT: ENERGY
Mexico’s Energy Sector Beckons on the Global Stage
Mexico’s energy reforms have opened the door for outside investment. At the same time, mandated clean energy goals are changing the shape of the nation’s energy structure. What opportunities do these chang- es portend?
Despite 1,743 miles of coast embracing the oil-rich Gulf of Mexico, as well as abun- dant onshore deposits and tropical sun, Mexico has been a sleeping giant in en-
ergy circles—until recently. Now, with changes in the Mexican constitution, Pemex, the government monopoly in oil production, refining, and market- ing, has taken on a new role, in which it partners with outside investors in oil and gas endeavors. Likewise, the Federal Electricity Commission (CFE), which also held a state monopoly for more than 80 years, has been unbundled into six differ- ent operating entities and opened to much-needed private investment and modernization.
Until recent reforms, Mexico’s energy sector con- sumed capital but fell behind the metrics of many other nations in terms of production. In oft-cited examples of bureaucratic stagnation, production from Mexico’s most prolific oil field, the Cantarell, plummeted 80 percent after 2004, while domestic electricity costs rose to double or more than that of the United States.
REFORMING ITS WAYS
Facing needs for large amounts of capital to up- grade its stagnating energy sector, in 2013 Mexico amended its constitution and embarked on the widely hailed Reforma Energética, which opened the sector to foreign investment and competition. In addition, Mexico moved to include environmen- tal concerns in its energy development plan and to import larger amounts of cleaner-burning and inexpensive natural gas from the United States.
And so the stage has been set for a second revolu- tion in Mexico, of large-scale capital investment in ramped-up oil and energy output, cleaner energy, and a modernized and enlarged infrastructure to
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