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  FERNANDO CALVILLO
President and CEO FERMACA
New Power:
Efficient and
Clean
For nearly 100 years, Mexico’s energy monopoly limited market activity within the sector to a handful of public–private partnerships that served only to build infrastructure for power generation. The idea of reform to the system was a work in progress. Since the Reforma Energética of 2013, however, the government has “leveled the playing field so that everyone can participate under the same conditions,” says Fernando Calvillo, the President and CEO of FERMACA. Today, both local and transnational companies are rushing to capitalize on one of the most remarkable development opportunities of the century.
Mexico is one of the world’s top oil-producing countries, and its gas reserves hold enormous potential as well. Yet, despite its prospects, it lacks a robust pipeline infrastructure. As Calvillo points out, “The state of Texas alone has 500,000 miles of pipelines; Mexico, with this new generation of pipelines, might touch 20,000 kilometers.” By opening the energy market, the nation hopes to catch up.
Yet, anyone familiar with Mexico’s business culture knows that corruption has plagued past ventures of this magnitude. Calvillo firmly declares that a new day has arrived. To improve transparency, private companies bid for projects on live television. “I don’t know how you can cheat that process,” he notes.
Investment and job creation—by way of the growth of infrastructure—may offer the most effective way to reduce poverty and improve education in Mexico, according to Calvillo. This extraordinary moment in the oil and gas sector may provide just that chance.
 they have in California,” observes David Fatzinger, General Manager, Latin America of energy infrastructure builder InterGen. There may be a body of older, “legacy” plants that can be upgraded, Fatzinger says, as well as opportunities in co-generation, mainte- nance, and renewables.
UNDER THE SUN
Mexico became the second nation to en- act a legal framework regarding global warming when it passed the General Climate Change Law in 2012, which mandated certain minimums for renew- able energy production.
Subsequently, in March 2016 the government held the first long-term auction for the right to provide solar and wind power into the Mexican grid, attracting 69 bidders, of which 11 were selected, from such names as SunPower, Italy’s Enel, and China’s Jinko Solar.
Interestingly, due to the high price of Mexican electricity and the falling pric- es of solar power, “Mexico had reached grid parity in solar energy,” reported a Harvard study. All good, says Andrea Bernardi, country manager at Enerray Mex: “The technology for producing energy needs to be mixed. Look at Colombia and Brazil; dependent on hy- dropower, they have had a debilitating energy crisis due to El Niño.”
RELISH THE RUSH
Mexico is hoping that the country’s abundant opportunities in oil, natural gas, and new power production and transmission will spell high returns for foreign investment. By 2030, 57 giga- watts (GW) of new and replacement capacity are expected to be installed (compared to the existing 68 GW), accompanied by a 25 percent increase in kilometers of transmission grid. This will entail connecting all of Mexico’s sub-grids, connecting its main grid with North and Central America, and
incorporating the latest technologies like smart grids and advanced metering infrastructure. New distribution lines will account for about 60 percent of distribution investment.
Because of the country’s clean energy pledge, the investment market in solar, wind, and other clean technologies is seen to be especially lucrative. Clean energy is expected to account for about half of all investment in generation through 2040. In order to meet the requirements of its clean energy objec- tives, Mexico will require about US$10 billion annually at least through 2040. While non-hydrocarbon generation pro- vides 20 percent of the current supply of electricity, that number should more than double by 2030.
Although oil and gas will account for smaller percentages of energy supply, hydrocarbon sources will be around for years to come, and investment oppor- tunities exist. The monopoly owned by Pemex had severely limited upstream opportunities in oil and gas; this field
is considered wide open for investment right now. Pemex refineries were all built before 1980 and have not been modernized in years. The country is desperate for new refinery capacity so as to lessen dependence on partner- ships with U.S. refiners. The average annual upstream investment from Pemex over the last 10 years has been around US$16 billion; the IEA reckons that this number should be closer to US$30 to US45 billion to meet Mexico’s needs by 2040. New technologies to in- crease output from existing shallow-wa- ter fields, plus new investments in untapped deepwater assets are required to maintain oil production.
The changes brought on by Refor-
ma energética are demanding, for the Mexican population, the government, and investors. There is much to absorb, and many opportunities exist. For now, it definitely does not look like rain for Mexico’s energy parade.
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