Page 152 - STRATEGY Magazine

According to Carlos de Regules Ruiz-Funes, Executive Director of the newly created National Agency for Industrial Safety and Environmental Protection of the Hydrocarbons Sector (ASEA), the agency’s mandate “goes from exploration to the gas pump. There is no other hydrocarbon regulator in the world that has such complex responsibilities.”
INFRASTRUCTURE,INFRASTRUCTURE, INFRASTRUCTURE
While the early rounds of the Reforma promise big things for Mexico’s deepwater oil infrastructure, there is significant need for investment in gas lines and storage as well. Some of this is al- ready happening—a 139 percent increase in gas imports between 2010 and 2015 provoked the construction of “incremental gas infrastructure to bring gas from the United States into Mexico,” according to David Fatzinger, General Manager of InterGen’s Latin American region. Yet this may just be a distraction from the real problem—the lack of large-scale pipelines for domestic production.
Mexico’s gas resources, totaling over 20.4 trillion cubic me- ters of conventional and unconventional reserves, will remain largely untouched until the nation develops the infrastructure to
meet demand. As with the oil sector, Mexico’s leaders hope that increased private-sector participation in natural gas production and marketing brings drastic results. For that reason, Pemex must sell off 70 percent of its natural gas contracts and compete with private organizations.
GLOBAL CHALLENGES
Mexico has acted with admirable care in crafting one of the 21st century’s most notable reform bills, and great dividends are expected. Yet it is worth noting that expansion may be hostage to global conditions as well as local regulations. Santiago Morales of Becquerel Capital agrees with David Shields that renewables are becoming “increasingly competitive” against hydrocarbons. So while the oil and gas industry survived 2016, expectations for 2017 are far from rosy. In the past year, long-term investments worth some $US620 billion were scrapped by major companies in response to the downturn. The fact that the early stages of the Reforma went off so successfully shows that oil giants are eager to capitalize on opportunity in their time of reckoning. The com- ing year will tell just how severe that reckoning will be.
Mexico is only the second country after the United Kingdom to legislate domestic climate promises, stacking the cards against oil and gas producers.
Gas Goes Nationwide in Mexico
DR. DAVID MADERO SUÁREZ
Director General CENAGAS
Mexico is getting serious about natural gas. At present, more than 1,000 kilometers of gas pipelines are being built in the country, and opportunities for further expansion are immense, believes David Madero Suárez, Director General of the state-run organization that oversees Mexico’s national gas pipeline system,
CENAGAS. He says, “There will be major projects coming up in the next five years. There are also opportunities for smaller projects.”
Since 2014, the country has introduced massive energy reforms to open investment in gas exploration and extraction. Today, Mexico has an independent regulatory system and companies that have been active in the sector for years. Madero believes that Mexico has a clear plan that will help it guarantee gas security, which in turn will help bring gas to the entire nation.
Expansion of the pipelines is also expected to boost Mexico’s industrial and social development. Madero explains, “Availability of cheap and reliable energy creates a large difference in the life- style and welfare of the society.” These opportunities are shaping Mexico’s policy for growth in natural gas. A major focus is now on smaller projects to reach communities that have been reliant on LP gas. The Mexican government believes that, over the next five years, a significant fraction of LP gas can be replaced by natural gas without adding costs to consumers.
In addition to pipeline infrastructure, Madero highlights oppor- tunities in hydrocarbon storage and processing. By introducing regulatory reforms and preparing for more energy-related con- struction, Mexico is sending out a clear message that it is ready for an exciting era in natural gas.
“In the next five years, we believe Mexico will have a completely modern gas system in which traders will be buying and selling capacity on the market within Mexico, at prices established in Mexico. That’s a complete vision that was difficult to understand just five years ago.”
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