Page 134 - STRATEGY Magazine

HIGH-TECH TO THE RESCUE?
Of course, a thread runs through all three of these sectors: the need for capital and advanced technologies to unlock the crude. Initial foreign interest in Mexico’s deepwater potential has been lukewarm, but it is building as oil giants become more comfortable with Mexico and as oil-recovery techniques continually improve.
For example, Italian oil giant Eni bid and won three of 10 Gulf of Mexico offshore areas in awarded in a June auction,
the fifth such auction of offshore oil regions under the reforms. Other winning bids were from such multinationals as Royal Dutch Shell Plc, France’s Total SA, and Spain’s Repsol SA, as well as Pemex. The June auction followed a December 2016
bid round for deepwater fields, in which such companies as Total, Japan’s Inpex, Norway’s Statoil, BP, and ExxonMobil won acreage. “All the big multinational oil companies have had someone here for years, and I believe that more will come,” predicts John D. Lawrence, CEO of oil and gas services compa- ny Petricore. He adds that companies like these, as they take more blocks at auction, will need more services from local firms as their operations come into play.
There are prospects for even weightier commitments from oil majors if crude prices recover. The IEA predicts that global oil
demand will hit the milestone 100 million-barrel-a-day mark in the fourth quarter of 2018, up from the current 98.0 mbd range. In November 2016, the agency also announced that it expects oil prices to rise approximately 75 percent from their current level by the end of 2019, as demand again outstrips supply. Moreover, by 2021, shale oil production should begin
to decline in the United States, as the sweetest shale-oil plays get tapped out. More robust development of Mexican crude oil assets is nearly certain if US$80-a-barrel oil becomes the norm again.
PIPELINES, NATURALLY
The surfeit of shale natural gas production in the United States and Mexico’s need to modernize power production away from oil and toward cheaper U.S. natural gas is the very definition of a win-win deal. There are 17 natural gas pipelines leading from the southern United States into Mexico, with more planned, and a more complete liberalization of Mexican natural gas markets is expected by the end of 2017. The IEA estimates that natural gas imports will rise to 50 percent of Mexican con- sumption in 2025 from about 20 percent in 2010.
There is a possibility that Mexico can develop its vast shale natural gas resources—the Eagle Ford field stretches deep into
An “Explosive” Era of Opportunity: Energy in Mexico
OSCAR SCOLARI R.
Rengen Energy Solutions President
Speaking of Mexico’s energy sector, Oscar Scolari R., President of Rengen Energy Solutions, proclaims, “It’s nothing short of dy- namic! No one knows what’s going to happen.” He estimates that, over the next 10 to 15 years, the nation will need an additional
57,000 megawatts (MW) of power, or almost twice as much as its current installed capacity of 60,000 MW. Scolari also says that the grid is “just saturated,” indicating a need to add transmission lines. Mexico’s goal over this period is for 30 percent of its gen- erated energy to come from renewables. Companies from Spain, Japan, Italy, and Portugal—and to a lesser extent, the United States—are already erecting wind and solar farms.
The natural gas infrastructure represents another opportuni- ty in the coming years. Scolari notes that Mexico uses around seven billion cubic feet (BCF) of natural gas per day, two billion of which comes from the United States. “We have a very deficient distribution network for natural gas. We are actually creating a grid for distribution right now that will add 5,000 kilometers of pipeline to the existing system.” He points out that smaller cities and manufacturers may not lie in the direct path of the main pipelines and will need interconnections and storage facilities.
Scolari calls this era of opportunity in Mexico’s energy sector “explosive” and compares it to the 1950s and ’60s in the United States, a period of extraordinary expansion. And speaking of the United States, he believes that the two countries can find a way to work together. “No one can stop our growth. It has its own synergy. It would be a big mistake for the United States not to come to Mexico now.”
The next 15 years will move Mexico from being perceived as a third-world country to being recognized as a powerhouse across North America and Latin America.
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