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Bracing for Impact: Mexico’s Oil Reform
In post-reform Mexico, the oil industry prepares for a competitive environment awash in new partnerships and landscapes. Foreign and domestic investors eye the country as an “oil mine,” while residents hope for lower prices and a booming economy.
“Today, Pemex has the flexibility to have partners in the private sector. This is a historic opportunity over the long term.” José Antonio González Anaya, Chief Executive Officer of the 78-year-old
Petróleos Mexicanos (Pemex), is excited about the ongoing prospects stemming from oil reform in Mexico. Prior to this remarkable change, it was impossible to imagine the level of competition and collaboration now possible, “not only in the energy field, but across the entire Mexican economy,” notes the oil executive.
In the post-reform economy, González Anaya says the country has largely accepted the shift. Born in the “oil town” of Coatzacoalcos, he remembers his own upbringing in an oil monopoly. “The things that are happening right now were unthinkable,” he recalls. One of the biggest controversies during the reform process was the idea that foreign companies would take the country’s resources. That worry has been largely ameliorated by the clear benefits of improved competition.
The reform was far from seamless, steeped in debates with more than a little controversy. González Anaya considers the outcome indicative of the country’s maturing political processes. Even with numerous threats of protests against reform, the transition was largely quiet thanks to public discussions designed to inform and share reform details.
LAND OF OPPORTUNITY
Decreasing oil prices on a global scale play a role in big oil company agendas, as do unique opportunities to get in on the ground floor of a newly open oil market. González Anaya notes that the nation is considered to be a fantastic opportunity for oil and gas companies, both local and around the world. In the Gulf of Mexico, where oil reserves have been much less exploited than those of many other countries, fast action is critical for oil companies to partner and invest with domestic firms.
President Peña Nieto and his administration were key in ushering in a golden and historic era, but González Anaya also cites the Federal Electricity Commission (CFE) for the many kilometers of gas pipelines that are slated for construction. The final pipeline system will double the infrastructure that existed at the beginning of the president’s administration. Gas stations owned by a myriad of oil and gas companies will dramatically change not just the country’s oil industry but its appearance and landscape—not to mention how people spend their money. The Secretariat of Energy was also paramount in the transition, encouraging Pemex and all incoming oil companies to be transparent and communicative.
DR. JOSÉ ANTONIO GONZÁLEZ ANAYA
CEO
Petróleos Mexicanos (Pemex)
LESS IS MORE
Most of the population is not aware of the project literally “in the pipelines,” but for many Mexicans, it is tough to ignore falling energy prices. This is an opportunity to nourish the country’s economy. New partnerships are developing rapidly, “something we could not imagine” before reform, points out González Anaya. Mexico simply was not open to having partners. “If we touched oil, it belonged to us.”
Now opportunities exist for startups as well as global giants, from untouched deepwater wells to secondary recovery in the smallest fields. Fields that were extracted years ago with older technologies can now be explored again with state-of-the-art equipment. González Anaya explains that larger companies cannot work little fields, but small companies are perfectly situated to do this type of extraction.
CHALLENGES AHEAD
No reform is without hurdles. One of the biggest concerns is whether all companies will adapt. It is a competitive environment—taking a monopoly and launching new players into the mix is bound to cause some friction. Introducing competition where it never existed demands transparency, new technology, and working closely with key players like the Secretariat of Finance and Public Credit. But as González Anaya notes, “That process is leading us to become more transparent, to be more competitive.”
Now that an unprecedented opportunity for investors has arisen in the field of energy and hydrocarbons, Mexico is preparing to take a place alongside Texas, the largest energy hub in North America. The United States is also the biggest energy consumer in the world, eating up 45 percent of global energy. “Opportunities for Mexico are enormous,” says González Anaya, but patience is required as the country adjusts to this big change. “As Americans say, ‘bear with us.’”
Mexico and Saudi Arabia are roughly equal in geographic size, although historically Mexico has supported five times the population while only exporting 25 percent of the oil.
INTERVIEW: PEMEX
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