Processing Magazine

Mexico mulls more private ownership of energy resources

June 25, 2013
mclein/iStockphoto/Thinkstock
View of Guanejueto City, Mexico. Most analysts believe Pemex will continue to be the primary owner of Mexico's hydrocarbon resourcs. (iStockphoto/Thinkstock)

Mexico is set to announce reforms to its energy sector in August and local and international experts have speculated about what form the changes would take. However, most agree that bold steps are needed to keep up with the huge progress of Canada and the United States.

This view was shared by industry experts at the Woodrow Wilson Center for International Studies forum. Ernesto Marcos Giacoman, co-founder and partner at energy industry consultants Marcos y Associados, commented that the oil and gas revolution in North America has a profound effect on Mexico's energy sector. If the country does not act quickly in response to changing conditions, there is the risk of Mexico losing its competitiveness as more local companies will build facilities in the United States where they can take advantage of lower prices and cheaper feedstock, he explained.

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Juan Pardinas Carpizo, general director of the Mexican Institute for Competitiveness, stated that many Mexican companies have been holding back investments from the national oil company Petroleos Mexicanos (Pemex) until they see the reforms proposed by the government and decide whether they are good enough for their business, Oil and Gas Journal reported.

According to Duncan Wood, director of the Wilson Center's Mexico Institute, the presidential elections in December were won by Enrique Pena Nieto partly because of his pledge to reform Mexico's energy sector and make it more competitive. He also promised to press ahead with legislative changes relating to the country's financial policy, the news source noted. While it is still not clear what the exact reforms will be, there seems to be a general consensus that there is an urgent need for changes, Wood said.

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Many analysts believe that Pemex will continue to be the primary owner of Mexico's hydrocarbon resources but Marcos said that reforms might concern production-sharing contracts. It is predicted that downstream private investment is likely to be allowed. In addition, the national hydrocarbons commission could be granted more regulatory power, Marcos commented.

Pardinas noted that Pemex has a full monopoly of the industry, controlling the entire chain from wells to retailers, and saying that even Cuba was more competitive in that respect.

It is also possible that Mexico could explore shale gas deposits near the border with the United States, in an area that is believed to be an extension of the Eagle Ford field, Marcos speculated.