Data Must Drive Decisions, Not Sentiment: Brilliant Energy

Q: What has been the key to the success of Brilliant Energy Consulting in Mexico, and how is the company prepared to meet the country’s specific context?  

A: As our name suggests, we are a consultancy composed of highly skilled professionals capable of seeing beyond the obvious and the literal of policymaking. We provide comprehensive consulting services that integrate strategic intelligence with legal expertise. Our approach involves a deep analysis of the law, reading between the lines to uncover the origins of decisions, anticipate their evolution, and assess whether regulations are likely to become more restrictive or permissive.  

Our insights are based on a deep understanding of decision-making behaviors, independent of direct connections with policymakers. This approach allows us to accurately forecast public policy developments and the enforcement of legislation. Over the past six years, we have focused on risks, given the uncertain regulatory landscape, while we also offer solutions to the same

Q: What are your current views on energy demand and how can the change in the US government reshape the landscape?  

A: With Donald Trump’s recent election victory, potential shifts in policies related to tariffs, homeshoring, domestic investment incentives, and a possible renegotiation of the USMCA could impact Mexico’s energy demand. An economic slowdown driven by these policies could lead to decreased energy consumption, underscoring the importance of scenario planning. 

If the United States remains Mexico’s main trading partner, and FDI continues growing alongside domestic demand, energy requirements are likely to increase. However, our current installed capacity for both hydrocarbons and electricity might fall short of meeting that demand.  

Conversely, a recession could leave us with sufficient capacity but lacking resilience, a challenge we faced last year. The issue was not only insufficient power generation but also the inability of the existing infrastructure to withstand extreme events, such as heatwaves. Mexico remains heavily dependent on US fuel and natural gas imports. If the United States prioritizes LNG exports to Europe or Asia over expanding natural gas supply to Mexico or developing local liquefaction facilities, this could pose significant challenges for the energy sector. Such a policy shift could strain bilateral relations, with US companies playing a critical role in shaping the outcome. Ultimately, the future will depend on the evolving political and trade decisions in both countries and Mexico's ability to adapt and plan for these uncertainties.

Q: How strong is Mexico’s stance in terms of an LNG negotiation?

A: Mexico's main vulnerability lies in the socio-environmental sphere. Liquefaction terminals are being built in Mexico because many US communities oppose having them on their territory. This reflects the “Not in My Backyard” phenomenon, where communities reject infrastructure perceived as polluting or disruptive to their surroundings, both physically and visually.  

Mexico offers sites perceived as less stringent regarding environmental regulations, although this does not imply a lack of oversight. Land use and project approval depend on both environmental authorities and rights holders, who may be ejidos, communities, or private landowners.  An example is the Mexico Pacific project, which has faced significant delays due to security concerns and socio-regulatory challenges, highlighting the complexities of developing energy infrastructure in Mexico.

Q: What is your assessment of investor confidence in Mexico, and what is the most pressing issue for these players?

A: The current outlook is marked by significant uncertainty. While the proposed constitutional reforms are not entirely negative, Mexico has become more closed to private investment. The most pressing issue is the weakened state of key institutions like CFE and PEMEX. When I first entered the sector, PEMEX produced 3.5MMb/d, with 2.5MMb/d coming from Cantarell alone. Today, Cantarell produces only around 60Mb/d, a significant decline. I am skeptical of the reported 1.8MMb/d, as the figures likely include condensates, other liquids, and potentially overestimated results.  

The weakening of CFE and PEMEX stems from poor management that predates López Obrador's administration. Over the years, no government has effectively addressed the challenges facing these key institutions. Instead, decisions have often been driven by political risk management rather than strategic long-term planning.  

For example, the last viable opportunity for a PEMEX IPO and possibly for CFE was in 2013, when both were still considered financially viable. The reform proposed by former president Felipe Calderón ultimately failed because PEMEX was already under significant strain. The 2013 reform had a broader scope but was curtailed due to external factors. Structural reforms of that magnitude need more than six years to produce results. However, as public perception shifted and a new administration took office, much of the progress was discarded.  

Q: What does the integration of autonomous bodies and autonomous technical capacity mean for the energy sector?  

A: Given the current circumstances, proposed changes could represent an improvement. Both CNH and CRE operate separately from SENER, functioning as collegiate bodies, yet there is evident disorder. 

Integrating these bodies under a single ministry carries its own risks, as it could overwhelm SENER. While the current minister appears moderate, the inclusion of more radical figures could create further instability. MORENA itself is divided, with factions based in Tabasco, Mexico City, and Veracruz, each in conflict with the others.  

In such a context, a collegiate body could result in chaos. A more effective approach could be a decentralized agency model, like ASEA, operating under a balanced SENER. Although this might seem less democratic or more centralized, it would be more functional than the current fragmented regulator, where individual members often serve external interests.  

Q: What do you think Sheinbaum’s development hubs will bring to Mexico, and where do you see the main challenges in their implementation?

A: The core issue is funding. I fully agree that Mexico's development is uneven. It is promising that the presidency is focusing on the southeast region, with initiatives like the Interoceanic Corridor. However, for these projects to succeed, they require intelligent, transparent, and efficient financial management. Additionally, policies must uphold the highest ethical standards to prevent corruption. Ensuring strong governance will be crucial for the success of these initiatives. 

Q: What advice would you give to companies evaluating the feasibility of investing in Mexico and to those already established here facing these changes?  

A: My advice is to avoid being overly pessimistic or optimistic. Base your decisions on solid data and remain flexible. Prepare for the worst but stay hopeful that better outcomes are possible. Unforeseen events are occurring, such as the judicial reform. This has shown that nothing is immune to extraordinary institutional or legal changes, even after 50 years of stability.

Brilliant Energy Consulting focuses on providing services related to energy transition and sustainability. The company advocates for cost-effective emissions reductions, the development of cogeneration projects, and the incorporation of renewable energy sources.