Juan Carlos Zepeda Molina
President Commissioner
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CNH’s Priorities as Newly Empowered Regulator

Mon, 09/01/2014 - 14:38

Q: Prior to the Energy Reform, what were CNH’s main achievements prior to the Energy Reform that prepared it to face its new mandate and operating environment?

A: CNH has long issued norms for matters pertaining to hydrocarbon exploration and production that were not regulated before the Commission was created. As a consequence of the introduction of gas flaring regulations, this practice saw a 90% decrease in Cantarell. By reviewing and properly approving PEMEX’s reserves reports and certifications from 2000 onwards, it became possible to align reserve quantifications with international best practices. CNH was able to issue rulings and recommendations on 48 ongoing exploration and production projects, as well as 23 new projects and developments undergoing substantial changes. CNH also gave its technical opinion on seven request procedures for surface exploration. Strategies to accurately measure hydrocarbon volumes and quality throughout the entire value chain were implemented in order to reduce uncertainty. Regarding industrial safety, the issued regulation established requirements related to risk prevention and mitigation plans and procedures, contingency prevention through financial coverage, and contracting of containment services in case of an accident or spill, as well as certifications for personnel, equipment, and procedures. Additionally, the Commission gave its technical opinion on the drilling of 11 deepwater and ultra-deepwater wells in the Gulf of Mexico.

CNH also provided the industry with reliable information, publishing statistical data, indicators, and information analysis on hydrocarbon exploration and exploitation, economic data, reserves, gas flaring, spills, and leaks on its website. This information is openly available to the general population, researchers, universities, and companies in order to promote the analysis and study hydrocarbon related matters. CNH created request forms in order to coordinate the terms and conditions under which PEMEX delivers technical information, put together a geological information record that publishes technical information about PEMEX’s exploration processes, as well as an oil record that provides more transparency to the agreements, resolutions, rulings, and opinions CNH issues. In addition, CNH is responsible for publishing technical studies on recovery factors, enhanced recovery methods, technologies used in the oil and gas industry, and analyses on project risk and profitability. These highly specialized analyses provide important elements that contribute to improvement of the Mexican oil and gas industry.

Q: What do you see as the main challenges in the transformation of CNH from being a public sector focused institution to becoming an open market regulator?

A: One of the main challenges CNH faces is to build the institutional capacity that it needs given its future responsibilities as a public sector institution. The second challenge that takes most of our attention is the development of the National Center of Hydrocarbon Information (CNIH), which we will need to create from scratch. The CNIH will hold the available geologic information as well as information to be collected from exploration activities and new discoveries.

Q: What is CNH’s mandate in the selection of fields and exploration areas that will be awarded to PEMEX in Round Zero, and which selection criteria will be used?

A: For those exploration areas in which PEMEX has made discoveries or investments, the oil company will be able to continue its activities for three years with a maximum extension of two additional years based on its financial plan and execution capabilities. If PEMEX succeeds in its endeavors, it will be able to continue with production operations. Otherwise, the government will take the assigned areas back. Regarding the awarding of existing fields, PEMEX will keep those fields that were in production at the time the Energy Reform was passed. PEMEX has to present an investment and operational plan in which it details a competitive and efficient production proposal. Assignments will determine the allowed operational depth, in case two subsurface reservoirs are located in the same geographical area in which extraction activities are to be carried out as separate projects.

Q: What are the objectives against which CNH will benchmark its 2014 achievements?

A: CNH has two clearly defined objectives. First, we are striving to help SENER in successfully completing Round Zero. Second, we will establish the foundations for Round One in 2015.