Pedro Joaquin Coldwell
Minister
Ministry of Energy
/
View from the Top

Energy Reform Demands Best International Practices

Wed, 05/02/2018 - 10:51

Q: In what ways has the Peña Nieto administration transformed the Mexican oil and gas industry?

A: The Energy Reform’s main achievement is its high level of transparency and accountability. The licensing model for E&P contracts has been adjusted over time to make it more competitive, transparent and internationally attractive. The hydrocarbons licensing system has allowed us to reach 67 percent in contract allocations with 107 awarded contracts from 161 offers, and with no complaints from participating companies. Moreover, we have had an average 74 percent government take. The expected economic spillover from these contracts amounts to US$161 billion and around 900,000 direct and indirect jobs in the country’s oil regions. New entrants into the market have created a highlydiversified hydrocarbons industry with 73 operators from 20 countries, ranging from the world’s most renowned IOCs to 34 new Mexican companies founded after the reform’s approval. The upcoming tender for Rounds 3.2 and 3.3 will take place in September and will contribute to these outstanding results.

Q: How will the Energy Reform impact final consumers?

A: The reform’s vision is to provide competitive energy prices through the creation of regulated markets. We are carrying out the largest expansion of the National Pipeline System to transport natural gas to a wide range of new regions at competitive prices. The incipient fuel market has also opened to competition, providing consumers with an offer of around 40 new brands. Over time, this will imply better services, competitive prices and greater efficiency for the benefit of Mexican consumers.

Q: What is your evaluation of PEMEX’s transformation into a productive state enterprise, the migration of COPFs and CIEPs and the acceleration of the farmout process?

A: The Energy Reform has provided PEMEX with the necessary tools to build associations and to venture into technologically-challenging or financially-robust projects along with partnering companies. The reform has provided PEMEX with the possibility to compete for E&P contracts in CNH’s licensing rounds and the NOC has obtained 11 contracts in partnership with seven IOCs so far, with a projected investment that totals US$17.5 billion. Additionally, PEMEX has been awarded three independent contracts that prove its capacity to win blocks on its own. Another mechanism granted to PEMEX after the reform refers to the possibility of migrating its concessions from Round Zero to E&P contracts, individually or through farmouts. This alternative has proven to be successful for the NOC after completing its first deepwater farmout in Trion with BHP Billiton at an estimated investment of US$7.6 billion. It also carried out two onshore farmouts with Cheíron Holdings for the Cárdenas-Mora field and with DEA Deutsche for the Ogarrio field, with an estimated investment of US$127 million and US$96 million, respectively. These three farmouts represent investments of US$7.8 billion, or 72 percent of PEMEX’s capital investment for 2017. Regarding the migration of CIEPs and COPFs contracts, PEMEX has successfully concluded two processes and it is in the process of finishing three more during 2018.

Q: What is the ministry’s message to private operators in light of Mexico’s political transition during 2018?

A: The licensing rounds under the new regulatory framework have been the most transparent in the national industry’s history. Such high levels of transparency guarantee their continuity and that they will transcend political or electoral cycles. The awarded contracts are shielded by the fact that CNH is the only entity with the legal capacity to rescind them. Rescission clauses have been pre-established in the contracts and operators were aware of them from the beginning. These include clauses for unjustified unfulfillment of investment commitments, serious accidents and irreversible damage to production and/or facilities. They are all related to violations in complying with the contract