Ministry Hopes Bidding Rounds Cements its LegacyWed, 01/18/2017 - 12:45
Q: What role will farm-outs play in PEMEX’s overall future and how can the process be accelerated?
A: Now, PEMEX can share with its partners the geological and financial risks, along with experience and technical and human capabilities. Through these alliances, PEMEX will be able to better manage its portfolio of investments and access financing and cutting-edge technology for the development of those projects in which it has already made initial investments and which, due to the high degree of complexity and the high levels of investment required, had not previously been possible to carry out. This is especially true of deepwater fields, which typically require strategic alliances due to the high risk, high investment and high complexity.
For PEMEX, farm-outs allow it to finance projects, mitigate risks and acquire technology and achieve greater efficiency and competitiveness, as the areas are the result of a competitive, open and transparent process.
Q: What improvements can be made in the areas of contract regulation, administration and investment protection in the upcoming licensing rounds to further attract foreign investment?
A: The Energy Reform brought about a radical and substantial change in the Mexican oil industry. Thus, the participation of the private sector is imminent in the exploration and production of hydrocarbons, which will accelerate and increase the country’s development. We have well-defined objectives and these are to increase production and increase our reserves.
Just as companies participate in exploration and production activities, we also encourage the industry to provide us with feedback, not only on the regulation and administration of contracts, but in all areas we consider to be of interest. We continually promote the exchange of information, generating the right conditions to provide the confidence necessary for companies to express their opinions and, above all, ensuring they know that their proposals are taken into account. We are in a continuous process of Improvement, always adapting to market conditions and offering competitive conditions with respect to other parts of the world where oil blocks are also being tendered. We trust that being a competitive and reliable market is what makes it attractive to invest in the country and this is evident if we observe the evolution of our bidding processes.
Q: What is the Ministry of Energy’s strategy to solidify the legacy of this administration in the oil and gas industry?
A: In terms of hydrocarbons, the predictability of tenders and the reliability of the adjudication of areas are fundamental to guarantee their permanence and future success. For this, a bidding system was designed under the highest standards of transparency, avoiding discretion at all times and involving several institutions in the whole process.
With the Energy Reform, new institutions were created and existing ones strengthened. The National Energy Control Center (CENACE) and the National Center for Natural Gas Control (CENAGAS) function as technical bodies for the formation of energy markets. The Mexican Petroleum Fund (FMP) manages oil revenue, ASEA ensures that environmental safety standards are met, while CNH and CRE have acquired new regulatory powers. All these players define the rules and processes to encourage competition and the arrival of new participants.
There are challenges to tackle to improve the design and day-to-day operation of regulatory bodies. Recently, the OECD published a specialized study, which suggested improving inter-institutional coordination, minimizing duplication and consolidating the legal framework, in particular that set out by ASEA, which consists of 11 laws and 12 regulations.