René Ortiz
OPEC (1979-1981)
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PEMEX's Position in an International Context

Tue, 01/22/2013 - 16:44

Q: How does an organization like OPEC allow nonmembers such as Mexico to participate in influencing global energy markets?

A: After the tumultuous years of 1979 and the early 1980s, of oil production shortages and several other threats, oil diplomacy was inaugurated at OPEC. Some of the OPEC gatherings were open to non-OPEC members like Mexico, Russia, Egypt, and Oman, among many others. Frequent dialogues took place between OPEC members, non-OPEC countries, consumer energy watchdogs, and international media, with the objective of establishing a just forum to discuss issues of common interest, and to avoid another energy crisis. Today, this idea is commonplace, and international organizations like OPEC, IEA, OLADE, IEF, and dozens of other institutions hold hundreds of forums year after year.

Q: With a renewed focus on North American energy security, and continued domestic industrial growth, how do you foresee the future of Mexico’s oil and gas sector?

A: The oil and gas industry is a capital-intensive industry. Ever since the first oil crisis, back in 1973-1974, the objective of oil importing countries has been to separate economic growth from energy consumption growth. However, there is no development without energy. The great political challenge faced by the Mexican government is to recognize that the pace of economic development relies upon assured flows of oil, gas, and coal, among other resources. The more of those resources that can be produced locally, the better it is to keep development costs lower.

Q: What are the biggest trends in the global oil and gas industry that have the potential to influence the development of the Mexican market?

A: Even the growth of countries like China, India, and Indonesia will not change the fact that oil and gas is the cheapest energy source available in the international marketplace, and cost of alternative energy sources will inevitably be compared to oil prices. The more high-tech applications that are developed for unconventional oil and gas operations, the better for countries like Mexico, which has huge unconventional oil and gas reserves.  

Q: How does Pemex benchmark against other NOCs and IOCs in a global context?

A: Unfortunately, Pemex is considered a local oil company. Pemex’s international exposure is not considered to be enough to evaluate its international stature. There are several NOCs that enjoy world-class reputations, which are taking advantage of an open marketplace to directly compete with the supermajors. Probably the only di†erence between a NOC and an IOC is the degree of investment in research and development.

Several other NOCs are much more mature in the international oil business than Pemex. Some of them have more than 40 years of international experience, and Pemex has barely even begun. Pemex will have the advantage of analyzing the historical international activities of other NOCs, and will be able to learn from their mistakes.

Q: With expectations for an internal reorganization of Pemex and a Mexican energy reform on the horizon, what do you believe would be the ideal structure?

A: The ongoing trend of NOC restructuring over the last 40 years clearly provides good and successful examples worldwide. ENI of Italy is one of the success stories of e†ective transformation. The original AGIP of 1927 was a 100% state-owned oil and gas company. ENI set the terms for restructuring. The government retained the so-called ‘golden shares’ to manage government interests, up to a range between 30-40%. Statoil of Norway followed a similar pattern. However, the management of the impact of resource wealth on public policy lead to the establishment of several special trust funds, called heritage funds. In the province of Alberta, Canada, similar trust funds have been in place since 1976. In other European countries, similar restructures took place, giving birth to Total of France, Repsol of Spain, OMV of Austria and so on. In Latin America, NOCs like Petrobras in Brazil and Ecopetrol of Colombia have established oil companies along the European model, with a varying amount of ‘golden shares’ to be managed by the government. The ideal NOC structure for Mexico is the Mexican way, following certain basic successful principles for the restructuring of other NOCs from around the world.