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Analysis

Shell on Energy Reform

Tue, 01/22/2013 - 10:25

Shell works around the world in extremely different environments and with different contractual conditions. In general we always look for business, intending to create a win-win situation for the country where we operate and for our company. If the Mexican government decides to move forward with any type of energy reform, the key is that the contractual terms are competitive vis á vis the world, and that the fiscal system balances risk and reward. The current fiscal system does not recognize this balance, thus making it hard to undertake high-risk projects. If the country adopts a broader energy reform in 2013 that establishes mechanisms for the potential participation of private investment and by strengthening the state operator, it could achieve industry consolidation and guarantee energy security for future generations. From the private investors’ point of view, our investment capital is finite and many projects within our portfolio are competing for the same funding. Therefore,

natural competition occurs within our evaluation of investment projects in which factors ranging from primary and secondary legislation, contracting schemes, return on investment, and long-term positions, to the ease of doing business in a country, political, social and economic stability, and the geopolitical situation are considered. We have seen in other opening markets that the proper scaffolding within the secondary tier the legal framework supports investments in the long term and attracts a larger amount of domestic and foreign private investment, thus increasing the size of a country’s economy. We are confident that our experience and our relationship with Mexico, developed through a local presence for almost 60 years, will continue to result in future business opportunities. We will closely follow the reform plans, always bearing in mind the possibility of increasing our presence in the Mexican market if the energy reform is approved.