Strong Ambitions for a Fully Integrated Oil and Gas Presence

Q: Why is it vital for Mexico to have a strong oil and gas industry?

A: The manufacturing industry is vital for the country’s economy and will continue to be no matter what. The chemical industry, as an important supplier to the manufacturing sector, is therefore a key component for the economic growth of the country. For every car that Mexico builds and exports there are US$3,000-US$5,000 worth of chemical products that are essential components. To have competitive petrochemical products, it is a must that our country produce sufficient and competitive natural gas, liquids and crude oil.

Electricity is also an important ingredient for any country that wants to have a strong industry. After the shale revolution in the US, it was clear that every sector in the country’s industry grew, so having a reliable natural gas supply is also logical. These examples are proof of the importance of having and securing the raw materials and sources of energy coming from the oil and gas industry.

Q: What is the status of the permits needed for Tonalli to start operations in the block it was assigned in Round 1.3?

A: All the permits needed before entering into production are extensive. This is good because the country is just opening its E&P sector and is carefully looking for the whole process to be transparent and for every permit to be correctly processed. Truth be told, the requirements of the agencies are reasonable; the problem is that they lack the number of people needed to manage all the information they are receiving. We have received almost all the approvals needed to start operations and expect to start production by June 2018. If we do it, that would mean it would take us almost two years to start production after signing the contract with CNH.

Considering that the Energy Reform was actually intended to be included in the original NAFTA, meaning that it took it almost 20 years to see the light of day, waiting a couple of months to ensure its continuity is no big deal. The future of the oil and gas industry in Mexico is bright but we have to be careful about how to achieve the short and long term benefits we want to achieve. The reality is that it will take five to 10 years at least for the projects brought by the licensing rounds to reach maturity, which shows how important it is to secure the integrity of the investments in the long term.

Q: How would IDESA rate the development of the Mexican midstream sector?

A: It is understandable that the midstream sector is taking longer to develop than upstream, considering all the resources that have been assigned to strengthen the country’s upstream activities. Actually, now we are seeing more companies enter the midstream sector. The Sur de Texas-Tuxpan pipeline project that IEnova is developing to import natural gas is a clear example of the tangible opportunities that the Mexican midstream sector has to offer. Importation of fuels represents a strong market opportunity in the short and medium terms. In our case, we already have activities in the port of Veracruz and are developing facilities to import diesel and gasoline.

Q: How is IDESA supporting the transition of PEMEX into a productive enterprise of the state?

A: As PEMEX has become a productive state enterprise, it no longer has an obligation to participate in the whole value chain of the oil and gas industry. Instead, it can focus on projects that are profitable for each subsidiary. Nevertheless, production from international players will take at least five years to materialize, meaning that in that time PEMEX must keep covering the country’s oil and gas needs. This highlights how vital it is for the country to make sure that PEMEX remains a strong player in the medium and long terms. Of course, this is easier said than done. To support PEMEX, Grupo IDESA takes part in both the ANIQ and CONCAMIN associations to present ideas on how to make PEMEX and the country’s oil and gas industry stronger.