MEXICO S ENERGY REFORM AND INVESTMENT OPPORTUNITIES

Size: px

Start display at page:

Download "MEXICO S ENERGY REFORM AND INVESTMENT OPPORTUNITIES"

Doreen Atkinson
6 years ago
Views:

1 MEXICO S ENERGY REFORM AND INVESTMENT OPPORTUNITIES NASCO REGIONAL COMPETITIVENESS SUMMIT Corpus Chris8, Texas April 28th,

2 Oil Perspective Hydrocarbons revenues represented 32% of the federal budget in Investment has increased and production has declined. Source: Secretaria de Energia 2

3 Gas Perspective Mexico: 6 th largest gas reserves. Demand has increased. Imports: 30% of consumption in Source: CNH 3

4 OTHER IMPORTANT REASONS FOR THE REFORM: - Underdeveloped hydrocarbon infrastructure - Lack of investment in research and development - Expensive electricity rates (average rates in Mexico are 75% above rates in the US) - Mexico imported 50% of gasoline 4

5 Objectives: HYDROCARBONS ELECTRICITY Promote investment and technology development Creation of an open electricity Market To have access to deepwater and unconventionals fields Increase market competitiveness to offer better prices Increase production Incentives to clean energies 5

The reform Constitution December 2013 Articles 26, 27 and 28 and 21 transitory articles to provide framework Key aspects: Allow private participation in areas reserved to the State in hydrocarbons

6 The reform Constitution December 2013 Articles 26, 27 and 28 and 21 transitory articles to provide framework Key aspects: Allow private participation in areas reserved to the State in hydrocarbons and electricity New energy institutional framework Free market access and direct and fair competition between state and private companies Secondary Laws (implementing legislation) August New Federal Statutes 12 Amended Laws Presidential Rules October Presidential Rules 6

7 New institutional framework Regulatory Agencies National Hydrocarbons Commission Energy Regulatory Commission Environmental and Industrial Safety Agency Energy sector coordinator: Department of Energy System Operators State Productive Enterprises Gas Grid CENAGAS PEMEX Electric Grid CENACE CFE Research Institutes Petroleum, Electricity and Nuclear Budget and Financing Department of Finance National Petroleum Fund 7

8 Oil and gas: Mexico s productive basins Source: PEMEX, January

9 Shale resources in Mexico Source: IMP 9

Important legal distinctions Surface rights In

Federal law Negotiation process with landowners

Federal Government In the USA transfer, mining

10 Important legal distinctions Surface rights In Mexico the energy sector is regulated only by Federal law Negotiation process with landowners Bidding process for E&P contracts with Mexican Federal Government In the USA transfer, mining and drilling is regulated by State law Mineral rights 10

New hydrocarbons E&P regime Mexico retains ownership of hydrocarbons BOOKING OF THE RESERVES Private companies and PEMEX will be allowed to book the estimated reserves of the blocks they have under

11 New hydrocarbons E&P regime Mexico retains ownership of hydrocarbons BOOKING OF THE RESERVES Private companies and PEMEX will be allowed to book the estimated reserves of the blocks they have under E&P contracts for accounting purposes Mechanisms to transfer the property of the hydrocarbons (at the wellhead) Entitlements to SPE s Exploration and Production Contracts (E&E) through open bids Private Companies 11

12 Round Zero: areas and highlights August Entitlements 22 Migration of Contracts 10 Farm-outs PEMEX got 83% 2P reserves 21% Prospective Resources Source: SENER 12

Round One: areas and highlights August 2014 169 blocks 109 exploration 60 production First tender 12/14 14 blocks in shallow

13 Round One: areas and highlights August blocks 109 exploration 60 production First tender 12/14 14 blocks in shallow waters Winning Announcement July 2015 Second Tender 03/15 9 blocks in shallow waters Winning Announcement September 2015 Source: SENER 13

14 March 2015 April 2015?? April 2015 May 2015?? 9 Production areas Source: SENER 14

E&P contracts: fiscal and financial terms First and second tender E&P Contracts for

Hydrocarbons Profit Sharing Contracts Cash Service Contracts Cash How do contractors get

month 61 (km 2 ) How the government gets paid?

15 E&P contracts: fiscal and financial terms First and second tender E&P Contracts for Shallow Waters Licenses In kind Hydrocarbons Production Sharing Contracts In kind Hydrocarbons Profit Sharing Contracts Cash Service Contracts Cash How do contractors get paid? Signing Bonus Contractual fee for exploratory phase (km) Royalties $1,150 / $2,750 month 61 (km 2 ) How the government gets paid? Compensation based hydrocarbon value Compensation based on operating income MPF ISR Fee for Exploration and Production $1500 E / $6,000 P(km 2 ) Taxes 15

16 Round One: Bidding Process Progress 16

17 Land use Surface rights must be negotiated and signed into contracts with individual landowners or communal land representatives (ejidos). Negotiation process should be completed in days. No confidentiality clause. Landowners will be eligible to be compensated as follows: 1. Rent value 2. Fee for projected damages 3. For E&P contracts. After making payments to the government, a percentage of the commercial production: 0.5% - 2% Oil 0.5% - 3% Gas 17

Land use Process Negotiation process will consider the following: Values of reference (market value, property rights)

Attorney General (Federal) Testimony or statements of social witnesses Other payments to the landowner: rent, compensation,

Release of land and vacation of premises and remediation of land NEGOTIATION (180 Days) Process to be validated A contract

Y E S CONTRACT/ ASSIGNMENT SIGNING Contractor will notify SEDATU and SENER.

Land Development AGREEMENT N O Legal easement is formed through judicial resolution?

18 Land use Process Negotiation process will consider the following: Values of reference (market value, property rights) Professional appraisal(s) (INDABIN, others) Fiscal and financial terms included in the E&P contracts Advisory from Agrarian Attorney General (Federal) Testimony or statements of social witnesses Other payments to the landowner: rent, compensation, and total revenues. Release of land and vacation of premises and remediation of land NEGOTIATION (180 Days) Process to be validated A contract will be signed for land use Y E S By Judge or Agrarian Tribunal MEDIATION (30 Days) A contract will be signed for land use Y E S CONTRACT/ ASSIGNMENT SIGNING Contractor will notify SEDATU and SENER. The negotiation process will begin between landowners and contractors SENER: Department of Energy SEDATU: Department of Land Development AGREEMENT N O Legal easement is formed through judicial resolution? Contractor will request a mediation to SEDATU 2 appraisals will be compared if the difference is -<15% the payment will be the average of the 2 appraisal values. If the difference is <15% a third appraisal will determine the value AGREEMENT N O SENER may request to SEDATU the administrative creation of a legal easement 18

E&P contracts and national content National content requirements are established to promote the participation of national and local suppliers to promote the growth of national industry.

19 E&P contracts and national content National content requirements are established to promote the participation of national and local suppliers to promote the growth of national industry. The general rule is that hydrocarbons projects should have at least 25% of domestic content. That goal will be gradually increased until reaching 35% in Deep and ultra-deep water projects will be determined later. 19

20 Gas infrastructure: maps (projected) 18 new projects 10,000 Kms billion dollars expected investment More imports from TX Source: SENER 20

21 Regasification LNG terminals Los Algodones San Luis Río Colorado Sásabe San Isidro Samalayuca Ojinaga Waha Operating gas pipelines Gas pipelines operating in 2014 Gas pipelines in construction Gas pipelines tenders (CFE) Gas pipelines projected Lasalle Colombia Webb Laredo Sur de Texas La Laguna Escobedo Los Ramones Durango Aguascalientes V. Reyes Naranjos Mérida Cancún Guadalajara Tula Tuxpan Cempoala Lázaro Cárdenas Jáltipan Acapulco Salina Cruz Tapachula 21

22 Gasoline, Diesel and LPG GRADUAL OPENING OF THE MARKETS Gasoline & diesel 2016: CRE starts issuing permits to independent service stations (no Pemex franchise) 2017: SENER begins issuing import permits to private companies 2018: Prices determined by the market LPG 2016: Regulation transferred to CRE; SENER starts issuing import permits to private companies 2017: Prices determined by the market (with focused subsidies: still 35% of residential energy consumption) 22

23 ELECTRICITY SECTOR POWER GENERATION TRANSMISSION DISTRIBUTION COMMERCIALIZATION AND SUPPLY Power Generation is no longer a Public service Permits National Electric Grid Reserved as public service OPERATE NATIONAL TRANSMISSION GRID Contracts and associations Qualified Consumers 1<MW 3 rd year Permits Basic Consumers Subsidized

24 ONSHORE SHALE GAS BASINS OF EASTERN MEXICO SIMILARITY WITH TEXAS GEOLOGICAL CONDITIONS? 18 WELLS IN MEXICO 3255 WELLS IN TEXAS

25 Gas infrastructure: Texas and Mexico 43,000 miles in TEXAS 7,000 Miles in MEXICO

26 Fracking in Mexico: Recommendations for Hydraulic Fracturing Regulations SOCIAL LICENCING Smart Regulations to build public trust. Importance of reporting, transparency and data management. 26

27 AEM BI- NATIONAL ENERGY COMMITTEE OUR MISSION To facilitate the exchange of opportuni2es and interconnec2vity among companies in the US and Mexico doing business within the energy sector.

28 HOW TO DO BUSINESS IN MEXICO / UPSTREAM RESERVED OR GRANTED TOPEMEX E&P CONTRACTS Services Proﬁt Sharing Produc2on Sharing Licenses FOREIGN CAPITAL ALLOWED UP TO 100% *Requirement to do business in Mexico in this sector as a legal en8ty created under Mexican laws JOINT VENTURES WITH PEMEX AS INDEPENDENT INVESTOR IN ASSOCIATION WITH PEMEX IN ASSOCIATION WITH PRIVATE PARTNERS DOMESTIC AND INTERNATIONAL NEW MEXICAN OIL AND GAS COMPANIES Petrobal

29 DATE% ASOCIATIONS% OBJECTIVE% AMOUNT% FOREIGN% COMPANY% MEXICAN% ENTITY% USD% USD% August& 25 th,& 2014& October&& 15 th &2014& & October& 26 th,& 2014& January& 12 th &2015& February& 19 th &2015& March& 12 th &2015& March& 26 th & 2015& March& 30 th& 2015& April&1 st & 2015& April&7 th & 2015& April&15th&! April& 2015& GDF&Suez&North& America& (USA)& Nustar&Energy& (USA)& Chevron& (USA)& ABENGOA& (Spain)& SEMPRA& (USA)& Energy&Transfer& Partners& (USA)& Black&Rock&and& First&Reserve& (USA)& Northcote&& (USA)& OENOKPartners& (USA)& First&Reserve!! (USA)& Citla&Energy&&& ACON! Investments(& (USA)& ATCO&Gas&and& Pipelines& (Canada)& PEMEX& PEMEX&PMI& PEMEX& CFE& PEMEX&Z& IEnova& CARSO& PEMEX&/&PMI& Gaia& Ecológica& FERMACA& Construction&of&Los&Ramones&Phase&II.& 291&Kilometers&from&San&Luis&Potosi&to& Apaseo&El&Alto,&Guanajuato& Expansion&of&a&previous&agreement&to& transport&and&store&naphtas&from& Reynosa,&Tamaulipas&to&Edinburg,&TX&& Operations&to&begin&on&April&2015& Collaborative+agreement+for+ beneficial+ projects)for)both)parties & The$Norte$III$Power&Plant&Project& Design'and'Construction'of'a'combined' cycle%plant& JV#To#pursue&LNG&Liquefaction( capability)at)the)energía!costa&azul& Plant&(other&partners&to&be&added)& Expand'operations'in'Mexico.'Gas' pipelines.(143(miles(of(pipelines& Los&Ramones&second&phase:&462&Miles& of&gas&pipelines& JV#for#oilfield#services,#environmental# remediation,+waste+water+treatment+& Build&Cross&border&Gas&Pipeline&& Roadrunner*Gas*Transmission* Pipeline & $&1&B& & & $700&M& & $767&M& $600&M& $900&M& $500&M& $500&M& PEMEX& Infrastructure,,Sea,Transport& $&1&B& Citla&México& JV#to#explore&opportunities&with&a& focus&on&exploration&and&production& activities& CFE& Construction*Gas*Pipelines*Ramal%Tula& $65.7&M& & OIL AND GAS PROJECTS ASSOCIATIONS, JOINT VENTURES AND PARTNERSHIPS ANNOUNCEMENTS FROM AUGUST 2014 TO APRIL 2015

30 DATE% ASOCIATIONS% OBJECTIVE% AMOUNT% February( 20 th (2015( March(5 th ( 2015( March(5 th ( 2015( March( 26 th (2015( April(20 th ( 2015( FOREIGN% COMPANY% Pattern( Development( (USA)( ACCIONA( (Spain)(( Enel%Green% Power!( (Italy)( EAWC% Technologies( (USA)( Aljaval( (Spain)( MEXICAN% ENTITY% CEMEX% Energía( CEMEX%and% Fisterra( Energy( CFE$And$ General( Motors( Tecnologías# Verdes( TecnoC ambiente(( JV#to#develop#renewable#projects#to# generate!1000#mw#of#renewable#power( Install'200'MW'of'Solar'Power'and'wind' farms&in&the&country.&award&of&a&grant&of& InterCAmerican)Development)Bank)(IDB)( Wind(projects(in(Oaxaca( Build&wasteCtoCenergy&plant&in&the&state&of& Chiapas( JV#received#a#CRE#(Energy#regulatory# Commission)(Permit(for(six(solar(projects( in#coahuila,#baja#california#norte#(160" MW)$and$Chiapas$(60MW)$( ( ( $160(M( ( ( RENEWABLE ENERGY PROJECTS ASSOCIATIONS, JOINT VENTURES AND PARTNERSHIPS ANNOUNCEMENTS FROM AUGUST 2014 TO APRIL 2015!

and Business Roadmap on How to do Business within the

31 Economic Impact Study in the States of Coahuila, Nuevo Leon, Tamaulipas and Veracruz including Legal Analysis and Business Roadmap on How to do Business within the energy sector in Mexico in light of the recent Energy Reforms

32 JORGE CANAVATI Logis2cs ARTURO ACOSTA Supply Chain Integra2on THANK YOU! We look forward to working with you ALEJANDRA BUENO Chair AEM Bi- Na2onal Energy CommiXee JAVIER SMITH Vice Chair Energy CommiXee SUBCOMMITTEES XAVIER HURTADO ENRIQUE DUHNE Hydrocarbons Sub- CommiXee FRANCISCO SORIANO Human Capital Development VICTOR QUIÑONES Energy Technology Development JORGE SANCHEZ Renewable Energy BEATRIZ C. MANEY Energy Finance

Third Quarter 2015 Financial Results

Third Quarter 2015 Financial Results October 23, 2015 Information regarding forward-looking statements This presentation contain statements that are not historical fact and constitute forward-looking statements