Mexico s Energy Reform Institutional framework Juan Carlos Zepeda March, 2014 www.cnh.gob.mx
Reserves and prospective resources Basin Accumalated Production Reserves Prospective Resources 1P 2P 3P Conv. No Conv. Southeast 45.4 12.1 18.0 24.4 20.1 Tampico Misantla 6.5 1.2 7.0 17.4 2.5 34.8 Burgos 2.3 0.4 0.5 0.7 2.9 15.0 Veracruz 0.7 0.1 0.2 0.3 1.6 0.6 Sabinas 0.1 0.0 0.0 0.1 0.4 9.8 Aguas Profundas 0.0 0.1 0.4 1.7 26.6 Plataforma de Yucatán 0.5 Total 55.0 13.9 26.2 44.5 28.0 86.8 Billions of barrels of oil equivalent 2
OIL PRODUCTION Despite an increase in investment in exploration and extraction, Mexican oil production has declined from 3.4 million barrels per day in 2004 to 2.5 million in 2012. 3.4 Investment in exploration and extraction (Billions of dollars) 20.7 25 20 3.0 15 11.7 Oil Production (Million of barrels per day) 2.5 10 4.7 5 1.5 0 Price of Mexican Crude Export Mix (Dollars per barrel) www.cnh.gob.mx 3
Million cubic feet per day NATURAL GAS Between 1997 and 2012, natural gas imports increased from 3% to 30% as a percentage of national consumption; this trend has deepened since 2008, due to the decrease of the price of natural gas in North America. 9,000 8,000 7,792 8,007 (100%) 7,000 6,000 Natural Gas Consumption 6,534 5,651 (70%) 5,000 4,576 (100%) 4,000 3,000 4,467 (97%) Natural Gas Production 2,356 (30%) 2,000 1,000 - Natural Gas Imports 1,258 109 (3%) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013* www.cnh.gob.mx 4
Thousands of barrels per day GASOLINE Gasoline imports represented 25% of total consumption in 1997; by 2012, that percentage had increased to 49%. 900 800 752 Gasoline Consumption 811 (100%) 700 600 500 503 (100%) Gasoline Production 455 416 (51%) 400 300 200 376 (75%) 127 (25%) Gasoline Imports 395 (49%) 100 54 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 www.cnh.gob.mx 5
NEW OIL AND GAS MODEL Features of the New oil and gas model E&P contracts for public and private companies. The range of contracts: license contracts, production sharing contracts, profit sharing contracts and service contracts. Permit schemes for midstream and downstream. Institutional strengthening. Basis for solid regulators, CNH and CRE, as well as new attributions for the Ministry of Energy to conduct the hydrocarbons policy Pemex strengthening. Financial autonomy, chance to associate with other companies. New institutional players. The National Agency for Safety and Environment (related to the Ministry of Environment) and the National Center for Control of Natural Gas (operation of the national pipeline system). Mexican Petroleum Fund. Mandate for transparency and public access to all the information. www.cnh.gob.mx 6
ROUND ZERO 1 Pemex will submit to the Ministry of Energy, the entitlement applications for the exploration areas and the production fields that it is able to operate. Pemex will maintain entitlements on: Exploration entitlements. Areas where has made commercial discovers or investments on exploration. Pemex has to submit an Exploration Plan for each of the entitlements (3-5 years period) Extraction entitlements. Pemex will maintain the rights on the field on production. (deadline 21 march) 2 The Ministry of Energy, with technical assistance of the National Hydrocarbons Commission (CNH), shall review Pemex s request, and issue the corresponding resolution. (deadline 17 sept) 3 Once the resolution on the entitlements has been issued, Pemex may propose to the Ministry of Energy the migration of the allocated entitlements into new contracts. The Ministry of Energy with the technical assistant of the National Hydrocarbons Commission (CNH) will migrate the entitlements into contracts www.cnh.gob.mx 7
E&P CONTRACTUAL FRAMEWORK 2 1 Selection of the areas Technical guidelines of the bidding rounds. Technical design of contracts. 4 3 Conducts the bidding rounds. Decides on the winning bids. Fiscal terms of contracts. 7 6 5 Mexican Petroleum Fund for Stabilization and Development makes payments and manages government cash flows. Technical management of contracts. Awards and signs the contracts on behalf of the Mexican State. www.cnh.gob.mx 8
E&P REGULATORY FRAMEWORK Constitutional mandate Technical assistance to the Ministry of Energy Regulating the execution of geological and geophysical services applied to hydrocarbons exploration Authorizing exploration activities Collect, organize and manage the geological, geophysical and operational information of the country Conduct the bidding rounds. Award and sign the contracts Technical management of the contracts and entitlements Supervise the exploration and extraction plans Issue regulation regarding the E&P activities www.cnh.gob.mx 9
TRANSPARENCY AND ANTI-CORRUPTION POLICIES 1 2 3 4 Bidding rounds and their guidelines will be public. Transparency clauses will be included in oil and gas contracts. Full disclosure of all payments associated to oil and gas contracts. External audits to supervise cost recovery and accounting aspects. www.cnh.gob.mx 10
MID AND DOWNSTREAM FRAMEWORK Transportation, Storage, Distribution and Commercialization National Center for Control of Natural Gas New entity in charge of the operation of pipeline system (right now manage by Pemex Gas) Permits for all transportation, storage, distribution and commercialization activities done by Pemex and/or the private sector Refining and petrochemistry Permits for refining and gas processing www.cnh.gob.mx 11
SAFETY AND ENVIRONMENT Upstream and downstream activities National Agency for Safety and Environment Regulate and supervise safety issues as well as the protection of the environment: installations, operations, disposals, Abandonment, among others www.cnh.gob.mx 12
WHATS NEXT March Secondary law April June Resolution for round zero Sept Dec 2014 Pemex proposal First seismic permits Creation of the National Center for Control of Natural Gas June 2015 Kick off First Bidding Round www.cnh.gob.mx 13
Mexico s Energy Reform Institutional framework Juan Carlos Zepeda March, 2014 www.cnh.gob.mx