Friday, July 26, 2013
Mexico’s energy landscape is rapidly being transformed by the boom in U.S. natural gas production — and no company may be better poised to profit than a Mexico unit of San Diego-based utility holding company Sempra Energy.
Infraestructura Energética Nova, better known as IEnova, has emerged as a key investor and strategic partner in Mexico’s rapid expansion of its natural gas transport network.
Gas interconnections are being added at the U.S. border and pipelines extending south, as Mexico races to keep up with rising electricity needs while retiring costly oil-burning power plants.
Shortfalls in electricity generation in Mexico led to 22 critical alerts last year in which industrial users were asked to reduce natural gas consumption, according to Mexico’s energy ministry, costing the economy an estimated $1.5 billion. Without significant investments, the power shortfall is forecast to grow.
Under that panorama, Sempra has recognized an outsized business opportunity in Mexico, where it already has invested $2.4 billion in energy infrastructure projects.
Eager to make new investments, Sempra took its Mexico holdings public in March on the Mexican stock exchange, raising roughly $600 million.
IEnova shares now trade about 50 percent above the initial offering price, with quarterly results due out today.
Sempra retains an 81 percent interest — now worth about $3.7 billion.
The offering built on suspense surrounding a push by Mexican President Enrique Peña Nieto and his political allies to open investment in oil and gas exploration 75 years after the sector was nationalized.
Nearby IEnova assets include a 600 megawatt natural gas power plant outside Mexicali that delivers power to San Diego area utility customers. The company placed turbine orders earlier this year for the first phase of a wind farm just south of the U.S. border at La Rumerosa that could eventually extend for a hundred miles along the windswept high plains of Baja California.
Current construction projects include a major natural gas line leading south from Arizona through Sonora and Sinaloa states — an effort designed to unlock economic and industrial growth in a region stymied by energy constraints.
“It involves over 500 miles of route, so there’s right-of-ways, there are permits, there are interconnections with the U.S. border, there are interconnections you have to do with certain power plants as you go,” said George Liparidis, CEO of Sempra International, which oversees businesses in Mexico, Peru, Chile and Argentina. “It is complex … but that’s our core competency in Mexico. If you look at what we have been doing the last 15 years, it is licensing, developing and building and operating pipelines.”
At the opposite end of the country, IEnova is part of a joint venture building an ethane pipeline across portions of Chiapas, Tabasco and Veracruz states designed to invigorate Mexico’s petrochemical industry.
In its biggest bid for business to date, IEnova is seeking a leading role in the construction of the 750-mile Los Ramones natural gas pipeline from the Texas border through the rugged Huasteca region into Guanajuato state. The company already is part of a joint venture building the first short segment, and is preparing a bid on the lengthier second phase — a nearly $2 billion proposition.
On future bids in Mexico, IEnova expects to compete with well financed international energy concerns such as TransCanada, Kinder Morgan, Elecnor and GDF Suez. Mexican oil and gas monopoly Petroleos Mexicanos may keep some future projects to itself.
Sempra’s entrance into Mexico started in earnest after legal reforms to Mexico’s energy sector in the 1990s opened up private investments in the storage, transportation and distribution of natural gas and in electric power plants with some restrictions.
The company helped build the natural gas transmission backbone for Baja California state, with tie-ins to the U.S. network, as power supplies switched over from oil to natural gas.
On major, capital intensive investments in Mexico, Sempra’s subsidiaries have proven adept at building and operating assets — pipelines, power plants and compression stations that make gas flow — that are backed up by long-term contracts with large, credit-worthy companies.
Sempra’s biggest infrastructure project to date in Mexico — the $1.2 billion Costa Azul natural gas terminal on the Baja California coast at Ensenada — is backed by contracts extending through 2028 with clients including Anglo-Dutch multinational Royal Dutch Shell and Russian oil and gas giant Gazprom. Those agreements have proven to be a crucial hedge for an underused terminal.
Costa Azul opened in 2008 on the eve of a U.S. natural gas “fracking” boom using hydraulic fracturing and horizontal drilling techniques that free gas reserves deep underground by injecting pressurized, chemical-laced fluids.
Expected deliveries to Costa Azul have been diverted to Asian markets, where prices are now several times higher than in the U.S.
IEnova parent company Sempra is among the companies racing to open the first gas export terminals in the lower-48 states for liquefying and exporting natural gas at its existing Cameron import facility in Hackberry, La.
Costa Azul is a future candidate for conversion to LNG exports, Sempra executives say, though hurdles exist. Mexico, for instance, has no experience or oversight standards for that kind of liquefaction facility, Liparidis said.
If Mexico were to successfully unlock more natural gas reserves, IEnova’s infrastructure holdings are well positioned.
“They have their own resources that they want to develop — south of Texas there are some of the same (natural gas) fields,” Liparidis said. “This same infrastructure can facilitate gas going north or south.”
IEnova’s growth prospects are tied, above all, to a new mindset about natural gas, according to Liparidis.
“The factor that has changed is that people believe that gas is very abundant and can be produced very economically in North America,” he said. “And they feel more comfortable about making these capital intensive decisions because they know the commodity is going to be there for a long time at a good price.
Thursday, July 25, 2013
Below is the schedule of the Institute of The Americas' upcoming energy forum.
The cost to attend is $10 per person.
Energy Reform in Mexico 2013
20 August - La Jolla
Weaver Center/Malamud Conference Room
3:00 Registration & Welcome Coffee
3:30 Opening remarks – Charles Shapiro, President, Institute of the Americas
3:45 Energy reform in Mexico: Outlook for 2013
Panel discussion on the prospects and challenges for energy reform, featuring:
Carlos Manuel Rodríguez, Mexico City Bureau Chief, Bloomberg News
Pedro Haas, Principal, McKinsey & Co
Marcelo Mereles, Partner, EnergeA Structura
Jose M. Larroque, Partner, Baker & McKenzieModerated by: Jeremy M. Martin, Director, Energy Program, Institute of the AmericasThe panel will address the most salient issues raised in the reform debate, including
What is politically feasible in 2013? What can realistically be achieved in the coming months and what remains to be done?
What should the Peña Nieto administration aim to achieve and what are the administration’s options with regards to constitutional and non-constitutional changes?
Have Pemex’s mixed results with integrated service contracts aided the reform effort? Are these a feasible model for other segments of the energy industry, such as shale development and deepwater?
What are the implications of the various reform proposals for the country’s electric power sector?
Has the slight economic downturn affected the opportunity for reform – in a positive or negative way?
What does the potential for energy reform mean for the US, particularly for natural gas?
5:30 Wine and Cheese Reception on the Institute of the Americas Plaza
From The Nogales International: Border card for Americans in the works in Mexico, mayor’s office reports
Mexican immigration officials are developing a card to make it easier for people from the United States to travel in the country’s northern border states, according to the office of Nogales, Sonora Mayor Ramon Guzman.
Guzman led a delegation to Mexico City last week that included Tucson Mayor Jonathan Rothschild and Pedro Yucupicio, chairman of the Pasqua Yaqui tribe in Arizona. On Thursday, they met with Ardelio Vargas Fosado, commissioner of the National Immigration Institure (INM), and told him of the bureaucratic headaches faced by businesspeople, workers and members of the Pasqua Yaqui tribe who cross from Arizona into Sonora on a regular basis, according to Guzman’s office.
In response, Vargas told the group that the INM is working to create a Tarjeta de Visitante Regional Fronterizo del Norte y Trabajador Fronterizo, or Northern Border Region Visitor and Border Worker Card, which would be valid for five years and would allow access to all areas of northern border states such as Sonora.
He said the card could be implemented as soon as three months from now, Guzman’s office said in a news release.
Currently, U.S. citizens can travel in Mexico’s immediate border area, including Nogales, Sonora and the beach resort of Puerto Peñasco (Rocky Point), Sonora, without documents other than a U.S. passport or passport card.
However, visitors to Sonoran cities further south, such as Hermosillo, San Carlos and Bahia de Kino, are required to obtain a FM-M tourist permit from the INM for stays up to 180 days. And business travelers must obtain a form known as the FM-N that’s good for 30 days.
OTTAWA - Foreign Affairs Minister John Baird welcomes his Mexican counterpart — Jose Antonio Meade Kuribrena — to Ottawa for talks later today.
A Mexican official, who spoke on condition of anonymity, says the two ministers will begin laying the groundwork for a possible visit to Mexico next year by Prime Minister Stephen Harper.
The two countries will celebrate two milestones in 2014 — the 20th anniversary of the North American Free Trade Agreement and 70 years of bilateral relations.
The official says Baird and Meade Kuribrena are to discuss further ways to deepen economic co-operation.
Harper paid host to Mexican President Enrique Pena Nieto last November just days before he was formally sworn in to office.
Baird visited Mexico in February and is expected to play a greater role in Canada's engagement with Latin America after the recent cabinet shuffle did away with the portfolio for the region that usually went to a junior foreign minister.
JOSE ANTONIO MEADE
Published Thursday, Jul. 25, 2013 10:41AM EDT
During the first years of the implementation of the North American free-trade agreement, commentators argued that it in fact stood for two bilateral agreements: the first between Canada and the United States, and the second between the United States and Mexico. This has now become an outdated point of view. Today, almost twenty years after its implementation, NAFTA is no longer considered a two-part deal between three countries. NAFTA is both a mirror and a motor of a far more integrated North American region.
Mexico City, Jul 24 (EFE).- Mexico's economy will gain strength in the second half of this year and finish 2013 with gross domestic product growth of 3.1 percent, Moody's Investors Service said.
The forecast from the U.S. credit-rating agency is in line with the latest projections from Mexican officials, who said domestic and external factors caused the economy to slow in the first half of this year.
"The Mexican economy has decelerated recently, but the current softness is more a product of cyclical deceleration and growth should resume toward the second half of this year and will, in fact, be stronger next year," Moody's Investors Service said.
Mexico's GDP should grow 3.1 percent this year and 3.5 percent in 2014, Moody's Investors Service assistant vice president Alonso Sanchez said.
"After the global economic crisis, many companies increased their cash reserves and extended maturities via refinancings," Moody's said.
These moves should help companies easily cover short-term, long-term and operating funding needs with cash and lines of credit until the end of next year, Moody's said.
Wednesday, July 24, 2013
Top the presses.... a whopping total of 13 carriers participating in FMCSA cross border program.
A 13th carrier is joining the U.S. pilot trucking program with Mexico, and some trucks and drivers participating in the program have been placed out-of-service.
The Federal Motor Carrier Safety Administration will admit Sergio Tristan Maldonado, DBA Tristan Transfer, to the cross-border program. The FMCSA made the announcement in a July 22 post responding to the concerns of the Advocates for Highway and Auto Safety over Tristan’s Pre-Authorization Safety Audit.
Applicants must pass these audits and meet additional criteria. The Advocates failed to show sufficient problems with Tristan’s PASA to pose a safety risk, the agency wrote.
In the program’s recent weeks, GCC Transportes, Transportes Monteblanco and Baja Express each had one truck placed out of service. Additionally, the agency cited two driver for hours-of-service violations for Servicios Transportes Internacional y Local.
Also, Adriana de Leon Amaro and Transportes Mor became the first two carriers to fail the Pre-Auhorization Safety Audit. The FMCSA has dismissed 14 applications and three more carriers withdrew applications.
Program participation currently consists of five carriers with permanent operating authority and seven with provisional authority. Decisions are pending on two additional applicants, Road Machinery and Transportation and Cargo Solutions DBA Tracso.
The District of Columbia appeals court has not indicated if it will rehear the consolidated case made by the Owner-Operator Independent Driver Association and the Teamsters union. On April 19, the court ruled to allow the agency to continue the program.
In a separate litigation against the program, the same court has not issued an opinion following OOIDA’s May 6 oral arguments. Program drivers are not required to have a medical certificate from the National Registry of Medical Examiners, while American CDL holders must have certificates issued by this U.S. registry, the association stated.
The pilot program has set a precedent, albeit for intercity bus service, the FMCSA told Congress June 21. Mexico now will allow Greyhound to provide transportation between two locations in one Mexican city. Previously, Mexico had refused the bus company’s application until the long-haul trucking dispute was resolved between the two nations.
Since the program began nearly two years ago, participants have made 4,820 border crossings. GCC Transportes had the most with 2,962 crossings, followed by Servios De Transportes Internacional Y Local with 349.
Program participants have undergone 1,605 inspections. GCC Transportes received with 813, while Servios De Transporte Internacional Y Local underwent 349 inspections.
Tuesday, July 23, 2013
Wednesday, July 17, 2013
Businesses in southern New Mexico could see up to $56 million in new spending in the next year by Mexicans, thanks to a change in border-crossing rules that took effect Friday.
Under the new rule, Mexicans with crossing cards became eligible to travel up to 55 miles into New Mexico, up from just 25 miles previously, without obtaining any additional permission from U.S. Customs and Border Protection.
Arrowhead projects between $28 million to $56 million in new spending by Mexicans annually -- and 170 to 340 new jobs.
"It will have small but positive impacts on the region," said NMSU economist Jim Peach. "We project an increase in both retail and wholesale activity, as well as spending at hotels, restaurants and the like."
If New Mexico aggressively markets the state's attractions to Mexican travelers, the impact over time could rise a lot more.
"We made the state Tourism Department aware that this initiative was coming last year. It's now actively marketing New Mexico in northern Mexico," Barela said. "I've also met multiple times with Mexican officials to make them aware of it."
Tuesday, July 16, 2013
MEXICO CITY (Reuters) - Mexican President Enrique Pena Nieto said on Monday he expects to see 4 trillion pesos ($300 billion) in spending on major infrastructure projects aimed at beefing up the country's economy during his six-year term.
Pena Nieto said public and private investments in transportation and communications infrastructure would reach nearly a third of that total, at an expected $1.3 trillion pesos ($100 billion) between 2013 and 2018.
The long-awaited plan will fund new highways, rail lines and telecommunications infrastructure, as well as port upgrades that will help improve logistics for the country's exporters.
"One of the key components for transforming our country is developing infrastructure the length and breadth of the country," Pena Nieto said in a speech in Mexico City.
Mexico's last six-year plan involved about $200 billion in spending and analysts expect the new plan to include greater involvement from the private sector. The government did not give details on the breakdown between public and private investment.
The president wants to boost investment in Mexico to ramp up economic growth to around 6 percent a year from an average of barely 2 percent since the millennium began.
Part of that project involves opening up state oil monopoly Pemex to more private investment, though Pena Nieto has yet to provide details of the plan, which is to be submitted to Congress by early September.
"In our opinion, we think the investment program ... presented today will have a very positive impact on the Mexican economy from 2014," said Alejandro Cervantes, an economist at Banorte.
The president said 582 billion pesos would go to transportation-related projects, while 700 billion pesos would go toward developing telecommunication infrastructure.
Earlier this year, Congress approved a reform of the country's telecom laws aimed at opening up the sector to greater competition and allowing more foreign investment.
The government also restated its desire to close Mexico's "digital gap," although details were thin.
Only about 20 percent of the population has a broadband subscription and just under 40 percent has Internet access.
Including investments by state-run energy and water companies, infrastructure spending during his six-year term could reach 4 trillion pesos, Pena Nieto said, though he did not detail plans for energy sector spending.
Among the government's other plans were two new satellites to be put in orbit, a tender process for two new national television networks and 15 new highways.
But the government did not commit to building a new airport for Mexico City, as many had speculated, saying only that it would continue to analyze the options.
Friday, July 12, 2013
Discussions of rising economies usually focus on Asia, Africa and the BRIC countries—Brazil, Russia, India and China. But what may well be the most important development of all is often overlooked: the arrival of North America as a global powerhouse. What's going on?
The North American Free Trade Agreement was signed by U.S. President George H.W. Bush, Canadian Prime Minister Brian Mulroney and Mexican President Carlos Salinas in 1992. It was ratified in the U.S. thanks to the leadership of President Bill Clinton in 1993. Since then, the integration of the three economies has proceeded at a sharp pace. Consider:
The three countries constitute around one-fourth of global GDP, and they have become each other's largest trading partners. Particularly notable is the integration of trade. A 2010 NBER study shows that 24.7% of imports from Canada were U.S. value-added, and 39.8% of U.S. imports from Mexico were U.S. value-added. (By contrast, the U.S. value-added in imports from China was only 4.2%.) This phenomenon of tight integration of trade stands apart from other major trading blocks including theEuropean Union or East Asian economies.
Tighter trade integration has been accompanied by a staggering level of legal movement of people. Total intra-North America movement is 230.8 million annually—over half stemming from same-day travel between the U.S. and Mexico alone. Looking just at overnight tourism, Canadians made 21.3 million trips to the U.S. in 2011 and spent $23.9 billion. U.S. visitors made 11.6 million trips to Canada and spent $7.7 billion. Mexican visitors made 13.5 million trips to the U.S. and spent $9.2 billion. U.S. visitors made 20.1 million trips to Mexico and spent $9.3 billion. (Mexico is the top outbound destination of U.S. travelers.) Legal border crossings for trucks in 2010 amounted to 10.7 million between the U.S. and Canada, and 9.5 million between the U.S. and Mexico.
The three Nafta countries together account for $6.63 trillion in total exports and imports. They have among them free-trade agreements with 50 other countries and there is massive overlap among them. The U.S. is now engaged in negotiations for a free-trade agreement with Europe. Mexico already has such an agreement, and Canada is close to one.
North America, with the U.S. in the lead, is the world's center of creativity and innovation. Any measure will do: new companies formed, Nobel Prizes received, R&D spending, attractiveness to high talent from anywhere, patents issued, and numbers of great universities.
Meanwhile, the energy picture is being transformed by the innovative use of horizontal drilling in the process called fracking. North America is on its way to being a net exporter of energy. The implications for geopolitical developments are vast. North America will have security of supply no matter what happens in the Middle East or elsewhere.
Meanwhile, the North American energy trade is itself notable: $65 billion annually between the U.S. and Mexico and over $100 billion annually between the U.S. and Canada. Cross-border infrastructure and markets for crude oil, refined products, natural gas and electricity increasingly enable the integration of both conventional and emerging forms of energy across the three economies.
Even more important than fracking are the potentials for new ways of producing energy and ideas for using energy more effectively. The promise of these new developments will emerge from the research and development under way at universities and companies in North America. Much of this research is funded by a combination of government and industry money. When good ideas do emerge, the system means that organizations are on hand that know how to scale and commercialize them. Through this R&D, North America can lead the way to a more environment-friendly outlook for the production and use of energy.
The fundamental determinant of productivity of people stems from their education. In the U.S., Canada and Mexico, there is a wide disparity in average K-12 achievement scores, even though, in all three countries, there are plenty of examples of outstanding schooling. In math, Canada is clearly and by far the best of the three countries in K-12 education. The U.S. lags considerably behind Canada, and Mexico is even further behind.
There are continuing efforts in all three countries to improve performance, and the potential for raising living standards is enormous. If the K-12 attainments of students in the U.S. and Mexico were to rise to the level in Canada, the average paycheck in the U.S. could grow by 20% per year. In Mexico, the increase in the average paycheck would be off the charts.
Addictive drugs present our continent, particularly the U.S. and Mexico, with a pressing problem. Every aspect of their use and sale has been criminalized in the U.S. The results are high prison rates in the U.S., high profits for drug dealers, and criminal activity in Mexico, Central and South America as drug cartels, with money and guns from the U.S., wreak havoc in many countries. Deaths in Mexico associated with the drug war have been estimated at around 60,000 over the past five or six years.
The U.S. should vigorously adopt the view expressed by Nancy Reagan in her address to the United Nations in 1988. She said that "if we cannot stem the American demand for drugs, then there will be little hope of preventing foreign drug producers from fulfilling that demand. We will not get anywhere if we place a heavier burden of action on foreign governments than on America's own mayors, judges, and legislators."
There needs to be an open debate on this subject in the U.S. and with our North American partners. We should examine the efforts by other countries and find better ways to deal with this savage problem.
Concerning immigration in North America, it should be noted that with fertility in Mexico declining, and an expanding Mexican economy that is now more than competitive with China in many ways, net immigration of Mexicans to the U.S. last year was zero. Meanwhile, approximately 70% of the people who work on farms in this country are immigrants, legal and illegal. The U.S. needs them. All this underlines the importance of sensible reform in the U.S. immigration system.
People often ask me what Ronald Reagan would think of this or that subject. In the case of immigration, we don't have to speculate. On Jan. 19, 1989, in his last formal statement at the White House, he said:
"We lead the world because, unique among nations, we draw our people—our strength—from every country and every corner of the world. And by doing so we continuously renew and enrich our nation.
"While other countries cling to the stale past, here in America we breathe life into dreams. We create the future, and the world follows us into tomorrow. Thanks to each wave of new arrivals to this land of opportunity, we're a nation forever young, forever bursting with energy and new ideas, and always on the cutting edge, always leading the world to the next frontier.
"This quality is vital to our future as a nation. If we ever closed the door to new Americans, our leadership in the world would soon be lost."
Mr. Shultz, a former secretary of labor, Treasury and state, and director, Office of Management and Budget, is a distinguished fellow at Stanford University's Hoover Institution.
Thursday, July 11, 2013
By Nacha Cattan and Veronica Navarro Espinosa - Jul 10, 2013
Mexico is on the cusp of opening its energy industry to outside investment as a wide consensus has developed that the constitution must be changed to end the government’s monopoly on production, according to a board member of state-controlled oil producer Petroleos Mexicanos.
The country needs “very deep” reforms to lure investment to its natural gas and crude fields after eight years of declining oil output, and proposed changes could be ready by the end of summer, Hector Moreira, who also is a former official in the country’s Energy Ministry, said today at the Bloomberg Mexico Conference in New York. A congressional bill to open the oil monopoly would prompt as much as $50 billion in annual investments if approved, he said.
Much-needed changes will open the way for faster growth and a stronger currency in the region’s second-largest economy, Gray Newman, Morgan Stanley’s chief Latin American economist, said at the event. Officials from JPMorgan Chase & Co. and Grupo Financiero Banorte said they’re optimistic President Enrique Pena Nieto will lead a successful effort at reforms this year.
“This administration doesn’t only have the willingness, but the political power and political capital” to enact the changes, Gabriel Casillas, Banorte’s chief Mexico economist, said. Casillas said he was “very bullish” on the peso, the best-performing major currency against the dollar this year, and that investors hadn’t yet priced in the reforms.
A slowdown in economic expansion is putting pressure on Pena Nieto to gain approval to open the energy industry and change laws to boost tax collection, reforms he says may lift growth to 6 percent.
“We need far more investment, we need capacity in production and we need technology,” Moreira said. “We need to transform the energy sector in a very deep way. I think now is the time.”
The ruling Institutional Revolutionary Party has the ability to pass the key bills, which will attract investment and bolster Mexican markets, according to Eduardo Cepeda, the senior country officer for JPMorgan in Mexico.
Mexico’s stock market may slump 10 percent if none of the promised reforms are carrier out this year, Cepeda said. Still, that could present a buying opportunity because the structural changes will eventually get done, he said.
The IPC stock index has dropped 8.4 percent this year, compared with declines of 25 percent for Brazil’s benchmark, 12 percent declines in Chile and a 15 percent fall in Colombia.
Yields on Mexican government bonds due in 2024 have climbed 1.35 percentage points in the past two months through yesterday to 5.83 percent as banks from JPMorgan to Barclays Plc cut Mexican growth forecasts and prospects for reduced U.S. stimulus sparked outflows from emerging markets. Average yields on local-currency developing-nation debt rose 0.5 percentage point in that span, according to Bank of America Corp.
Mexico’s peso has “a lot of upside,” Douglas Smith, director of emerging-marked fixed income research at TIAA-CREF Investment Management, said today at the conference. The peso is at a good entry level for medium- and long-term investors, said Gerardo Rodriguez, managing director at BlackRock Financial Management Inc.
The peso weakened 0.4 percent to 12.9478 per dollar at 2:12 p.m. in New York, extending its drop this year to 0.6 percent.
Barclays predicts the economy will expand 2.5 percent this year, the weakest pace since it shrank 6.2 percent in 2009 and below the 2.9 percent forecast by analysts in a Bloomberg survey. JPMorgan predicts GDP will climb 2.8 percent this year. Mexico’s 1.7 percent annual growth in the past five years is about half the rate in Brazil.
Pena Nieto said in an interview in London last month the passage of education and telecommunications bills earlier this year and the formation of an alliance between the country’s leading political parties signals there’s momentum to adopt more reforms.
He said his administration will send bills to overhaul energy and tax policies to lawmakers when regular congressional sessions resume in September. The 46-year-old former State of Mexico governor said he’s confident the so-called Pact for Mexico alliance between his ruling Institutional Revolutionary Party, or PRI, the opposition National Action Party, known as the PAN, and Democratic Revolution Party, or PRD, will ensure the energy bill is approved by Congress before year-end.
Mexico is seeking to attract capital for deep-water and shale deposits found in the past decade as reserves dwindle in Cantarell, the 1976 oil discovery that ranked among the world’s largest. Mexican law prohibits Pemex, as Petroleos Mexicanos is known, from profit-sharing agreements with other companies for exploration, extraction and refining.
“Pemex would benefit from competition,” Moreira said at today’s conference. “There is nothing more efficient to make a company more competitive than to have competition.”
Pemex, the source of funds for about a third of Mexico’s federal budget, was founded after Mexico expropriated assets from U.K. and U.S. companies and changed its constitution to assert control over its energy resources in 1938.
While Pena Nieto hasn’t said whether his energy law proposal would require amending the constitution, Juan Molinar Horcasitas, a spokesman for the opposition PAN party, said July 8 the party is set to push for changes to the country’s charter. Mexico City’s former mayor, Marcelo Ebrard, has said his opposition PRD party should “strongly” oppose Pena Nieto’s oil plan, which would have state-owned Pemex develop certain fields, with others being tapped by foreign and private companies.
‘Eve’ of Reform
Optimism over legal changes is helping push up growth expectations for next year to 4 percent, according to the median estimate of economists surveyed by Bloomberg, with Mexico forecast to expand more than Brazil for a fourth year. A pick-up in the U.S. economy and passage of new laws will boost investment in Mexico while falling commodity prices won’t hurt the nation as much as Brazil, according to Citigroup Inc.
“We are on the eve of a narrative-changing constitutional reform in energy,” Morgan Stanley’s Newman said today.
Mexico’s energy reform “has already started” and international companies are preparing capital for potential investment, Guido Cerini, managing director at Credit Suisse, said today at the conference.
“When you go to Mexico, for the first time ever, you have the feeling that something will happen,” Cerini said.
Wednesday, July 10, 2013