Clean and Green

Will the fall in petroleum prices make Mexico’s energy reform less effective in promoting economic growth?

Mexico’s energy reform established a whole new legal and institutional framework, setting the basis for the development of open and competitive markets throughout the energy sector. In the hydrocarbons sector, companies can participate in upstream activities through competitive bidding rounds or in partnerships with Pemex (farm-outs). Current oil prices restrict the investment capacity of all companies in the industry; however, it is important to acknowledge that E&P projects are evaluated based on wider time frames in which current oil prices are not as fundamental. Additionally, a company’s long-term profitability depends on its capacity to add new reserves and maintain its exploratory activity to sustain their business. Mexico has a wide range of oil resources, and the energy reform was carefully designed to improve exploitation. In general, the proceedings of hydrocarbon biddings have distinguished themselves worldwide as being public, transparent, and open to national and international participation, all being streamed live. Clarity in these rules and the new institutional framework have created interest in foreign and Mexican private oil companies, which in return has generated 24 awarded contracts. We are starting to observe the creation of a new ecosystem of companies that have placed their trust in our country, and we expect many more will come.

How would you characterize the importance and potential of electricity co-generation for the Mexican economy?

Co-generation, a procedure to obtain both electric and thermal energy, contributes to saving fuel consumption and increasing economic efficiency of production processes. Additionally, it plays an important role in Mexico’s transition to a cleaner and more sustainable economy. The energy reform encourages the development of efficient co-generation projects through incorporating these technologies into the wholesale electricity market, where generators can compete to sell power at lower costs. Efficient co-generation producers can obtain clean energy certificates, which are financial instruments to promote clean power. Through these financial instruments, Mexico will increase the use of clean energy to reach the national goal of clean generation.

What is the significance of International Energy Agency (IEA) membership for Mexico?

Mexico’s energy reform has brought to date the legal framework to adopt best international practices as well as the shared goals that the IEA drives. In November 2015, Mexico formally applied for full membership to this autonomous organization. For our country, it is highly relevant to have a voice in this forum where major economies participate and outstanding collective actions on energy are decided. As a member of the IEA, Mexico would have access to key information systems for decision making in energy security and sustainability. The IEA is going through a transition process that underlies proactive attitudes and has assumed the leadership in global issues such as energy security, data and statistics, energy policies, transparency of markets, energy efficiency, technology, and renewable resources. Those are the subjects in which Mexico would like to contribute within the IEA.

What are your key plans and goals for the coming three years?

In the next three years, we expect to build a more diversified industrial energy system. Our aim is that hydrocarbon and electric enterprises—either state owned or privately owned—may compete in order to offer competitive prices, higher quality, and reliability in the supply of energy. We will also increase and update the fuel storage and transportation infrastructure, and we expect to install additional power generation capacity as well as build new transmission and distribution grids. The current strategy for power generation is to reduce the use of fossil fuels and boost the transition to clean energy. By 2019, we will have expanded the natural gas pipelines to 84%, which will allow us to gradually substitute pollutant fuels. Our goal for 2018 is that 25% of power generation will be obtained via cleaner energies. To reach this goal, we are encouraging new private investments, mainly through long-term electricity auctions and clean energy certificates.