The following is the second in a series of summaries of each presentation and panel that took place during the Mexico Oil and Gas Summit last Tuesday, July 1st in the Sheraton María Isabel in Mexico City. To download the speaker’s presentations which have been approved for public distribution so far, which now includes Gabriel Heller’s presentation, click here.
The forum continued with a presentation by SENER’s Director General of Investments, Gabriel Heller, whose presentation dealt with the opening of the oil and gas industry. He began by saying that there is external investment coming to Mexico, but there is also interest in seeing what the domestic market will bring to the table, particularly regarding SMEs. “We should help national SMEs become highly important enterprises that can someday both export their technology and expand overseas.” He stressed that the Energy Reform seeks free competition in which the productive enterprises of the state can participate with other NOCs and IOCs in equal circumstances. This will be achieved by the creation and empowerment of flexible, independent government agencies that give companies legal certainty.
Heller talked about the upstream segment, saying that in Round Zero, PEMEX already gave SENER a list of the fields it would like to keep or develop. In the upcoming Round One, both private and state companies will participate in tenders. However, Heller said that there are discussions regarding the possibility of a pre-qualification round as not all contracts will be the same. “Each contract will have its own rules and the winning company will be the one to offer the best conditions. We are now implementing a process that is new to us and that makes transparency an extremely crucial factor.” Heller says the new scheme will seek 25% of national content annually in E&P projects. The percentage will vary according to each contract. For instance, deepwater projects will seldom require high national content, but the percentage will be leveraged in mature fields and shallow waters.
He explained that in the new model, oil revenues equal to 4.7% of the GDP will go to public expenditure, remaining profits equivalent to 3% of the GNP will go to a long-term savings fund, and the rest will be destined to social programs.
Regarding midstream, Heller reminded the audience that after the Reform industrial transformation is no longer considered a strategic sector. This means PEMEX is no longer the sole responsible party and SENER can grant permits to private actors. He mentioned how the National Center of Natural Gas Control (CENAGAS) has already contemplated expanding infrastructure for transportation and storage. This agency has 18 works for natural gas transportation planned for 2018, involving 10,000km of pipeline and an investment of US$13.3 billion. “We expect these developments to be ready by 2018. This network will be one of the country’s industrial motors.”
Heller talked about gasoline and diesel, telling the audience that he, in representation of SENER, does not feel that the current infrastructure fosters competitiveness. As part of the transition that accompanies the Energy Reform, a maximum price for gasoline will be gradually established from 2015 until 2019. Nonetheless, gasoline prices will adjust to inflation during this period. According to Heller, prices will be liberated and guided by international, markets in 2020. “In 2017 we will start seeing gas stations of foreign companies selling PEMEX products but with differentiating factors. They might import their products, but we will stick to the maximum price scheme until 2020,” explained Heller.