Tag Archive for: México

Mexico’s Billion Dollar Oil Industry Ripe for the Picking

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Baystreet Staff / May 22

 

It may have taken the better part of a century, but Mexico figured out that their state-owned energy monopoly, PEMEX, was a business model that just wasn’t working out. After hammering out legislation in 2013 to denationalize the nation’s oil and gas industry, the worst thing that could happen, did; oil prices collapsed, and companies globally hit the brakes on spending. What was expected to be the opening of floodgates to invest in arguably the biggest energy opportunity today didn’t happen quite as expected. With oil prices climbing to fresh three-and-a-half year highs, all that is changing and the Mexico’s oil space is starting to heat up with investment of $150 billion now secured.

As it happens, investors’ conservative approach worked perfectly in favor of Steve Hanson and his team at International Frontier Resources Corp. (TSX-V: IFR) . “We knew that we were heading to Mexico for the first onshore licensing round to build the cornerstones of our operations,” Hanson said in a phone call with Baystreet.ca. “We were in a strong financial position with a clear mission to become the next energy leader in Mexico. Others staying on the sidelines as oil bottomed in 2016 really worked to our benefit as a first-mover in Mexico’s energy reform.”

The savvy leadership at IFR, formed an equal partnership with a Mexican petrochemical giant, as a result, this Canadian company became the first foreign-owned joint venture (JV) and independent oil company to actively explore onshore opportunities in Mexico in over 80 years. Through its strategic JV, IFR is also the first foreign company to complete the regulatory review and drill onshore conventional oil in Mexico under license contract. You’d think it would have been a major like Halliburton (NYSE: HAL) or Baker Hughes (NYSE: BHGE) or Schlumberger (NYSE: SLB), companies that were already working in the area as service providers to PEMEX, but it wasn’t. It was a little $30 million market cap. company that was nimble enough to beat everyone to the punch.

“We weren’t afraid of the price of oil. Not even at the $40 per barrel that oil was fetching at the time; we knew we could still make money based on our expertise and interpretation of the geology,” said Hanson. “At $70 oil, we’re obviously excited with our position, ” he added.

Confident for Good Reason

Hanson’s confidence isn’t unfounded. He has over two decades of well-grounded experience in finance and corporate development, serving as chairman and managing director at the award-winning equity money management firm Van Arbor Asset Management before selling it with a sizable payout to the ZLC Private Investment Management in 2008. Next he was the CEO and president of PanAsian Petroleum that was sold profitably to Ivanhoe Energy, shortly after Hanson took charge. Likewise, that was followed by serving as a director at Lion Petroleum, a company focused on oil and gas in East Africa which was then acquired by Taipan Resources.

IFR’s management team is the embodiment of success and has experience across the finance and energy spectrum throughout the globe, including COO and director Andy Fisher, who has a history of taking companies with negligible assets to robust oil and gas production. For instance, he founded Arcan Resources and grew it from no production to 4,000 barrels of oil equivalent per day (boe/d), before the company was sold to Aspenleaf Energy Ltd., in June 2015 for CDN. $300 million. He was also VP, international contracts and negotiation, at Pacalta Resources Ltd. (“Pacalta”) in Ecuador, where he helped in growing the company from 100 boe/d in production to roughly 45,000 boe/d. In 1999, Alberta Energy Co., the predecessor to EnCana’s (TSX: ECA) (NYSE: ECA), bought Pacalta in a deal worth approximately CDN. $1.0 billion!

For the sake of brevity, the profiles of everyone contributing to IFR’s future can’t be covered; however, it certainly is worth mentioning that Colin Mills, an independent director at IFR, has more than three decades of diverse international experience in power generation, including building two power plants in Mexico, which adds to the local advantage of IFR in terms of navigating the regulatory environment in Mexico.

The commitment and confidence of these individuals to IFR is best recognized based on the fact that insiders hold more than one-third of the company’s outstanding shares.

It’s this experience and dedication at IFR that led to the formation of Tonalli Energia, a 50-50 JV between IFR’s Mexican subsidiary, Petro Frontera S.A.P.I de CV, and Mexican petrochemical giant Grupo IDESA. As a first mover, the partnership and its in-country experience gives Tonalli a serious competitive edge to catapult it forward into becoming the next energy leader in Mexico.

The Tecolutla Project – Now a Producer!

Imagine every bit of oil in Texas was controlled by one company for the last 80 years. That’s a rough analogy for what has been going on in Mexico. It’s explored enough (both on- and offshore) to know that there are tremendous reserves, possibly comparable to the all-resilient Permian Basin, but woefully little with respect to extracting oil and gas. Right now, Mexico ranks as the Western hemisphere’s third largest oil producer and host of the fourth largest known oil reserves.

Those could be conservative positions in the future considering Premier Oil last summer made a major offshore discovery in a block next to Talos Energy and Sierra Oil and Gas that is estimated to hold in excess of one billion barrels of oil that possibly extend into the adjacent block. This was discovered through the first shallow water offshore exploration well drilled since denationalization. Shares of Premier rocketed higher with the find. “Few think of Mexico in the same terms as Saudi Arabia, despite the fact that Mexico has similar quantities of hydrocarbon resources,” argued a recent report published by Manhattan Institute for Policy Research. However, this is about to change with higher oil prices and growing investor interest.

Lending further credence to Mexican oil potential, IHS Markit thinks the country’s untapped Tampico-Misantla Basin on the east coast of Mexico could be one of the world’s next “super basins.” Part of the basin includes the massive Poza Rica oil field, estimated to contain 3.8 billion boe, and IFR’s Tecolutla project which has now commenced completion operations for its recently drilled TEC-10 well.

The Tampico basin is known to have geology similar to the prolific North American basins, with stacked conventional and unconventional pay zones. In fact, IFR recently drilled 138 meters of reef thickness at its directional evaluation, TEC-10 well. It is also known that such basins tend to have “halo” zones of tight oil (light oil that is easily produced) surrounding them, this may be supported by the limited amount of exploration that has so far occurred at Tecolutla.

Seven wells were drilled between 1956-1972, with a well with last recorded production rates in January 2016. IFR announced the completion of a successful workover of a legacy TEC-2 well which was tested for production for a total of seven days and far exceeded management expectations. The well reported an average flow of 125 barrels of oil per day which was more than 13 times higher compared to last recorded production on the well! Newly drilled TEC-10 is next to test for production rates which is the most exciting moment for IFR JV since its inception!

IFR was awarded the block in May 2016 with no cash payment, merely a royalty agreement which offered one of the most favourable terms in comparison to the royalties on other blocks offered during the bid round. Furthermore, Export Development Canada (EDC) backstopped IFR by putting up the company’s portion of the performance bond required by Tonalli, allowing the company to conserve its cash, while lending a great deal of validation to the project. IFR ended the first quarter of 2018 with $2.81 million in cash and cash equivalents and no debt.

The first drill rig penetrated the ground in April, reached depth of 2,453 meters total vertical depth and was cased for production testing this month which was a historic moment for the Mexican oil and gas sector. Several points stand out when looking at the disclosed results, namely the fact that visible oil was noticeable from the core and the fact that oil was hit at deeper levels than oil was ever produced in the zone historically, indicating the El Abra reservoir at Tecolutla could have greater volume than ever believed.

Moreover, IFR, via Tonalli, is using modern exploration technology at Tecolutla for the first time. IFR is using the first-ever 3D seismic data shot for the whopping 81-billion-barrel Chicontepec formation with the aim of helping better understand Tecolutla field.

The beauty of the rock, according to Hanson, is not just that it is apparently flush with oil, but naturally fractured as well, making horizontal drilling easy, without the need for fracturing that draw the ire of environmentalists. These characteristics mean that the drilling is low cost, to the extent that Hanson believes the company can produce profitably at a cost of less than $20-$25 per barrel.

The Upcoming Catalysts

IFR is presently working on production testing, continuing analysis of the wireline, image logs and core analysis, refining the 3D seismic model and identifying the next drill target. The JV is looking ahead to the second tender of Round Three of bidding for projects (scheduled for September 27, 2018). Given the surge in value that Premier Oil experienced with its find, any positive data regarding the initial drill hole underpinned by historic production, should energize IFR shares and likely drive the attention of the investment community.

“We started IFR and moved aggressively in Mexico with the purpose of building a billion-dollar company,” Hanson added during the call. He continued, “We are very proud of being a first-mover in what we believe is going to quickly emerge as one of the most vibrant energy markets in the world and we’re not going to relent in our efforts to build value just as we have with previous companies.”

It’s difficult to disagree with anything Hanson says. They have nailed all of their milestones so far and certainly have plenty of running room to add to their portfolio. They have an outstanding partner in Grupo IDESA, the backing of EDC, are fully-funded for the existing work program, all the necessary infrastructure is in place, and they have outstanding experience across the entire supply chain that should allow IFR to sell oil at a price that couldn’t be realized anywhere else in the Western hemisphere.

Now, if they just start to prove the oil and the economic viability of the resource as they believe, IFR should be off to the races as the company looks to notch the next major success in their already impressive accomplishments.

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Baystreet Staff / May 22

 

NAFTA Sticking Points: 9 Issues Standing In The Way Of A Deal

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Huffington Post / Alexander Panetta / May 22

 

From cars to milk to pharmaceuticals, there’s plenty left to resolve.

WASHINGTON — The NAFTA negotiations could continue for a while, with U.S. trade czar Robert Lighthizer signalling he wants significant changes in multiple areas and isn’t interested in a quick, limited deal.

Here are some key flashpoints involving Canada:

—Autos: This is the sticking point countries have spent the most effort trying to solve. The U.S. wants to stem the loss of manufacturing jobs to Mexico. Canada broadly shares that goal. However, the issue has prompted some concern, and not only from Mexico. While the U.S. has significantly softened its earlier demands, it still wants 40 per cent of every car built in a high-wage jurisdiction; 75 per cent of all parts to be North American; and 70 per cent of steel to be North American.

Critics of the plan say it could backfire: if auto-makers decide they don’t want to deal with all this red tape, they can just ignore NAFTA and simply pay the 2.5 per cent U.S. tariff on cars. Critics say that won’t create jobs — just more expensive cars, and less economic activity.

—Pharmaceuticals: It’s the stated goal of U.S. trade policy to make other countries pay more for drugs, so that foreigners shoulder more of the burden of research and development costs. The U.S. has a particular gripe with Canada: it’s reduced Canada’s ranking in an annual report card on intellectual property, partly over policy changes at Canada’s Patented Medicine Prices Review Board.

The U.S. wants more transparency in how drug prices are set in Canada. Its industry is also pushing for greater ability to appeal pricing decisions. Such objectives place it in direct conflict with the Trudeau government, which wants to create a national pharmacare plan and intends to argue that its policy is consistent with that of President Donald Trump, who campaigned on controlling drug prices.

—Dairy: The U.S. has two problems with Canadian dairy policy. First, Canada limits imports and sets fixed prices under a supply-management system, and does the same for poultry and eggs. Second, Canadian producers who are protected from competition are at the same time selling surplus ingredients onto the world market for cheese-making, contributing to a global glut.

The U.S. has demanded an end to these surplus sales, and also an end to supply management within 10 years. Canada’s counterpoint is that the U.S. engages in its own protections, supporting farmers during boom-bust cycles; it argues that Canada’s system at least has the benefit of being stable, and not requiring periodic bailouts. If past history is any guide, a middle-ground compromise might be possible: in agreements with Europe and the TPP countries, Canada opened up its dairy market by several percentage points.

—Dispute settlement: NAFTA is enforced by three main systems for settling disputes: Chapter 11 lets companies sue governments for unfair treatment, Chapter 19 lets industries fight punitive duties, and Chapter 20 lets countries sue countries.

The U.S. wants to weaken two of the three, and entirely end Chapter 19. It’s a historically emotional issue for Canada, as Chapter 19 was the original make-or-break condition for free trade with the U.S.; it’s also been used to fight softwood lumber duties. However, some observers question the relevance of Chapter 19 today, as other forums exist for fighting duties.

Take the spat against Bombardier, in which duties were overturned in the U.S. court system. As for Chapter 11, Canada has less of a historical attachment, although it’s extremely popular with those business allies in the U.S. fighting to preserve NAFTA.

The Trump administration’s trade czar dislikes all these systems — Lighthizer sees them not only as a violation of national sovereignty: he argues that Chapter 11 helps companies do the dirty deed of outsourcing jobs. He argues that if companies want to shift plants elsewhere, the U.S. government should not be in the business of protecting their legal rights in, for instance, Mexico.

—De minimis: Americans are allowed to spend $800 online before they pay duties on a foreign purchase; Canadians can spend $20. It’s one of the lowest rates in the world. Lighthizer says it might not be necessary to match the U.S. amount, but he says that 40-fold difference is unreasonable. Retailers argue that shifting the de minimis level would fuel a commercial real-estate crisis, and disproportionately benefit American tech companies which enjoy economies of scale.

—Intellectual property: The U.S. complains about Canada’s border controls on counterfeit goods. It says it’s concerned that Canada doesn’t provide customs officials with the ability to inspect, seize, and destroy pirated goods moving through Canada to the United States. It complains that there were no known criminal prosecutions for counterfeiting in Canada in 2017, calling Canada an outlier among developed countries. It also bemoans what it calls excessive use of education-related exceptions to copyright laws, which it says have damaged the market for educational publishers and authors.

—Procurement: Canada’s aim is to increase companies’ access to public-works contracts abroad, expanding that access from federal contracts to state/provincial and local ones. Currently, subnational procurement rights are negotiated on a case-by-case basis. The U.S. has the opposite goal: It wants to limit the access Canadian and Mexican companies already enjoy at the federal level, restricted to whatever amount of contracts American companies win in the other countries.

—Sunset clause: One of the most controversial ideas of this negotiation. The U.S. has pushed for a clause in the deal that would cancel NAFTA after five years, unless every country agrees to keep it. Critics say this is a recipe for permanent uncertainty. They ask how a car company, for instance, is supposed to invest in all the assembly-line changes demanded in this deal, when the whole deal could be over in five years. They also point out that NAFTA already has a termination clause, which countries can invoke if they’re unhappy.

Prime Minister Justin Trudeau ridiculed the sunset idea in a public event in New York. He used a real-estate metaphor and made clear he was addressing President Donald Trump: What developer would build a skyscraper on a piece of land, Trudeau asked, if access to that land was only guaranteed for five years?

—Professional visas: Canada wants to modernize the list of professions eligible for a NAFTA work visa under Chapter 16. The current list of jobs eligible for these visas is decades old, and features almost nothing for the tech industry. Companies complain this makes it hard to send their own employees to branches across the border. The U.S. has put up some resistance, as any expansion of work-related migration risks being wrapped into the heated U.S. immigration debate.

 

Huffington Post / Alexander Panetta / May 22

 

 

Proveedores y prestadores de servicios para las operaciones de Exploración y Extracción de hidrocarburos en el mar

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En un sector tan complejo como el de los Hidrocarburos, las empresas no pueden ser autosuficientes, por lo que requieren que terceros les provean de bienes y servicios que les permitan llevar a cabo sus actividades.

La exactitud, prontitud y calidad con la que proveedores y contratistas presten sus servicios son factores indispensables para el adecuado funcionamiento de una organización.

En el caso específico de las empresas que realizan actividades en el Sector Hidrocarburos, al desempeñarse en un ámbito de alto riesgo requieren la certeza de que sus proveedores y prestadores de servicios desempeñarán sus tareas con los más altos estándares de seguridad, para evitar la ocurrencia de accidentes, que pongan en peligro la vida y/o integridad de personas, daños a bienes o al medio ambiente.

Por eso, de acuerdo con las Disposiciones Administrativas de carácter general que establecen las reglas para el requerimiento mínimo de seguros a los Regulados que lleven a cabo obras o actividades de exploración y extracción de hidrocarburos, tratamiento y refinación de petróleo y procesamiento de gas natural (DACGS), emitidas el 23 de junio de 2016, las empresas del Sector Hidrocarburos que realicen las actividades antes mencionadas, deben requerir a sus contratistas, subcontratistas, proveedores o prestadores de servicio que cuenten con pólizas de seguro con las coberturas y montos necesarios y suficientes para amparar la responsabilidad por los daños que pudieran generar con motivo de las obras, servicios y/o actividades que realicen.

En este sentido, es responsabilidad de las empresas titulares de las licencias para operar, asegurarse que sus proveedores y contratistas podrán responder por los daños que llegaran a causar en el desarrollo de sus operaciones, además de que deberán contar con las coberturas de control de pozos, responsabilidad civil y responsabilidad ambiental, de acuerdo con la regulación aplicable.

En el caso de los montos, por ejemplo, una empresa que lleve a cabo la exploración y extracción de hidrocarburos que requiera de lanchas rápidas y embarcaciones menores de servicio y para ello contrate los servicios de otra empresa que se dedique al transporte marítimo, deberá solicitarle sus pólizas de seguro de protección e indemnización (P&I) por un monto no menor a USD 5´000,000 (cinco millones de dólares de los Estados Unidos de América), de conformidad con  el artículo 29, fracción II de las DACGS. En caso de que las embarcaciones que sean utilizadas no estén listadas en el artículo antes mencionado, la fracción V del mismo dispone que la póliza de seguro sea por un monto no menor a USD  100,000,000.00 (cien millones de dólares de los Estados Unidos de América).

En NRGI Broker somos expertos en seguros de protección e indemnización y en regulación en materia de seguridad industrial y protección ambiental. Acércate a nosotros, con gusto te atenderemos.

 

NAFTA countries set to blow through Paul Ryan’s May 17 deadline without a deal

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Bloomberg.com / Financial Post / May 14

 

The three countries’ ministers working on the deal aren’t scheduled to meet this week, sources say, though lower-level talks continue and may yield a breakthrough

NAFTA negotiators from the U.S., Canada and Mexico are poised to miss the deadline this week cited by House Speaker Paul Ryan, the latest blown marker for reworking the 24-year-old deal.

U.S. Trade Representative Robert Lighthizer, Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Affairs Minister Chrystia Freeland aren’t scheduled to meet together in person this week, according to three government officials familiar with talks who spoke on condition of anonymity. The trio met at least bilaterally every day last week.

The Trump administration is increasingly preoccupied with its efforts to reach a peace deal with North Korea and avoid a trade war with China. Senior economic adviser Liu He will be in Washington this week for talks with the administration on ways to resolve the trade dispute between the two countries.

Lower-level NAFTA talks will continue and could yield a breakthrough and a ministerial meeting, but none has been scheduled so far, according to the people. The three officials said the ministers could meet next week, or later in the month. Chief negotiators are scheduled to hold a conference call early this week to assess the status of the talks and whether a ministerial meeting is feasible later this week, one of the people said.

While the ministers will keep in touch by phone, the lack of a face-to-face meeting after such a big push last week would show how far apart the sides remain on updating the North American Free Trade Agreement. Ryan injected a sense of urgency when he said lawmakers need notice of intent to sign a deal by May 17 so they can vote before this Congress ends in December.

The Canadian dollar pared its gain in Monday trading, while Mexico’s peso extended its losses, falling 0.7 per cent to 19.5585 per dollar at 1:45 p.m. in New York.

WORK CONTINUES

Although Ryan’s comments put the firmest deadline yet on NAFTA talks, many analysts have said U.S. deadlines are murky, and that a deal reached later in May or even in June could theoretically get passed. A spokeswoman for Ryan, AshLee Strong, said the May 17 target is due to timelines set out in U.S. trade law, not an arbitrary political date. “This is not a statutory deadline, but a timeline and calendar deadline,” Strong said by email Friday.

Whether Lighthizer could seek to notify Ryan by Thursday of his intent to sign, without an actual deal in place, is somewhat unclear. Lighthizer cited the House speaker’s deadline to pressure his Canadian and Mexican counterparts during a trilateral meeting Friday, according to two people familiar with the talks. President Donald Trump’s trade chief has indicated he needs a deal this month but hasn’t publicly identified a particular day.

Emily Davis, a spokeswoman for Lighthizer, referred to a written statement he released Friday when asked for comment Monday. In it, Lighthizer said talks have “covered a large number of very complex issues” and the U.S. “is ready to continue working with Mexico and Canada to achieve needed breakthroughs on these objectives.” The statement made no mention of any deadline.

‘TOO STUBBORN’

Former Mexican President Vicente Fox said Mexico will only sign on to a good NAFTA deal, otherwise it could withdraw and pivot to expanded trade with countries such as China, Argentina and Brazil.

“Mexico is not weak on this negotiation. We have leverage, and this should be understood on the U.S. side — which, by the way, everybody understands how this can be solved except Señor Trump,” Fox said Monday in an interview with Bloomberg Television. “He’s too stubborn. He just wants to win, he wants all the marbles for himself and nothing for the rest.”

Freeland is in Mexico City Monday for talks on Venezuela and hasn’t said if she will meet Guajardo privately there. In a sign of the dimming odds for an imminent deal, Guajardo and his team told dozens of stakeholders from Mexico’s private sector they should return home from Washington because no breakthrough was expected, according to two people familiar with the meeting. Stakeholders from all three countries are cancelling or delaying visits to Washington this week, four other people familiar with the talks said.

The existing NAFTA remains on the books unless a country withdraws, which would require six months notice. No country has given that notice, though Trump has threatened to do so. On Friday, the president called NAFTA a “horrible disaster” for the U.S.

Lighthizer has said the political calculus for passing a new NAFTA would change if it had to be voted on by the next Congress. Mexico and Canada have downplayed the urgency to reach a deal this week.

The countries have been holding periodic discussions since August. They had initially sought a deal by December, and then by March, and are now in what they consider a continuous round of negotiations. Talks have focused recently on the auto sector, with Canada hailing progress but with big gaps still remaining. Even if the sides agree on auto rules, they remain far apart on issues such as a sunset clause and dispute-settlement panels.

Ryan is pushing for a deal because of timelines in U.S. trade law, but another deadline looms. Mexico’s election will be held July 1 and looks set to usher in a new president who could seek changes to anything not yet finalized.

 

Bloomberg.com / Financial Post / May 14

 

Los retos ambientales en el Sector Energético

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Es indiscutible que la dinámica del mundo se basa en gran medida en el consumo de energía, no obstante actualmente nos enfrentamos al reto de desarrollar fuentes de energía que sean sostenibles y sustentables, lo cual implica armonizar el  binomio compuesto por el desarrollo económico y la protección ambiental.

En este contexto, es importante destacar que si bien, en algunas partes del mundo se pueden observar avances importantes para el desarrollo de energías renovables, una fuente muy importante siguen siendo los hidrocarburos[1].

El reto para las naciones que están comprometidas en desarrollar fuentes de energía limpias es mayúsculo. El caso de México es un gran ejemplo, pues se trata de un país que se encuentra en pleno desarrollo de su Reforma Energética, que implica por un lado, el aprovechamiento de recursos energéticos estratégicos como el petróleo (a través de las Rondas de licitaciones), pero por otro lado, se encuentra comprometido con lograr el avance en la generación de energías limpias en un plazo de tiempo determinado, como puede verse en el documento denominado Agenda 2030, signado por nuestro país.

Lo anterior implica actuar en diversos frentes, a fin de lograr consciencia entre los diversos actores que se desempeñan en el sector de la energía,  un sector que además típicamente ha sido considerado como de alto riesgo.

Afortunadamente, entre los ciudadanos existe también una mayor conciencia acerca de la importancia de cuidar los ecosistemas y en este sentido valoran mucho que una empresa genere y utilice responsablemente la energía.

La ley es muy clara cuando señala que “el que contamina paga”, de manera que aquellos que lleguen a causar un daño al medio ambiente, deberán repararlo adecuadamente. Sabemos que los costos de una catástrofe ambiental pueden llegar a ser muy altos, de ahí que aquellos sectores que son considerados de alto riesgo, la regulación establezca la obligación de contratar seguros, que les permitan responder por los daños que puedan causar con sus actividades.

Por lo anterior, uno de los retos ambientales más importantes en el sector energético es reforzar la cultura de aseguramiento, pero tomando en cuenta que los seguros aunque son indispensables, -dado que el riesgo siempre está presente- deben ser el último recurso. Lo más importante es que a las actividades de toda la cadena de valor se incorporen las mejores prácticas internacionales para evitar que sucedan accidentes.

En NRGI Broker, somos expertos en seguros para el Sector Energético. Acércate a nosotros, con gusto te atenderemos.

[1]De acuerdo con el reporte World Energy Resources 2016,emitido por el Consejo Mundial de Energía, Ver: http://www.worldenergy.org/wp-content/uploads/2016/10/World-Energy-Resources_Report_2016.pdf, p. 4.

 

NAFTA negotiations enter critical week with the U.S. still pushing a hard line

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From: Financial Post / Thomson Reuters / Veronica Gomez and Anthony Esposito / May 7

 

Sources close to the talks have suggested there is a creeping feeling of uncertainty and pessimism because of gridlock on the most critical issues

WASHINGTON — Talks to update the NAFTA trade deal enter a make-or-break week on Monday, as ministers from Canada, the United States and Mexico seek to resolve an impasse in key areas before elections in Mexico and the United States complicate the process.

Discussions in Washington will center on rules of origin that govern what percentage of a car needs to be built in the North American Free Trade Agreement region to avoid tariffs, the dispute-resolution mechanism and U.S. demands for a sunset clause that could automatically kill the trade deal after five years.

U.S. Trade Representative Robert Lighthizer warned last week that if the talks took too long, approval by the Republican-controlled Congress may be on “thin ice.” The aim is to complete a vote during the “lame-duck” period before a new Congress is seated after November’s congressional elections.

Mexico holds its presidential election on July 1 and the front-runner, leftist Andres Manuel Lopez Obrador, says he wants a hand in redrafting NAFTA if he wins.

“We have a window of opportunity in the next two or three weeks … considering two things: where the talks are now and the political calendars” in Mexico and the United States, said Moises Kalach, head of the international negotiating arm of Mexico’s CCE business lobby, which is leading the private sector’s involvement in the talks.

Sources close to the talks have suggested there is a creeping feeling of uncertainty and pessimism going into the new round because of gridlock on the most critical issues.

At the heart of the NAFTA revamp is U.S. President Donald Trump’s desire to retool rules for the automotive sector in order to try to bring jobs and investment back north from lower-cost Mexico. Despite months of talks on the issue, the sides remain far apart.

A round of talks among Canadian Foreign Minister Chrystia Freeland, Mexican Economy Minister Ildefonso Guajardo and Lighthizer scheduled for last week was cancelled to allow consultations with the Mexican car industry and for the American to go on a trade mission to China.

Mexico’s main auto sector lobby has described the latest U.S. demands, which include raising the North American content to 75 per cent from the current 62.5 per cent over a period of four years for light vehicles, as “not acceptable.”

“The positive momentum on the rules of origin appears to be counterbalanced by the opposite movement on labour wage treatment proposals,” said Flavio Volpe, president of Canada’s Automotive Parts Manufacturers Association.

The U.S. proposal also would require that 40 per cent of the value of light-duty passenger vehicles and 45 per cent for pickup trucks be built in areas with wages of US$16 per hour or higher.

That is seen as a hard pill to swallow for Mexico, where the Ann Arbor, Michigan-based Center for Automotive Research has estimated auto assembly workers average under US$6 an hour, and auto parts plants workers average less than US$3 an hour.

Critics also say it would create a bureaucratic nightmare of paperwork.

 

From: Financial Post / Thomson Reuters / Veronica Gomez and Anthony Esposito / May 7

 

 

La Administración de Riesgos en el Sector Hidrocarburos

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Uno de los nuevos órganos reguladores que surgieron con la Reforma Energética fue la Agencia Nacional de Seguridad Industrial y Protección del Medio Ambiente del Sector Hidrocarburos (ASEA), con el objetivo de promover la cultura de la previsión entre los regulados, por ello, el 13 de mayo de 2016, se publicaron en el Diario Oficial de la Federación, las Disposiciones Administrativas de carácter general que establecen los lineamientos para la conformación, implementación y autorización del Sistema de Administración de Seguridad Industrial, Seguridad Operativa y Protección Ambiental (SASISOPA).

El SASISOPA es un conjunto de elementos interrelacionados y documentados cuyo propósito es prevenir, controlar y mitigar una instalación o un conjunto de ellas en materia de seguridad industrial, seguridad operativa y protección ambiental.

Su objetivo primordial es mitigar el riesgo inherente a las instalaciones y actividades del sector hidrocarburos, a fin de evitar accidentes y con ello garantizar la seguridad de las personas, los bienes y el medio ambiente.

Tomando en consideración que las empresas no empiezan de cero en la conformación del sistema de administración, se estableció la obligación de elaborar un Documento Puente, en el que conste el estudio de correspondencia de los elementos del sistema de administración de cada empresa con los establecidos en el artículo 13 de la Ley de la ASEA, para estar en posibilidad de conformar, implementar y obtener la autorización del SASISOPA.

Lo anterior, permite retomar las medidas previas y complementarlas con las políticas establecidas por la ASEA, para lograr la uniformidad en el sector.

Uno de los aspectos más importantes para la conformación del SASISOPA es la identificación de peligros y análisis de riesgos, para definir las medidas de prevención, control y mitigación, así como la valuación de incidentes, accidentes y pérdidas esperadas en los distintos escenarios de riesgo, en función de las consecuencias que esos riesgos representan en la población, medio ambiente, instalaciones y edificaciones comprendidas en el perímetro de las instalaciones industriales y en las inmediaciones.

La identificación de riesgos y la valuación de incidentes y accidentes son componentes fundamentales para tomar medidas preventivas y determinar cuáles serán los mecanismos correctivos en caso de que se llegara a materializar el riesgo.

En este punto, la contratación de los seguros es indispensable, pues una vez identificado y valuado el riesgo, se podrán contratar los seguros adecuados y suficientes para transferir el riesgo y con ello evitar que la empresa pueda ver afectadas sus finanzas por la reparación de los daños ocasionados por un siniestro.

En NRGI Broker, somos expertos en seguros para el Sector Hidrocarburos. Acércate a nosotros, con gusto te atenderemos.

 

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Mexico Opens Last Round Of Oil Bidding Before Election

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From: Oil Price / Oxford Business Group / 28 April 2017

 

The latest round of open bidding for exploration rights in Mexico’s energy sector received mixed interest, with two further rights sales to take place later in the year.

Of the 35 shallow offshore blocks on offer in the March 27 auction, 16 were sold, with the strongest interest seen in blocks in the Sureste Basin – in the south-eastern portion of the Gulf of Mexico – where all eight offerings found buyers.

Mexico’s state-owned oil producer, Petróleos Mexicanos (Pemex), won seven of the blocks on offer, one in its own right and six more in partnership with overseas energy firms.

Fourteen oil majors were pre-qualified to bid alongside 22 consortia. France’s Total was the biggest winner in the Sureste Basin, coming away with the largest share of three blocks coverin­­g a total of 2342 sq km. It received two of these as part of a consortium with Pemex, and one with BP and Pan American.

The Ministry of Energy estimates that developing and operating the 16 blocks will require investment of $8.6 billion over the lifetime of the deposits.

Related: How High Can Trump Push Oil Prices?

Overall response to the auctions was slightly muted, with local and international majors showing some caution when making offers, partly due to the upcoming presidential election in July 2018, which has sparked concerns about potential changes to energy sector policy and rising supply in the market.

Auctions for shale deposits set for September

Indeed, the March auction was the first of up to three rights sales to be staged this year, with the remaining two land bids scheduled for late July and early September. The former will cover a total of 37 contractual areas in Burgos, Tampico-Misantla-Veracruz and the Sureste Basin.

The September round of bidding will be particularly notable, as it will be the first time that development rights for shale deposits have been auctioned off in Mexico.

Depleting natural gas reserves and high potential for shale – the country has 545trn cu feet of technically recoverable sources of shale gas, according to the World Resources Institute – have driven Mexico to accelerate development of the industry.

Early last month the energy sector regulator, the National Hydrocarbons Commission (Comisión Nacional de Hidrocarburos, CNH), called for bids on nine blocks in the Burgos Basin – located in the state of Tamaulipas, in the north-west of the country – to be auctioned off in September.

The blocks contain an estimated 1.1 billion barrels of oil equivalent (boe), and winning bidders will have the right to conduct exploratory work for conventional oil and gas, as well as any shale deposits identified.

Energy reform supports private sector development

The successive rounds of auctions for exploration and production rights are the keystone of Mexico’s energy reform policy. Launched in 2013, the reforms ended Pemex’s upstream and downstream monopoly, and offer the country the potential to generate $1trn of foreign direct investment by 2040, according to the Mexican Association of Hydrocarbons Companies.

 

From: Oil Price / Oxford Business Group / 28 April 2017

 

 

 

 

Mexican Oil Giant Pemex Seeks Partners to Drill in 7 Southern Areas

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FROM: Sputnik News / 27 April 2017

 

MEXICO CITY (Sputnik) – Mexico’s state oil giant Pemex is looking for partners in joint ventures that will drill at seven onshore areas in the country’s south, the national hydrocarbons authority said Thursday.

Contracts for drilling in the states of Veracruz, Chiapas and Tabasco will be signed for a period of 35 to 40 years with a possibility of a ten-year extension, according to the National Hydrocarbons Commission.

Mexico has been overhauling its energy sector since late 2013. The reform ended almost 80 years of Pemex’s monopoly by allowing foreign investments and contracts with private businesses.

 

FROM: Sputnik News / 27 April 2017

 

Mexico fully expects to reach a consensus on NAFTA trade deal

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FROM: CNBC / Sam Meredith / 22 April 2018

Mexico believes it is on the brink of agreeing to the modernization of the North American Free Trade Agreement (NAFTA).

Alongside the U.S. and Canada, Mexico is in the midst of eight-month-old talks to try to update the NAFTA deal — which is thought to underpin about $1.2 trillion in yearly trilateral trade.

“In the baseline scenario of the central bank, we have that there will be a version of NAFTA,” Mexican Central Bank Governor Alejandro Diaz de Leon told CNBC’s Joumanna Bercetche on Saturday.

“We know that there have been ups and downs in the negotiation … (But) we do hope that the advantages for the three countries will prevail in some version of the agreement,” he added.

Rules of origin

In an apparent bid to try to quickly wrap up the reworking of the 24-year-old accord, leading Mexican officials have sought to convey an upbeat tone in recent days.

Late last week, Mexico’s Economy Minister, Ildefonso Guajardo, said lawmakers had made “a lot of progress” after the second day of meetings with U.S. Trade Representative Robert Lighthizer and Canada’s Chrystia Freeland. And on Sunday, Mexican President Enrique Pena Nieto said his country was feeling optimistic about the prospect of being able to successfully conclude the talks in the coming weeks.

Canada’s Foreign Minister Chrystia Freeland (C) speaks before the start of a trilateral meeting with Mexico’s Economy Minister Ildefonso Guajardo (L) and U.S. Trade Representative Robert Lighthizer during the third round of NAFTA talks involving the United States, Mexico and Canada in Ottawa, Ontario, Canada, September 27, 2017.

Ministers from the U.S., Canada and Mexico are trying to press ahead with the negotiations in order to try to avoid clashing with a presidential election in Mexico on July 1. Nonetheless, reaching this milestone would mean overcoming major differences on several U.S. demands.

Canada and Mexico have battled with the U.S. over their apparent reluctance to adhere to tougher NAFTA regulations on the content of vehicles made in North American nations. Often referred to as the rules of origin, it is widely considered to be a key sticking point to the talks.

President Donald Trump’s negotiators had initially called for tariffs on the content of vehicles made in NAFTA nations to increase to 85 percent from 62.5 percent. However, Washington’s stance over this issue has reportedly softened in an effort to reach a consensus with their North American neighbors sooner rather than later.

Market has ‘priced in’ NAFTA outcome

The U.S. was thought to be looking to secure a deal in principle with the NAFTA agreement sometime over the next three weeks. Meanwhile, Mexico’s Guajardo said he saw an 80 percent chance of reaching a deal by the first week of May.

Trump, who has repeatedly threatened to walk away from the negotiating table in the absence of major changes, has criticized the pact for creating jobs in Mexico at the expense of U.S. workers.

When asked to what extent it had been a challenge to manage Mexico’s currency at a time when tweets from the U.S. president could prompt volatile swings in the exchange rate, Mexico’s Diaz de Leon replied: “Obviously some of these news and posture and messages have an effect on the exchange rate, but I also think the exchange rate has been learning how to extract the signal from those pieces of information.”

“So far, the market has priced in the NAFTA event according to what is likely to happen,” he added.

FROM: CNBC / Sam Meredith / 22 April 2018