Tag Archive for: oil and gas

Unfinished business: Putting the final touches on the USMCA

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The Hill /  David L. Goldwyn / October 29

 

The proposed US Mexico Canada Agreement (USMCA) makes important, but incomplete, progress in securing an integrated North American energy market.

In terms of progress, the agreement preserves zero tariffs for trade in oil, gas and petroleum products across North America. It effectively locks in Mexico’s historic energy reforms by ensuring that Mexico cannot reinstate restrictions on US investment in the oil and gas sector. A “ratchet” clause ensures that if Mexico decides to further liberalize the sector, then that higher floor becomes the new USMCA commitment.

While Investor-state dispute settlement (ISDS) mechanisms are weaker, they remain in force for certain “covered sectors,” including oil and gas investments in Mexico and power generation and pipeline investments where the investor has a contract with the government.

These are all positive steps for North American energy security. Mexico and Canada provide the United States with the heavy grades of oil not produced domestically, helping US refineries produce gasoline at the lowest possible cost. Thanks to this relationship,  the United States is an efficient net exporter of petroleum products.

However, while this progress is laudable, it remains incomplete.

In the rush to conclude the agreement, effective protection for power generation investments like new wind and solar plants, refining and natural gas infrastructure, and power transmission lines were left out, perhaps inadvertently. Contracts for these investments are with state owned enterprises (SOEs) like Mexico’s CFE and PEMEX, which do not now fall within the definition of “federal government” because they are not disposing of assets but signing a contract for service. These essential investments, in the gas and refined product infrastructure which carry US products to and through Mexico, transmission lines which carry US electricity south, and investments in power generation are not permitted to bring ISDS claims to enforce their rights.

This is an oversight, and a protection these investments should enjoy. Rather, the proposed agreement creates an uneven playing field as investors who do have a contract with the Federal government, say for exploration, are entitled to bring an ISDS claim for any of their businesses, while those who do not have such contract do not. The problem can be easily fixed by expanding the definition of federal government to include these wholly owned SOEs.

These (for now) unprotected investments are critical to North American energy security. They secure US exports of electricity and natural gas and assure the continued reliability of the North American electricity system. They are the lifelines which carry US exports to Mexico – currently our number one customer for natural gas and petroleum products.

Protecting investments in Mexico’s electricity sector improves US national security by supporting Mexico’s prosperity through a more resilient power system.

Finally, if US power sector investments in Mexico are not protected and thus potentially hindered or lost, China is certain to fill the gap.

Chinese investment in all forms of power generation, transmission, and distribution is rapidly accelerating throughout Latin America. According to a recent Atlantic Council report, cumulative flows of Chinese foreign direct investment in Latin America have reached $110 billion, with $25 billion in oil and gas investment, and $13 billion in electricity, utilities and alternative energy. China’s State Grid has invested $7 billion in Brazil, through a combination of greenfield investments and acquisitions.

If the Mexican government is willing to offer these investments protections (and they are), and create a level playing field for American companies investing in our closest neighbor, the US should not object.

Fortunately, there is still time to correct the definition of eligible claimants as both sides ready the agreement for ratification.  With these modest steps, the United States, Mexico and Canada can improve the resilience of North America’s energy system, and the US can simultaneously advance its economic and national security interests.

David L. Goldwyn is president of Goldwyn Global Strategies, an international energy advisory consultancy and serves as chairman of the Atlantic Council Global Energy Center Energy Advisory Group. He served as the U.S. State Department’s special envoy and coordinator for international energy affairs from 2009 to 2011; he previously served as assistant secretary of energy for international affairs and as national security deputy to U.S. Ambassador to the United Nations Bill Richardson. He is a member of the U.S. National Petroleum Council and the Council on Foreign Relations.

 

The Hill /  David L. Goldwyn / October 29

 

Mexican President-Elect Pledges to Save Country’s Oil Sector

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Sputnik News / October 15

 

MEXICO CITY (Sputnik) – Mexican President-elect Andres Manuel Lopez Obrador has pledged to save the country’s oil sector just like former Mexican President Lazaro Cardenas, who headed the country from 1934 to 1940, had done.

In March 1938, Cardenas announced the nationalization of the oil industry, and only in 2013, the Mexican Congress approved an energy reform opening the oil sector to private companies, including the foreign ones.

“We will produce oil because oil and gas production has been decreasing since the beginning of the energy reform. We will save the oil industry like Gen. Cardenas did in 1938,” Lopez Obrador posted on Twitter late on Sunday.

In September, Lopez Obrador, who won the election in July and will assume office on December 1, pledged that crude oil production would increase up to 2.6 million barrels per day from the current level of 1.8 million barrels per day by the end of his six-year-long administration.

In August, Pemex, Mexico’s major oil and gas company, produced oil at the average level of 1,816 million barrels per day, which is a 5.9 percent decrease year-on-year, and a 28 percent decrease compared with the notch registered in August 2013.

 

Sputnik News / October 15

 

Feature: Mexico’s oil industry cautiously optimistic of future energy policy

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S&P Global / Daniel Rodriguez / Edited by Pankti Mehta / October 1

 

Mexico City — Oil and gas executives attending last week’s Mexican Petroleum Congress (CMP) in Acapulco told S&P Global Platts that they were cautiously optimistic about the future of the country’s energy reform, pointing to higher oil prices and some clarification of President-elect Andres Manuel Lopez Obrador’s policies.

The conference took place as Lopez Obrador held a closed-door meeting with the country’s association of hydrocarbon producers, AMEXHI, on Thursday in Mexico City.

The incoming administration gave a firm message: Mexico will continue the energy reform and private upstream investment as long as they can deliver results by boosting output.

The meeting cleared some uncertainties that had built up since Lopez Obrador’s electoral victory in July. Obrador has been historically opposed to private investment in Mexico’s energy sector.

PRIVATE OPERATORS TO PRODUCE 280,000 B/D: LOPEZ OBRADOR

According to a video of the meeting obtained by Platts, Lopez Obrador told operators that the future of the reform rested on their shoulders.

“We want to give you the opportunity to invest and work on this reform,” Lopez Obrador said. However, companies must invest and boost output to prove the success of the country’s new energy model.

The president-elect said his goal is that private operators produce 280,000 b/d of crude oil and 305 MMcf/d of the natural gas by the end of his term in 2024. “That would be the ideal. We aren’t asking for more and we are happy with that level,” he said.

This is a very conservative projection compared to the 430,000 b/d estimate shared by outgoing Energy Secretary Pedro Joaquin Coldwell at the inauguration of CMP.

At a webcast press conference Thursday, Mexico’s future energy secretary Rocio Nahle said that auction rounds would be halted. She said the country first needs to evaluate the 110 contracts awarded to date because they have not helped boost domestic production.

“It would be irresponsible to continue auctioning areas without a previous production gain [from awarded areas],” Nahle said.

OPERATORS ARE CALM WITH INCOMING GOVERNMENT

AMEXHI members are allies of the state and can collaborate with Pemex to “continue strengthening Mexico’s energy security,” Alberto de la Fuente, AMEXHI’s president, said in a statement Thursday.

This message of partnership was also shared by senior executives from BHP Billiton, BP, Chevron, DEA Deutsche Erdoel, Equinor, and Shell at the CMP.

“We aren’t here to replace Pemex but to complement it and help to achieve the incoming administration’s goal of boosting oil output,” Steve Pastor, BHP Billiton’s president for petroleum operations, told Platts last week at the CMP.

De la Fuente denied that private operators were uncertain over the review of contracts awarded by the country’s National Hydrocarbon Commission (CNH).

In the statement, he said that AMEXHI members left the meeting with the incoming administration with the knowledge that Lopez Obrador will honor their contracts.

However, some industry members expressed their frustration to Platts at the conference about an apparent lack of understanding from the incoming administration on the long-term nature of the upstream industry.

INCOMING ADMINISTRATION WILL SEEK TO CUT RED TAPE

At the meeting with AMEXHI members, Lopez Obrador said his administration would work with regulators to cut the red tape and quicken the development of new projects.

“Some of you have told me permits take too long, and regulators delay your investment plans as well as Pemex’s activities,” Lopez Obrador said. “We are going to solve all bureaucratic roadblocks.”

Juan Carlos Zepeda, CNH’s president commissioner, told reporters Friday there was space to make the regulatory process leaner and more efficient while protecting the wellbeing of the country’s fields and hydrocarbon resources.

“We share views with President-elect Lopez Obrador and the industry … we are working toward that path without neglecting our responsibility of protecting Mexico’s reservoirs,” Zepeda said.

Right now, Mexico is more efficient than the US when it comes to the development of wells as CNH only requires notice from the operators instead of regulatory approvals, Zepeda said.

Also, CNH is working on a new process to expedite the approval of exploratory and development programs, which is currently under public consultation, he added.

A major regulatory roadblock for Mexico’s upstream sector has been Pemex’s framework to farmout projects via CNH auctions, Pemex senior officials said at CMP.

Zepeda said he supports the idea of Pemex being able to choose its own farm out partners. However, the company should maintain transparency levels upheld by CNH.

 

S&P Global / Daniel Rodriguez / Edited by Pankti Mehta / October 1

 

Mexican energy sector overhaul could reduce U.S. export demand

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Chron / Katherine Blunt / August 6

 

An ambitious plan to boost Mexico’s oil and gas production could potentially slow the country’s energy sector reforms and hinder trade opportunities for U.S. refiners and pipeline companies that have ramped up exports to meet growing demand there, according to research firm Morningstar.

Mexican president-elect Andrés Manuel López Obrador announced late last month a plan to invest billions of dollars in Pemex, the country’s state-owned energy company, in an effort to  reverse years of declining production. He also reaffirmed his intent to review more than 100 exploration and production contracts awarded to private oil and gas companies since the 2013 reforms, which opened the country’s energy sector to foreign investment for the first time in decades.

Mexico’s energy reforms are enshrined in its constitution, and López Obrador has said that he will he will honor existing contracts so long as they don’t reveal corruption. But Morningstar noted that any effort to scale back the reforms or increase Mexican energy production could jeopardize some $200 billion in outside investments planned for the country’s oil and gas, power, refining and distribution sectors.

Part of López Obrador’s plan involves investing $2.6 billion to upgrade the nation’s six existing refineries as well as building a new, $8.6 billion refinery at the oil port of Dos Bocas in Tabasco. The country’s existing refineries have been operating at less than 70 percent capacity since 2012, according to Mexico’s energy department, requiring the country to import more gasoline, diesel, jet fuel and other refined products.

 

Chron / Katherine Blunt / August 6

 

The security policy in the hydrocarbons sector

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The safety policy of the hydrocarbon sector focuses on two concepts that respond to the environment that may be impacted by the activities developed with hydrocarbons and their derivatives: industrial safety that refers to the external environment and the relationship of the installation with third parties and operational security, referred to the internal scope and related to the installation’s own processes.

In the ASEA Law, Industrial Safety is defined as the multidisciplinary area responsible for identifying, reducing, evaluating, preventing, mitigating, controlling and managing risks in the sector, with the aim of protecting people and the environment.

Operational safety, is understood as the multidisciplinary area that is responsible for the analysis, evaluation, prevention, mitigation, control of the associated risks of the process, which includes the design, construction, startup, operation, normal stoppages, emergency stoppages and maintenance.

As we can see, industrial safety is a broader concept that involves considering not only the installation but its environment, at least where their activities may have some impact, such as the surrounding population, which may suffer damage to their people and to their assets, or the pollution of the environment.

On the other hand, operational safety focuses on internal processes, which must also be procured, in order to avoid damage to the installation and personnel, as well as preventing an accident from reaching greater proportions and also affect industrial safety.

Risks are an inherent part of the activities of the hydrocarbon sector, therefore as part of its security policy, companies must make the decision between retaining and transferring risks. They will generally retain those that may have minor consequences and whose costs do not affect their assets. In the case of risks that can have serious consequences, it is better to transfer them through an insurance.

The insurances that companies in the hydrocarbon sector must contract to complement their industrial and operational safety policy are: 1) well control (exploration and extraction companies); 2) construction and assembly; 3) civil and environmental liability; 4) property damage; 5) electronic equipment; 6) machinery breakage; 7) Boilers and equipment subject to pressure, among others.

If the activities are carried out with vessels, the insurances to be contracted are: 1) hull and machinery, 2) protection and compensation and, if applicable, 3) the charterer’s civil liability.

Each one of these insurances will cover some aspect that will contribute to complement the policy of industrial and operational safety, with the aim of having safer facilities and reducing to the maximum the possibility of an economic detriment to the companies of the sector.

 

At NRGI Broker, we are experts in insurance for the hydrocarbon sector. Come to us, we will gladly assist you.

 

Enbridge (ENB) Commences Mex-Border Pipeline’s Offshore Work

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Zacks Equity Research / June 14

 

Enbridge Inc. (ENB – Free Report) recently started construction work on its Valley Crossing natural gas pipeline’s border crossing offshore part, per Reuters. The $1.6 billion pipeline that lies between Mexico and Texas is scheduled to come online in October.

The energy infrastructure company is currently working on a 305-meter part of the pipeline’s offshore section, while the rest 165-mile onshore and offshore section is ready for operation. The company has plans to start the pipeline’s commissioning process soon.

Significance of the Pipeline

The Valley Crossing pipeline has a shipping capacity of 2.6 billion cubic feet of natural gas per day (Bcf/d). It will transport gas from Texas to Mexico’s growing energy market. Following the energy reform in Mexico, the country witnessed a rising interest from international oil and gas companies.

Energy-related imports have risen in the country over the past few years. Mexico’s year-to-date average gas import from the United States currently stands at 4 Bcf/d.

The pipeline is designed to supply clean burning gas primarily to the Mexican state-run utility company, Federal Electricity Commission aka CFE, which has around 37 million clients. Moreover, the pipeline is expected to open new market opportunities for the gas producers in Texas. As a result, Enbridge’s cash flow is expected to benefit immensely.

There’s More

The Valley Crossing pipeline would to be connected to the Sur de Texas-Tuxpan pipeline in the Gulf of Mexico, and is expected to create a huge pipeline network between the United States and Mexico. The Sur de Texas-Tuxpan pipeline is currently being built by a joint venture between Sempra Energy (SRE – Free Report) and TransCanada Corp. (TRP – Free Report) .

Price Performance

Calgary Canada-based Enbridge has lost 14% in the past year compared with 7.4% decline of its industry.

Zacks Rank and One Stock to Consider

Enbridge Energy carries a Zacks Rank #3 (Hold). Investors interested in the Energy sector can opt for a better-ranked stock like Delek US Holdings, Inc. (DK– Free Report) that sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Brentwood, TN-based Delek is an energy company. The company’s top line for 2018 is anticipated to improve 39.2% year over year, while its bottom line is expected to increase 230.2%.

 

Zacks Equity Research / June 14

 

El descontrol de pozos ¿un riesgo catastrófico?

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Un descontrol de pozo ocurre cuando la presión de la formación[1] es mayor a la presión del fluido de control, lo que provoca un reventón o blow out, que no puede manejarse a voluntad.

El descontrol de un pozo es el evento más indeseado en materia de actividades petroleras, por las consecuencias catastróficas que se pueden desencadenar, tales como pérdida de vidas humanas, pérdida del pozo y del equipo de perforación, así como daños al medio ambiente.

El caso de mayores proporciones que se ha vivido recientemente en el mundo fue el Deepwater Horizon, en Estados Unidos. El 20 de abril de 2010, la empresa británica British Petroleum (BP) se encontraba realizando operaciones de exploración de aguas profundas en el pozo Macondo, ubicado a 75 kilómetros de la costa de Luisiana, cuando un escape de gas provocó una explosión de la plataforma semi-sumergible Deepwater Horizon con un incendio que duró 36 horas. Millones de barriles de petróleo fueron derramados, en una superficie de entre 86,500 y 180,000 kilómetros cuadrados; fallecieron 11 personas y otras más resultaron heridas.

Este siniestro es considerado uno de los peores en la industria del petróleo, no sólo por los daños directos provocados, sino también por los perjuicios resultantes, tales como la afectación a las actividades pesquera y turística.

En México no existen cifras oficiales acerca de qué tan frecuentemente se descontrola un pozo, pero el peor caso conocido hasta ahora fue el del Ixtoc I. El 3 de junio de 1979, mientras se llevaban a cabo los trabajos de perforación del pozo Ixtoc I de Petróleos Mexicanos, se produjo el descontrol del pozo, lo que ocasionó un incendio de gran magnitud y el derrame de más de 3 millones de barriles de crudo. El evento provocó que el petróleo llegara hasta las costas de Campeche, Tabasco, Veracruz y Tamaulipas e incluso a algunas zonas de Texas, por las que Estados Unidos solicitó compensación.

Para evitar un acontecimiento de este tipo que sin duda puede llegar a ser catastrófico, las empresas petroleras implementan diversas medidas de seguridad industrial y seguridad operativa, mediante la aplicación de sistemas adecuados de fluidos de perforación, equipos de medición y control de parámetros, y personal debidamente capacitado; no obstante la posibilidad de se origine el descontrol de un pozo es un riesgo latente.

De ahí la importancia de que las empresas petroleras cuenten con un programa integral de seguros, que les permita afrontar las consecuencias de un siniestro, sin poner en riesgo la rentabilidad de la compañía.

En NRGI Broker, somos expertos en programas integrales de seguros para empresas petroleras. Acércate a nosotros, con gusto te atenderemos.

[1] Por formación se entiende la estructura rocosa en la que se encuentra el hidrocarburo.

RGU Secures Funding to Help Develop Oil, Gas Workforce in Mexico

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Robert Gordon University (RGU) in Aberdeen has been awarded funding to create a skills development framework for the oil and gas sector in Mexico. 

The framework will provide recommendations on how to address the potential skills gap in the Mexican oil and gas industry over the next 15 years, both at graduate and vocational level. The university secured the funding, which will be delivered by the British Embassy in Mexico, from the British Government’s Prosperity Fund. 

As part of the development plan, RGU will advise the Ministry of Energy in Mexico (SENER) on appropriate delivery models to train and further develop the Mexican workforce, and to secure a pipeline of future talent.

Work on the development plan has already begun and the framework will be presented to the Mexican Government in December, an RGU spokesperson told Rigzone. In its plan, RGU is undertaking a review of what the UK has done to develop its skilled workforce and is using that information to advise the Mexican Government.

Although Mexico has a long-standing track record as one of the leading hydrocarbon producing countries in the world, it is estimated that it will require more than 135,000 additional skilled people in the oil and gas industry over the next 15 years in order to meet production targets set by the government. 

“The Energy Reform in Mexico presents huge opportunities for the Mexican oil and gas sector,” said Professor Paul de Leeuw, director of RGU’s Oil & Gas Institute.

“RGU is delighted to undertake this important review on behalf of the FCO and to advise the Mexican Government on skills development options for Mexico,” he added.

“As part of the Energy Reform, SENER has developed a coordinated strategic human resource program for the energy sector, seeking to rapidly build capacity to respond to the needs of the transformed energy sector,” said Leonardo Beltran, SENER’s undersecretary for planning and energy transition.

“The partnership with the UK and particularly with RGU will support the development of capacity building of Mexico’s oil and gas sector,” he added.

“We aim to build a strong partnership that promotes an open, robustly-regulated Mexican energy sector with significant British collaboration. The UK is a global centre of energy excellence and we hope our experience can contribute to the successful implementation of Mexico’s new energy markets,” said the British Ambassador to Mexico, Duncan Taylor.

The project builds on the relationship RGU has been developing with SENER following the visit from the President of Mexico, Enrique Peña Nieto and his delegation to the university in March 2015, and builds on the Memorandum of Understanding (MoU) which RGU signed with SENER in September 2015.

This project is funded by the British Embassy in Mexico as part of its Prosperity Fund energy program. This program seeks to support Mexico’s economic development and create commercial opportunities in the energy sector. Through the Prosperity Fund, the British Government has supported Mexico to shape its energy legislation based on international best practices.

Copyright: Rig Zone

Offshore Safety Improves Across UKCS Oil, Gas Operations

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Offshore safety across oil and gas operations on the UK Continental Shelf (UKCS) continued to improve in 2015, according to the 2016 Oil & Gas UK Health & Safety Report published August 1.

There were no reported fatalities and reportable injury rates were lower than other industries such as manufacturing, construction, retail and education. The lost time injury frequency rate on the UKCS was also below the European average and lower than Norway, Denmark and Ireland.

The category of dangerous occurrences – which captures oil and gas releases, fires or explosions, dropped objects and weather damage – was down overall too, with an almost 30 percent fall between 2013 and 2015. Within that category, the total number of oil and gas releases rose slightly by 9 percent, with the majority of these classified as minor, while major releases remained the same.

A rise in minor releases could partially reflect that more and more operators are using technology that helps detect the smallest of escapes. New reporting criteria also came into place in the second half of 2015 and now includes releases that were not deemed reportable under previous legislation.

In March 2015 the Forties Echo platform in the North Sea was shut after being hit by a supply vessel, which resulted in 15 workers being transferred to the nearby Forties Bravo platform. In July 2015, oil and gas industry skills organization OPITO reported a 250 percent rise in the number of North Sea energy firms investing in systems which assess and develop workforce competence and safety.

“I am pleased to say there were no reported fatalities on the UK Continental Shelf in 2015. Health and Safety Executive statistics in our report show that the industry non-fatal injury rate and the over-seven-day and specified injuries rates also decreased,” said Mick Borwell, health, safety and environment policy director at Oil & Gas UK.

“That picture of personal safety improvement was echoed in the smaller annual benchmarking exercise that we carry out ourselves. We looked at 28 production operators and found a continuing downward trend in the average frequency of reportable injuries and dangerous occurrences,” he added.

“This is a testing time for the industry and our commitment to safety has, at times, been questioned. However, our report demonstrates that safe operations continue to be intrinsic to how we go about our activities on the UK Continental Shelf, regardless of the oil price. It shows that the UK sector is focusing in the right areas and overall is heading in the right direction. The report is also a reminder that there is no place for compromise or complacency and that safety must remain at the top of our agenda,” Borwell concluded.

Copyright: Rig Zone

Mexico Plans Next Bidding Round For Energy Opening By End-July

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The next bidding round in the opening of Mexico’s oil and gas sector will be called by the end of July and consist of 15 shallow water blocks for exploration and extraction in the Gulf of Mexico, Energy Minister Pedro Joaquin Coldwell said.

Coldwell announced the round, denominated 2.1, at an event in the northern city of Monterrey on Wednesday.

The following round, or 2.2, would be called by the end of the summer and comprise 14 onshore blocks for exploration and production in the gas-rich Burgos basin in the north of the country as well as in southeast Mexico, Coldwell added.

Mexico ended the oil and gas monopoly of national oil company Pemex at the end of 2013 to open up the industry to more private sector investment. However, the auctions of oil and gas blocks have been complicated by a sharp drop in crude prices.

Crude futures on Wednesday hit their highest levels in 2016, beyond $50 per barrel. Coldwell said it was very hard to forecast whether the recovery in prices would last

Copy right: Rig Zone