{"id":8302,"date":"2017-09-12T09:51:06","date_gmt":"2017-09-12T14:51:06","guid":{"rendered":"http:\/\/nrgibroker.com\/?p=8302"},"modified":"2017-09-13T07:50:43","modified_gmt":"2017-09-13T12:50:43","slug":"mexicos-energy-reform-is-paying-off","status":"publish","type":"post","link":"https:\/\/nrgibroker.com\/en\/mexicos-energy-reform-is-paying-off\/","title":{"rendered":"Mexico&#8217;s Energy Reform is Paying Off"},"content":{"rendered":"<h4 style=\"text-align: justify;\"><span style=\"font-size: 8pt; font-family: Helvetica;\"><a href=\"http:\/\/www.breakbulk.com\/mexicos-energy-reform-paying-off\/\">From Breakbulk.com \/ By Kerry Dimmer<\/a><\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;For more than 80 years, the state-owned Petr\u00f3leos Mexicanos, or PEMEX, hegemony on the energy sector restricted Mexico\u2019s ability to adapt to changing global energy markets.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;The impacts have been profound. One of the most significant changes saw the country\u2019s oil and gas production decline, which in turn increased the nation\u2019s dependency on imports of gas and oil products. Further exacerbation to its economy came from rising power production costs, aging infrastructure and a widening human resources gap, among other negatives.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;So, it was with some relief that the government in 2013 announced its energy reform bill. Conceptually, it is an extremely significant and insightful document, because it underscores the government\u2019s commitment to change Mexico\u2019s economy and is touted as the catalyst for continued and sustainable growth and welfare.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;With it comes a new era of free trade for the nation, with new global partners that view it as a strong and competitive energy hub, and one that also endorses environmentally friendly practices, a sign of Mexico\u2019s intention indicated by it being one of the earliest nations to sign the Paris climate accord.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;Fast forward to 2017 and Mexico seems to have made good on its promises, having agreed:<\/span><\/h4>\n<ul style=\"text-align: justify;\">\n<li>\n<h4><span style=\"font-size: 12pt; font-family: Helvetica;\">Eleven free-trade agreements with 46 countries.<\/span><\/h4>\n<\/li>\n<li>\n<h4><span style=\"font-size: 12pt; font-family: Helvetica;\">Nine economic cooperation agreements.<\/span><\/h4>\n<\/li>\n<li>\n<h4><span style=\"font-size: 12pt; font-family: Helvetica;\">Thirty-three Reciprocal Investment Promotion and Protection agreements.&#8221;<\/span><\/h4>\n<\/li>\n<\/ul>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;These indicate that Mexico\u2019s energy reform just might be something special to tap into.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\"><strong>Making Moves in Record Time<\/strong><\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;It is remarkable that Mexico has been able to initiate its energy reform in just a few short years, compared with the 20-plus years that more mature markets have faced. As the world\u2019s 10th-largest export economy, according to MIT\u2019s Observatory of Economic Complexity, Mexico has also been named as the 21st-most complex according to the Economic Complexity Index. Whether its energy reform can bolster these rankings will be clear by the end of the decade, as Mexico hits the seven-year marker for its reform.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;What makes Mexico\u2019s progress all the most notable is that this blueprint has been actioned at a time when oil prices are in a tailspin and global economic volatility is at a peak.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;National policies to improve energy efficiency are critical to all countries, but perhaps more so for Mexico, whose oil sector has taken serious knocks over recent years. Despite attempts to diversify away from hydrocarbons, oil revenue still accounted for about one-third fiscal revenue in 2014, according to the International Energy Agency, or IEA.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;In its report, the Mexico Energy Outlook (2016), IEA confirmed that Mexico\u2019s fiscal revenue fell by more than half in 2015 due to the global decline in oil prices. With crude oil production falling further in 2016, Mexico might have floundered into dire straits were it not for \u201cthe increasing availability of relatively cheap natural gas imports from the U.S. providing a welcome boost to Mexico\u2019s power sector,\u201d the IEA said.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;With its energy reform in place, Mexico can return to the benefits of its large hydrocarbon resources, but in a more sustainable, efficient, transparent and productive manner.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;For project cargo interest, an indication of what is to come was highlighted by the first bidding process in December 2016 for eight of the 10 blocks of deepwater offerings. This first round opened Mexico\u2019s oil and gas scene to international interest, and with some 80 percent of the contracts already awarded, it attracted the oil majors and proved that exploration and production is back on the agenda in Mexico. This bodes well for the project cargo market in transporting the large components needed in the construction of fields and processing plants.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\"><strong>Chasing Green Energy<\/strong><\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;However, while oil remains important, Mexico will also continue to encourage low-carbon sources of energy growth \u2013 mainly through gas, solar and wind farm power \u2013 on the back of the government\u2019s desire to embrace clean power generation.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;Alternative power source production will go a long way towards easing demands on the national power grid, an imperative given a 25 percent increase in energy demand since 2000. With the energy reform in place, this sector is also expected to create some 2 million jobs by 2025, as an added benefit.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;Generating 35 percent of total energy from clean sources by 2024 and 50 percent by 2050 are the goals, and in facilitating this the government is offering private companies opportunities to produce and sell electricity in competition with its state-owned utility Comision Federal de Electricidad, or CFE.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;Solar, followed by wind, are the most dominant and popular projects, unsurprising given the country is blessed with significant renewable natural resources. Both renewables are expected to account for about half of total investment in generation and half of generation capacity additions in coming years.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter  wp-image-8303\" src=\"https:\/\/nrgibroker.com\/wp-content\/uploads\/2017\/09\/2-300x200.png\" alt=\"2\" width=\"461\" height=\"307\" srcset=\"https:\/\/nrgibroker.com\/wp-content\/uploads\/2017\/09\/2-300x200.png 300w, https:\/\/nrgibroker.com\/wp-content\/uploads\/2017\/09\/2-450x300.png 450w, https:\/\/nrgibroker.com\/wp-content\/uploads\/2017\/09\/2.png 600w\" sizes=\"auto, (max-width: 461px) 100vw, 461px\" \/><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\"><strong>Eye on Developments<\/strong><\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;Augustin Valdivia, owner\u2019s engineer at Think Forward Power, said the transition was slow when the energy reform was introduced, but after Mexican state-owned utility CFE and power grid operator CENACE (Centro Nacional de Control de Energia) concluded two public Power Purchase Agreements, or PPAs, more than 5.4 gigawatts of contracted power capacity manifested.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;\u201cThese PPA auctions appear to have stimulated the market for new project development and construction,\u201d Valdivia said, \u201cand those companies that won PPAs from the CFE and CENANCE auction are currently working on developing and building those projects over the forthcoming years.\u201d&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;Think Forward Power, whose main activities include consultancy, outage support, regulatory approvals and permitting, and power generation project development and construction, has kept a keen eye on the growing energy market, given it is \u201cstill maturing,\u201d as Valdivia described it.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;\u201cOne of the current biggest challenges, but which we also see as being an opportunity, is for existing service providers to adapt to a new, more competitive market. New power plant construction is reportedly being developed with very aggressive and competitive prices, which in turn results in reduced project budgets. Spanish companies appear to be well-positioned in the market based on their familiarity with the culture, language compatibility and competitive pricing,\u201d he said.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;This does not mean, however, that other nations are excluded, Valdivia said. \u201cMexico welcomes partnerships with foreign organizations and particularly those in oil exploration and production, liquefied natural gas export, solar, wind and gas-fired power generation. Each area of the energy market includes a number of active international participants, and those appear to be driven by individual companies\u2019 skills, know-how and interest in investment in Mexico.\u201d&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">&#8220;Freight forwarders; cargo carriers; engineering, procurement and construction companies; and other logistics suppliers are some of the new investors, particularly for the wind energy projects, which depend heavily on effective, capable transportation and logistics.&#8221;<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\">\u201cFor example, a typical 125-megawatt project may require shipments of approximately 1,000 large components, including blades, nacelles and tower sections,\u201d Valdivia said. \u201cThese components are often delivered to Mexico through Altamira Port in the Gulf of Mexico, or Manzanillo Port in the Pacific. Such transportation is going to be crucial in helping contractors to deliver projects on time.\u201d<\/span><\/h4>\n<h4 style=\"text-align: justify;\"><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 12pt; font-family: Helvetica;\"><strong>Boon For Transporters<\/strong><\/span><\/h4>\n<h4 style=\"text-align: justify;\">&#8220;Mexico\u2019s energy reform is already having positive impacts for the region\u2019s transport industry, including for well-established businesses like Mucino Transportes, which offers specialized transport services, particularly those of heavy and oversized loads in Mexico, the U.S. and Canada.&#8221;<\/h4>\n<h4 style=\"text-align: justify;\">&#8220;Ra\u00fal Cuevas Fernandez, in Mucino\u2019s commercial division, said he anticipates being very active with the number of wind farms planned for development next year plus other wind combined cycle projects. Mucino already transports, across distances of 1,000 kilometers, heavy components ranging from 200 to 300 tonnes for energy projects in the towns of Topolobampo, Cortijo and El Carmen. Mucino is also in the planning stages of transporting an oversized load from Topolobampo to San Miguel Zapotitlan in the Los Mochis area.&#8221;<\/h4>\n<h4 style=\"text-align: justify;\">&#8220;Given the potential, it\u2019s a particularly competitive market. \u201cThere are a number of foreign companies entering Mexico, and combined with other major players that are dropping market prices, we are starting to see some delays on projects. This makes it more difficult to win bids, but we believe there are enough projects in forthcoming years, for many to benefit from,\u201d Fernandez said.&#8221;<\/h4>\n<h4 style=\"text-align: justify;\">&#8220;Some transporters were concerned about access to projects, given that wind farms, for example, are usually sited in remote locations. However, Fernandez did not see this as a problem: \u201cMexico\u2019s infrastructure is constantly evolving, but ultimately it\u2019s about doing business with what exists and adapting to opportunities. As such we are expanding our capabilities with the acquisition of new equipment such as Faktor 5 and Addrive, along with other ultra-long decks so that we are well prepared with the right tools, for when new opportunities arise.\u201d&#8221;<\/h4>\n<h4 style=\"text-align: justify;\">&#8220;However, while Mexico\u2019s energy reform is certainly on its way to becoming one of the world\u2019s most attractive investment destinations, challenges remain, including consolidation of the new model, and transparency and accountability. Also, the need to attract private investment means that value chains of supply, and delivery of those, will prove vital in changing the economic landscape for all involved.&#8221;<\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"font-size: 8pt; font-family: Helvetica;\"><a href=\"http:\/\/www.breakbulk.com\/mexicos-energy-reform-paying-off\/\">From Breakbulk.com \/ By Kerry Dimmer<\/a><\/span><\/h4>\n<h4 style=\"text-align: justify;\"><\/h4>\n","protected":false},"excerpt":{"rendered":"<p>From Breakbulk.com \/ By Kerry Dimmer &#8220;For more than 80 years, the state-owned Petr\u00f3leos Mexicanos, or PEMEX, hegemony on the energy sector restricted Mexico\u2019s ability to adapt to changing global energy markets.&#8221; &#8220;The impacts have been profound. One of the most significant changes saw the country\u2019s oil and gas production decline, which in turn increased [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":8303,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1017],"tags":[],"class_list":["post-8302","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/nrgibroker.com\/en\/wp-json\/wp\/v2\/posts\/8302","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/nrgibroker.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/nrgibroker.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/nrgibroker.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/nrgibroker.com\/en\/wp-json\/wp\/v2\/comments?post=8302"}],"version-history":[{"count":0,"href":"https:\/\/nrgibroker.com\/en\/wp-json\/wp\/v2\/posts\/8302\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/nrgibroker.com\/en\/wp-json\/wp\/v2\/media\/8303"}],"wp:attachment":[{"href":"https:\/\/nrgibroker.com\/en\/wp-json\/wp\/v2\/media?parent=8302"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/nrgibroker.com\/en\/wp-json\/wp\/v2\/categories?post=8302"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/nrgibroker.com\/en\/wp-json\/wp\/v2\/tags?post=8302"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}