Mexico is making concerted efforts to bring in the private sector into its potentially lucrative hydrocarbon sector. This “apertura” or “opening” is a process that much like the one in Venezuela in the early 1990s brought in considerably foreign investment and technology to the national industry.
The Country boasts large reserves and massive resources of conventional and unconventional hydrocarbons both onshore and offshore, and the new energy reform approved in December 2013 is intended to provide the flexibility necessary for the opening of the hydrocarbon sector to private and foreign participation, and to produce them wisely.
The initial phase of the Mexican Oil & Gas “Apertura” involves transferring producing assets that are currently under service contract arrangements. Pemex is then planning to enter into joint venture arrangements with private or foreign sector entities (i.e. farm-out agreements) for mature fields, deep water, and extra heavy crudes requiring capital investment and technological expertise. In addition, the Mexican government will go through a bidding round (Round 1) in which 109 exploration blocks and 60 producing fields, including deep and shallow water, and unconventional blocks will be offered up for investment. All this is expected to happen fast, started in 2014 and will continue in 2015.
The energy reforms also established a new HSE regulatory body for the oil and gas sector, and the Decree enacting the Law of the National Agency of Industrial Safety and Environmental Protection of the Hydrocarbons Sector became effective August 12, 2014. The ASEA (Spanish acronym for the Agencia) was created under the Ministry of Environment and Natural Resources (SEMARNAT), with technical and procedural autonomy, tasked with regulating and supervising industrial and operational safety, as well as environmental protection of the Hydrocarbon Sector. In summary, HSE risks and impacts of oil and gas will be regulated and supervised by ASEA.
The Energy Reforms only provide generalized conceptual legislation, but they also specify that detailed legislation must be enacted within 12 months for the development of additional environmental regulations governing the energy sector.
This “opening” of the Mexican hydrocarbon sector can lead to important positive benefits, including considerable increase in production, reserves, GDP growth, creation of jobs, provision of goods and services, additional injection of foreign investment, and infrastructure growth.
It is also possible to concurrently obtain those positive benefits while ensuring that the Apertura is implemented protecting the environment, safeguarding the people, and guaranteeing sustainability. This requires the use of good international industry practices and available technologies, and to have proper regulation and a rigorous and effective supervision. Legislation is in place and implementation is unfolding.
Now is the time for foreign investors to engage, understand the HSE and sustainable development context within the country oil and gas sector, and prepare to capitalize on the Mexican opportunity provided by this important episode in Mexico’s hydrocarbon sector.