Mexico Energy Reforms – Opportunity Awaits

In August 2014, Mexico’s President Enrique Peña Nieto signed the country’s wide-ranging energy reform. The reform creates a new framework that allows for private investment for the first time, signifying the arrival of a new era for the state-owned oil firm Pemex and power utility CFE.

The reform will both revert the drastic fall in oil output over the last decade as well as contribute to reducing the country’s electricity prices, while allowing for a long overdue upgrade of the national grid.

The reform is designed to bolster investment in Pemex and by inviting global and experienced firms to participate in exploration and production, and revert the country’s declining oil output that has been held in a stranglehold by the prohibition of foreign investment in Mexico’s oil industry.

Pemex will be relying on the reform to allow companies with experience in deep water drilling and fracking to provide the know-how and technology to exploit untapped reserves. More than half of Mexico’s proven reserves lie in deep water in the Gulf of Mexico.

In addition, the country’s energy reform stipulates that, from 2017, it will be the energy regulatory commission (“CRE”), and not Pemex, that will grant licenses to firms to sell gasoline in Mexico. This breaks the monopoly that the state-owned firms have held over the awarding of gas station franchises.

Currently, only Pemex is authorized to import and sell gasoline in the country, but the reform will allow private firms to set up shop and open gas stations, ushering in competition for the sector.

Australian designers, engineers, manufacturers and technology companies have a number of strengths that may add value to the Mexican petroleum industry. Australian oil and gas companies are pioneering advanced subsea geotechnics in extreme marine environments and large- scale geosequestration projects. All of which could useful if Mexico will be successful at exploring their offshore oil and gas fields.

According to the Austrade website, within the energy sector, the best prospects for Australian exporters relates to: drilling of work-over rigs, to be used in the exploration, discovery, development, maintenance, testing, depletion or production of oil and natural gas wells, pipe, valves, pumps, electrical apparatus, for switching, insulated wire cable, electric capacitors, board panels, electric transformers, electric motors and generators, static converters and rotary converters.

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