Mexico Oil & Gas Summit 2018 Impact Report by Mexico Business Publishing

IMPACT REPORT

2018

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2018 Mexico’s Energy Reform is only five years old but already it has created sweeping change in Mexico’s oil and gas industry. Now, the new administration has the challenge of consolidating the efforts already made by the Peña Nieto government. The industry is holding its breath as it looks to the new president to eradicate legal and regulatory bottlenecks and continue opening new and profitable opportunities for local and international companies that see Mexico as an attractive destination to invest.

With Rounds 3.2 and 3.3 scheduled for next September as well as PEMEX’s seven farmouts scheduled for October, Peña Nieto’s energy transition team, AMLO’s incoming team and CNH will have to work together to guarantee a competitive process for the last licensing round of the current administration.

The rules of the game are clear and players should be ready to put their best bids on the table and continue consolidating their business portfolios and Mexico’s upstream attractiveness for the years to come.

Clearing up doubts and staying far away from any type of misinformation is key to maintaining a strong and healthy market. Mexico Oil & Gas Summit 2018 proudly offers the opportunity to listen to the expert opinions of the leaders shaping this industry. We are pleased to welcome you to participate in the discussion at this important time of change and consolidation.

2019

Quick Look:

“Next to geological resources, the most important consideration state authorities must make is their investment in human resources” Alejandra Bueno, CEO of R&I Solutions and Strategic Advisor to Access to Energy

INCLUDING: ∙∙ Juan Carlos Zepeda, President Commissioner of CNH ∙∙ Alberto de la Fuente, President of AMEXHI ∙∙ Carla García, President of the Energy Commission of the American Chamber Mexico ∙∙ Andrés Fusco, Energy Commissioner of the State of Tamaulipas

TOP SPEAKERS

∙∙ Rosanety Barrios, Head of the Industrial Transformation Policy Unit at the Deputy Ministry of Hydrocarbons ∙∙ David Madero, Director General of CENAGAS ∙∙ Guillermo García, President Commissioner of CRE ∙∙ Merlin Cochran, Deputy Director General of Exploration and Extraction of Hydrocarbons at the Ministry of Energy ∙∙ Rogelio Garza, Deputy MInister of Industry and Commerce

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192 COMPANIES REPRESENTED (not counting speakers)

“When companies enter Mexico, although they may be used to working globally, they may not be aware of the intricacies Mexico involves” Luis Manuel Ocejo, President of CAMEINTRAM

327

PARTICIPANTS

“Royalties from natural gas should be zero, because it is really difficult to compete against the US. Mexico needs to incentive the fiscal regime for natural gas and allow operators to deduct drilling costs.” Juan Carlos Zepeda, President Commissioner of CNH

COMPA N Y AT T E N DA N C E 3M

Eagle Mapping

ABB

Ej Krause

ABS

Embassy of Canada in Mexico

Access To Energy

Emerson

Agilent

EMGS

Aimsa Petroleum

ENERMAR

Alpha Deepwater Services

Engineering & Terminal Services

American Chamber

Enix

AMESPAC

Ensco Drilling Mexico LLC

AMEXHI

Entrepose

Ampelmann

EPG events

ARHIP

Erciyas

ASEA

ERGON

Astrum

ERM

ATCO

Estado de Tamaulipas

Autotanques Beltrán e hijos

Evonik

Bajainnova

Exterran

Baker Hughes a GE company

BAML

F Tech

Banorte

FalconView Energy Products

Base Logístika

Fifomi

BASF

Finestra Energía

Bernhard Schulte Shipmanagement

FRAP

Mexico

Gardline

Bistro

Gas Liquids Engineering

Blackhorse Market Solutions

GMI Consulting

Boluda Towage and Salvage

Goodrich, Riquelme y Abogados

Borr Drilling

Government of Alberta

Boskalis

Government of Canada

Braskem Idesa

Green Momentum

C&C Reservoirs

Greensill Capital

California Resources Corporation

Grupo Industrial Águila

CAMEINTRAM

Grupo R

Capgemini

Grupo Roales SA de CV

Carlson Wagonlit Travel

Grupo TMM

CENEGAS

HASKELL

Chevron

HealthCare Partners Mx

Clyde Co México

Heerema

CNH

Henkel

COSL

Hexagon

Cotemar

IHS Markit

Crédit Agricole CIB (CACIB)

IMEC Corporation

CVS Controls

Impact Fluid Solutions

DBR De Mexico

IMS Global

DFI

INDUSTRIAS ENERGÉTICAS

Diablo pipelines solutions

INPEX CORPORATION

Diesel Tech Industries Ltd.

Integral Consulting Inc

DNV-GL

InTELA2-integral

Dow Chemical

International Frontier

Drebbel de Mexico

International SOS

Dupont

Interproteccion

Dutch Energy Association

IPN Instituto Politécnico Nacional

Dutch Embassy

IPS Powerful People

JaG Valve

OilTanking

SMPS Legal

Jaguar E&P

Oxiteno

Solar Turbines

Jorge Aldredo

PBOK TECHNICAL CONSULTING LTD

SPS

KDM Firesystems

Pemex

Statoil

Keppel AmFELS

Petrofac

Subsea7

Kiewit

PGS

Summum

Kongsberg Oil and Gas Technology

Premier Oil

Superior Energy Services

KPMG CARDENAS DOSAL

PRESCO

TABEHSA

LA Rainmakers

Prosafe

Talos Energy

LOC London Offshore Consultants

PWC

Tarsco Mexico

MAN Diesel & Turbo Mexico

QMAX

TD Williamson

Marcos y Asociados

Queiroz Galvão ÓLeo e Gás S.A.

TECHNIP FMC

Marinsa

Repsol

Tetra Tech (Integral)

MCM Abogados

Rockwell Automation

TGS

MEXTUG SAPI DE CV

Rosen

Thermo Design Engineering

Mitsubishi Electric Automation Inc.

Rystad Energy

Tidewater Mexico

MNJ CAPITAL

S&P Global

Tonalli Energia

MODEC SOFEC

Salles Sainz Grant Thornton

Trelleborg Offshore

Multiservicios Petrolero

Schlumberger

US-Mexico Chamber of Commerce

Nalco Champion

Scottish Development International

Vallen

Naviera Integral

SENER

Vista Oil & Gas

NET BRAINS

SERIMAX

VOPAK

NUÑEZ RODRIGUEZ ABOGADOS, S.C.

Servicios de Liquidación

Weatherford

NUVOIL

SGS DE MEXICO

WEIR

OCEAMAR

Shell

WesternGeco

Oceaneering

Sherwin Williams

WILLIAMS SCOTSMAN

OceanPact

Sierra Oil

Wison Offshore & Marine (USA), Inc.

OECD

Simmons Edeco

WorleyParsons

Offshore Technical Compliance

SKF De Mexico

Xwells

Profile of Attendants

63% C-Level 37% Upper Management

Satisfaction Level

9% Very satisfied 45% Satisfied 27% Neutral 9% Dissatisfied 9% Very dissatisfied

Most Valuable Element

40% Networking opportunities 30% Quality of presentation 30% Level of panel members

P R O GR A M

JULY 18 07:30 REGISTRATION 08:30

MEXICO’S FIRST NINE LICENSING ROUNDS AND WHAT SHOULD COME NEXT

Presentation: Juan Carlos Zepeda, President Commissioner of CNH 09:15

OIL AND GAS POLICY OUTLOOK: INDUSTRY WISH LIST

Moderator:

Luis Vielma, Vice President of International Affairs at AMESPAC

Panelists:

Alberto de la Fuente, President of AMEXHI

Roberto Martinez, Head of the OECD Mexico Center

Carla García, President of the Energy Commission of the American Chamber Mexico

Jan Frowijn, Director General of the ROSEN Group Mexico

10:30

NETWORKING COFFEE BREAK

11:00

THE AMBITIONS OF MEXICO’S KEY OIL AND GAS STATES

Moderator:

Alejandra Bueno, CEO of R&I Solutions and Strategic Advisor to Access to Energy

Panelists:

Andrés Fusco, Energy Commissioner of the State of Tamaulipas

Wilver Mendez, Secretary of Economic Development and Tourism for the State of Tabasco

Ernesto Marcos, Partner at Marcos y Asociados

12:00

NETWORKING COFFEE BREAK

12:30

ACHIEVEMENTS OF THE ENERGY REFORM AND HOW TO CONSOLIDATE THEM

Presentation: Rosanety Barrios, Head of the Industrial Transformation Policy Unit at the Deputy Ministry of Hydrocarbons 13:30

NETWORKING LUNCH

15:00

ENVIRONMENTAL IMPACT ASSESSMENTS: THE KEY TO UNLOCKING MEXICO’S ONSHORE POTENTIAL

Presentation: Alberto Vega, Senior Partner at ERM Latin America and Caribbean 15:30

NATURAL GAS SUPPLY, DEMAND AND INFRASTRUCTURE

Moderator:

Alfredo Alvarez, Energy Segment Leader LATAM North at EY

Panelists:

David Madero, Director General of CENAGAS

Guillermo García, President Commissioner of CRE

Elie Atme, Senior Vice President, Business Development of ATCO

Rosanety Barrios, Head of the Industrial Transformation Policy Unit at the Deputy Ministry of Hydrocarbons

16:30

NETWORKING COCKTAIL

KEY SPEAKER

CNH’S ZEPEDA: MEXICO’S LICENSING ROUNDS AND WHAT SHOULD COME NEXT Juan Carlos Zepeda, President Commissioner of CNH, opened Mexico Oil & Gas Summit 2018 on Wednesday at the Hotel Sheraton Maria Isabel, sharing relevant indicators from the past bidding processes and the opportunities the new administration could tackle, while also highlighting the upstream process. Mexico has concluded 14 E&P bidding processes: nine licensing rounds and five farmouts. From these processes, CNH has allocated 107 contracts: 31 production sharing contracts (PSCs) and 76 licenses. Likewise, during Round Zero, the

JUAN CARLOS ZEPEDA

Ministry of Energy granted 21 percent of Mexico’s prospective resources (23,447

President Commissioner of CNH

Mmboe in 66,000km2) to PEMEX and 93 percent of the country’s 1P reserves

Juan Carlos Zepeda has been

(12,448 Mmboe). Overall, PEMEX has 390 E&P assignations in an area of more

responsible for various aspects of the

than 100,000 km2. So far, operators have committed 138 exploration wells, 74

oil economy at the Ministry of Energy

onshore, 64 offshore. From 2018 to 2021, Mexico will drill 26 offshore exploration

and the Ministry of Finance. At the

wells and 50 percent of these will be drilled by new operators.

Ministry of Finance, he oversaw the evaluation of PEMEX’s investment

In terms of superficial recognition contracts or ARES, Zepeda said that “seismic

projects, the design of the PEMEX

companies have invested US$2 billion in the last three years. The Gulf of Mexico

fiscal regime, the evaluation and

used to have a seismic coverage of 35 percent, but that coverage is now 100

monitoring of PEMEX’s budget

percent. All this seismic data belongs to Mexico but the legal framework allows

and finances and design of the

companies to market their products and services to promote better data that

oil industry’s pricing policy. In the

will allow operators to make informed decisions.” CNH enacted the regulation

Ministry of Energy, as Director General

of the ARES contracts in 2015. Zepeda stressed that CNH had created an oil and

of Exploration and Exploitation of

gas information industry in Mexico from which CNH receives a royalty from each

Hydrocarbons, he was in charge of

activity. “Since the Energy Reform was enacted, CNH has granted more than

the technical evaluation of exploration

40 ARES contracts and PEMEX has transferred all its data to CNH (87,096km2

and exploitation projects.

of 3D-WAZ). Overall, Mexico has tripled its seismic activities in the past three years,” he said. Zepeda also highlighted Mexico’s government take related to E&P contracts and compared it with the country’s major regional competition. Mexico’s government take from license contracts is 63 percent and 75 percent from PSCs, on average.

In the US, the take is 55 percent for license contracts and in Brazil it is 59 percent from concessions and 75 percent from PSCs. Zepeda also said that “it is impossible to renegotiate the allocated contracts with CNH. If an operator does not fulfill its obligations, CNH will charge them the financial guarantees presented in the bidding process.” After dissecting the E&P process and relevant

a d m i n i st rat i o n i s a c h a n ce to c a p i t a l i ze o n

“Since the Energy Reform was enacted, CNH has granted more than 40 ARES contracts and PEMEX has transferred all its data to CNH (87,096km2 of 3D-WAZ). Overall, Mexico has tripled its seismic activities in the past three years”

opportunities, particularly regarding PEMEX. Andrés

Juan Carlos Zepeda, President Commissioner of CNH

indicators, Zepeda stressed the focal point for PEMEX’s future success: capital and reinvestment. “Today, if the NOC wants to raise capital for E&P investments, it needs to associate with other operators, but these operators will ask PEMEX to operate the assignations. Why? Because PEMEX has a specific fiscal regime that does not allow the company to raise capital in the financial markets.” Zepeda also said that the change in the federal

Manuel López Obrador was elected Mexico’s next president on July 1. “PEMEX needs to be outside the budget’s control and must not be made responsible for the debt obligations of the Mexican government. PEMEX should not be obligated to give any more money to the federal budget beyond the taxes it pays.” Zepeda offered a simple resolution for PEMEX’s fiscal regime. “The NOC should reduce its fiscal regime to incentivize investment for strategic projects,” he said. The President Commissioner also mentioned that natural gas is a priority for Mexico’s energy security. “Today, Mexico consumes around 8Bcf/d, from which PEMEX itself consumes 2Bcf/d with the nation consuming the rest.” According to Zepeda, Mexico is importing 85 percent of its national consumption. Ninety percent of these imports comes from the US. “This is an operational vulnerability for the country. Mexico needs to produce more natural gas. PEMEX needs to create competitive and attractive farmouts in this regard to boost Mexico’s natural gas production,” he said. Zepeda also mentioned that “royalties from natural gas should be zero, because it is really difficult to compete against the US. Mexico needs to incentive the fiscal regime for natural gas and allow operators to deduct drilling costs.” Moving forward, Zepeda also shared with the audience CENAGAS’ strategic storage plan which, he said, should be revised and oblige big users to have a daily minimum level of storage.

OIL AND GAS POLICY OUTLOOK: INDUSTRY WISH LIST As Mexico prepares for another political transition following President-elect Andrés Manuel López Obrador’s victory on July 1, the country’s oil and gas industry is waiting to see which direction the administration will take regarding the sector. Mexico Oil & Gas Summit 2018, held at the Hotel Sheraton Maria Isabel on Wednesday, provided a platform for industry players to contribute to the discussion of what the industry needs and how to coordinate efforts between the new administration and the private sector to capitalize on the milestones already achieved by the industry.

In his capacity as President of AMEXHI, the Mexican Association of Hydrocarbon Companies, Alberto de la Fuente insisted the private sector has the will to establish a teamwork dynamic with the new administration according to four core principles: competition, continuity, transparency and knowledge. As López Obrador’s transition team takes up positions in key ministries and public offices, the industry is waiting for pronouncements on the next licensing rounds, scheduled for later in 2018. De la Fuente said that AMEXHI and the new administration share common ground regarding the vision of economic growth propelled by the success of the country’s oil and gas industry. This includes a robust social agenda rooted in creating jobs. Private companies’ international experiences could also contribute to building on the achievements related to transparency, openness and dialogue that the incumbent administration put in place. Giving a voice to the companies further down the industry’s value chain, Jan Frowijn, Director General of ROSEN Group Mexico, highlighted the necessity to prepare for the new business reality in Mexico, with significant opportunities following the country’s accomplishments in offshore developments from the Licensing Rounds, specifically in liquid storage, refining capacity and pipeline integrity services. By aligning global best practices to Mexico’s industry specifics, the country’s private sector can develop healthy and beneficial competition, both

KEY SPEAKER

for local companies and players coming from abroad looking for a market foothold. With an increased focus on injecting innovative technologies and processes, the country can seize the opportunity to build a strengthened industry on the basis of top-tier technology and effective safety and environmental practices. Roberto Martínez, Head of the OECD Mexico Center, commended Mexico’s standing as the most active OECD country in pushing forward critical structural reforms, as well as the roles of CRE, CNH and ASEA, both as industry regulators and enablers. Looking ahead, regulators are called to coordinate performance criteria focused primarily on transparency and openness to private initiative, while the new

JAN FROWIJN

administration should continue guaranteeing an equivalent level of independence

Director General of the

and autonomy, as ASEA still lacks a full-fledged governing body in the image of

ROSEN Group Mexico

its regulatory peers, CNH and CRE. Martínez also congratulated the regulators’

Jan Frowijn joined ROSEN Europe in

strategic planning with a long-term vision, critical for the industry. Equally

2000 as Finance Manager. In 2006

important is for regulators to continue the coordinating efforts materialized with

he was transferred to ROSEN USA’s

the creation of the Coordinated Assistance Office of the Energy Industry (ODAC)

office in Houston, Texas. In 2014 he

for in integrated, digitalized information and management systems, coupled with

was transferred to ROSEN Mexico to

coordinated accountability mechanisms and strengthened consulting mechanisms

fill the role of Managing Director. He

with the private sector.

is now Director Business Collaboration, part of the sub-region Mexico and

While regulatory transparency has been the name of the game during the Energy

Central American management team.

Reform’s consolidation, communication is the other side of the same coin. Carla

Frowijn received a Bachelor’s degree in

García, President of the Energy Commission of the American Chamber Mexico,

business economics from the Saxion

said the success and continuity of the licensing rounds and their inherent

Hogeschool and an MBA from TSM

investment flows are rooted in effective communication of the benefits of such

Business School.

processes to the entire value chain and to the general public. Public access to

all relevant information from the rounds, farmouts and contract migrations is

KEY SPEAKER

essential for the industry’s prosperity and the general acceptance of the policy, aiming at the industry’s consolidation. Regulators must continue showcasing the same transparency shown so far, which has received international recognition.

OIL AND GAS POLICY OUTLOOK: INDUSTRY WISH LIST HUMAN TALENT, INFRASTRUCTURE: STATE PRIORITIES TO DETONATE O&G Tabasco, Tamaulipas, Campeche and Veracruz make up Mexico’s key oil and gas states due to their significant onshore and offshore resources. But at Mexico Oil &

ALEJANDRA BUENO

Gas Summit 2018 on Wednesday at the Sheraton Maria Isbabel hotel in Mexico City,

CEO of R&I Solutions and Strategic

Alejandra Bueno, CEO of R&I Solutions and Strategic Advisor to Access to Energy,

Advisor to Access to Energy

said the next consideration is the availability of human talent. “Next to geological

Alejandra Bueno is the CEO of R&I

resources, the most important consideration state authorities must make is their

Solutions, a cross-border consulting

investment in human resources,” she said.

firm representing foreign investors doing business in Mexico within the

Wilver Mendez, Minister of Economic Development and Tourism for the State of

energy industry. She is Chairwoman

Tabasco, agreed. “The state is promoting specialized degrees for the oil and gas

of the Energy Committee of the

industry,” he said. “University graduates in Tabasco have a 70 percent absorption

Asociación de Empresarios Mexicanos

rate in the oil industry.”

(AEM). Bueno works as a Strategic Advisor in Texas to Access to Energy,

With total deepwater E&P investment in Tabasco estimated at US$26.6 billion,

a multidisciplinary corporate shelter

shallow-water E&P at US$10.9 billion and onshore E&P at US$1.28 billion, it is easy

service for companies trying to

to see why more human talent is needed. Mendez highlighted that 31 of the contracts

enter the Mexican energy market.

awarded in the licensing rounds and two onshore fields awarded in PEMEX farm-outs

Bueno holds a law degree from the

are located in Tabasco, with 13 new companies already working in the state, including

Universidad Iberoamericana and two

Statoil, Eni and Murphy Oil.

Master’s degrees in law.

While Mendez highlighted the importance of training human talent to strengthen local content and the national supply chain, Ernesto Marcos, Partner at energy consultancy Marcos y Asociados, said the country should learn from mistakes made in markets such as Brazil and Colombia. During its energy transition, Brazil set extremely high local talent requirements that the country was unable to meet. “Best practices can be incorporated from both markets but the authorities should bear in mind that this process is a marathon, not a race,” he said.

“Support is needed not only on the federal level, but also on state, municipal and across all levels of government” Ernesto Marcos, Partner at Marcos y Asociados

Apart from setting obtainable human talent requirements, Andrés Fusco, Energy Commissioner of the State of Tamaulipas, emphasized the importance of facilitating business for the operators investing in Mexico by creating a body to oversee key issues, such as environmental permitting and social issues. “Tamaulipas created the State Energy Commission, which is the first of its kind in the country,” he said.

With almost one-third of the awarded blocks in the bidding rounds located in Tamaulipas and close to US$59 billion due to be invested in the state, Fusco believes infrastructure development is another aspect that the government could promote to help operators. “In terms of port infrastructure, we have the Port of Tampico in the south of the state and the Matamoros port is currently under construction,” he said. “This will be developed as a one-stop supply base for the energy industry.” Tamaulipas is expected to attract US$64.4 billion in E&P investment. Given the high investment levels, Marcos agreed that the state plays half the role in the oil and gas industry. “This is the case firstly because the state owns the resources and secondly because the establishment of infrastructure will benefit the state,” he said. “Support is needed not only on the federal level, but also on state, municipal and across all levels of government.” Fusco said that the development of Matamoros displays Tamaulipas’ commitment to the oil and gas industry. “We are very receptive to the transition,” he said. “We have designed state-level policies to accompany the reform in innovation, education, technology transfer and infrastructure development.” Mendez said that Tabasco aims to contribute through its ZEE, which will be set up in Paraiso. “This program will target urban development, infrastructure development, support for investors, protection and conservation of the environment and training of human talent, among other issues,” he explained. “All these factors can be used to support the oil and gas industry in the state.”

ACHIEVEMENTS OF THE ENERGY REFORM AND HOW TO CONSOLIDATE THEM

KEY SPEAKER

Energy Agency’s model for securing energy supply is an example that Mexico could replicate to address its own energy needs, specifically with natural gas, Rosanety Barrios, Head of the Industrial Transformation Policy Unit at the Deputy Ministry of Hydrocarbons, told the Mexico Oil & Gas Summit 2018 on Wednesday at the Sheraton Maria Isabel hotel in Mexico City. Speaking on the first day of the two-day summit, Barrios said that “after the shale gas revolution in the US, which started in 2008, Mexico was not prepared to compete against the lower production costs that its northern neighbor enjoyed thanks to its

ROSANETY BARRIOS

technology access.” She pointed out that the US continues to have a comparative

Head of the Industrial

advantage in terms not only of E&P activities related to shale gas, but also in terms

Transformation Policy Unit at the

of its midstream infrastructure to market that production and even the US refining

Deputy Ministry of Hydrocarbons

capacity compared to the Mexico, which, according to Barrios, “is inefficient given

Rosanety Barrios is responsible

its lack of maintenance and specialization.”

for the development of public

Barrios referred to the IEA’s model to secure energy supply. She mentioned that

transportation logistics, storage and

policy applicable to the supply, “the incumbent administration had, since the beginning, implemented critical alerts

distribution of oil and natural gas.

related to natural gas supply because Mexico is a country used to importing natural

Prior to her current appointment she

gas from Texas’ basins. This comfortable reality never allowed the development of

collaborated in the development of

a local natural gas industry.” Barrios added: “This is why the Ministry of Energy’s

the legal framework of the energy

priority is to incentivize the proper development of a local natural gas market. How?

sector approved by Congress in

By liberalizing market prices, granting access to current storage, distribution and

August 2014 and coordinated the

transportation infrastructure and consolidating symmetry between policymakers

development of the legal regulation

and regulators to have clear rules.”

corresponding to her current

According to Barrios, this mandate to create and consolidate a natural gas market

Member of CENAGAS and Alternate

responsibility. She is Alternate Board should be everyone’s responsibility, referring to the Ministry of Energy, CNH, CRE

Board Member of PMI Comercio

and the industry itself. She mentioned that “Mexico is some years behind its northern

Internacional.

neighbor but, nevertheless, the country is in the right moment to take advantage of the untapped opportunities present thanks to the Energy Reform.” Barrios also highlighted Mexico’s first open season, related to infrastructure, that opened the door to private and public investment that was previously only in the

“After the shale gas revolution in the US, which started in 2008, Mexico was not prepared to compete against the lower production costs that its northern neighbor enjoyed thanks to its technology access” Rosanety Barrios, Head of the Indrustrial Transformation Policy Unit at the Deputy Ministry of Hydrocarbons

hands of PEMEX and CFE. “Private players are able to invest, co-invest and develop strategic projects for the sake of the country’s energy supply,” she said, pointing out that “the incumbent administration built 7,521km of new pipelines, 66 percent more than was completed in the previous administration, and it is committed to the continued development of strategic projects to secure energy supply for years to come.” Developing the country’s storage capacity is another area that requires attention, Barrios said, particularly in regions where fuels or natural gas are greatly needed. “CRE has announced 56 new storage projects. This does not mean that all these projects will see the light but, what we can project in the short term is that the industry

in general is more conscious about Mexico’s lack of strategic storage installed capacity.” She also highlighted the opportunities further along the value chain. “In terms of retail fuelsl, Mexico has 46 new brands with 3,061 service stations across the country, representing 26 percent of the total number of service stations.” Barrios concluded her presentation with a nod to the incoming administration of President-elect Andrés Manuel López Obrador. “Consolidating the achievements of the Energy Reform takes time,” she said. “Mexico has taken the first step and the country needs to continue moving forward. Every player involved in this industry needs to understand that this is a group effort and the president-elect’s new administration should understand this message and keep working to incentivize the growth and health of the country’s energy supply.”

KEY SPEAKER ESIA THE DIFFERENCE BETWEEN A SUCCESSFUL AND A FAILED PROJECT Much of Mexico’s culture is enriched by its indigenous populations and heritage, and there are still large communities or ejidos whose homes stretch along the coast of the Gulf of Mexico. As a result, onshore oil and gas operators can run into difficulties with access to land, water and community relations, said Alberto Vega, Senior Partner at ERM Latin America and the Caribbean.

ALBERTO VEGA

“A comprehensive Environmental Social Impact Assessment (ESIA) can make

Senior Partner at ERM Latin

the difference between a failed and a successful operation,” he told Mexico Oil

America and Caribbean

& Gas Summit 2018 at the Sheraton Maria Isabel in Mexico City on Wednesday.

Alberto Vega has over 35 years of

“Mexico’s regulatory framework related to E&P site access and safe sustainable

professional experience leading

operations is clear, but not every company understands the process to assess

environmental and social assessments

environmental and social impact studies properly.”

for large infrastructure projects in more than 15 countries in Latin

The largest onshore licensing rounds are currently open to bidders. Today, CNH

America and the Caribbean. Vega

announced that, for participation in Rounds 3.2 and 3.3, access to the data rooms

holds an MSc in system ecology from

will close on Jan. 8, 2019, prequalification deadline will be Jan. 29, 2019 and the

the University of Florida. Dedicated

presentation of proposals will take place on Feb. 14, 2019.

to sustainable development since the beginning of his career, he is

Thirty-seven onshore contractual areas will be up for grabs in Round 3.2: 21 within

capable of combining his gathered

the Burgos Province, nine within Tampico-Misantla-Veracruz and seven within

specialized training and experience in

the Southeast Basin. In Round 3.3, nine contractual areas will be made available,

management with his solid education

located within the Burgos province in Tamaulipas, and the fields will include

in environmental and natural sciences.

conventional and unconventional resources.

But Vega warns that without appropriate due diligence, operators face discontented communities, delays and legal implications. “It is vital to identify issues early,” he warned. “These include potential conflict with land use, potential conflict with other water users in the area, ensuring long-term access to the site and security.”

“Support is needed not only on the federal level, but also on state, municipal and across all levels of government” Ernesto Marcos, Partner at Marcos y Asociados

He pointed out that the last census was carried out in 2010, and with rapidly shifting landscapes, companies cannot simply rely on this information. “Companies need to visit the communities in person, understand what is expected from the project and explain the implications under the Free, Prior and Informed Consent model,” he said. “The community needs to be well-informed, and this consent has to be obtained without pressure, ensuring the community is given and understands all the information necessary.” A robust SIA does not only consider community consultation. Among other considerations are identification of impact mitigation and compensation measures. He also stressed the importance of forming solid, binding agreements with the communities and registering them with the relevant authorities. “Land rights pertaining to derechos ejidales, communal property and private land should be respected and compensated according to fair land value,” he said. “But it is important to ensure the process is formalized and access is registered appropriately.” Vega acknowledged that some operators may not be aware of the intricacies and rules of the systems, so he provided some simple considerations to take away:

MEXICO’S NATURAL GAS SUPPLY, DEMAND AND INFRASTRUCTURE Mexico is paving the way for natural gas to become the country’s standard, costcompetitive and environmentally friendly fuel source for bolstered economic activity, panelists told the audience at the Mexico Oil & Gas Summit 2018 at the Hotel Sheraton Maria Isabel in Mexico City on Wednesday. Representatives

“We must keep in mind that 15 percent of Mexico’s households still rely on lumber, posing a health hazard, and leading to CO2 emissions and high-cost issues”

from CENAGAS, CRE, the Ministry of Energy and

Guillermo García, President Commissioner of CRE

competing with PEMEX. This shift allowed the

ATCO gathered to discuss the landmarks achieved for natural gas supply, demand and infrastructure as Mexico moves toward its long-term sustainability goals and the increasingly relevant role natural gas will play in that regard. “The price liberalization for natural gas that CRE approved in mid-2017 ended the difficulty of identification of scarcity locations and to act on that, a significant advance for a country that spent 20 years in

transition conditions with no additional infrastructure, subject to production drops and supply cutoffs,” said Rosanety Barrios, Head of Political Units of Industrial Transformation at the Ministry of Energy. This milestone enabled the identification of important regional gaps in terms of natural gas pricing, as Mexico’s southern region primarily depends on national production, given the lack of infrastructure available to import the fuel while the country revamps its production capacity. “We provided an pulse to an already over-diagnosed market with well-known issues. The previously used first-hand sale price methodology generated greater costs for Mexico’s southern region, inhibiting PEMEX from producing additional gas,” said Guillermo García, President Commissioner of CRE. With the entry of a permanent regime supported by CENACE, the Ministry of Energy and constant consultations with the private sector, CRE’s regulatory modifications unlocked 40 percent of national natural gas consumption to be procured by private suppliers, with additional pipelines in operation. For CENAGAS’ third revision of the Five-Year Plan 2015-2019 authorized in March 27, 2018, CRE asked for different technical alternatives to bring natural gas to Mexico’s south and reach as far as the region’s homes. “We must keep in mind that 15 percent of Mexico’s households still rely on lumber, posing a health hazard, and leading to CO2 emissions and high-cost issues,” García said. Answering the call,

CENAGAS is developing a bid to reconfigure the Zempoala, Veracruz compression

KEY SPEAKER

station. “It includes two compression nodes and new capacities of natural gas flow regulation and metering to direct Zempoala’s compressed gas toward the southern region of the country,” said David Madero, Director General of CENAGAS. Natural gas storage in Mexico presents two advantages: it fosters energy security for the country and an attractive business opportunity for private companies specialized in such a service. “The country showcases a major opportunity in natural gas storage but projects remain developed on the other side of Mexico’s northern border. Regulatory stability, coupled with an increasing penetration of natural gas in the market as more expensive options such as diesel and fuel oil

GUILLERMO GARCÍA

are replaced can detonate a mature energy storage niche in Mexico,” said Elie

President Commissioner of CRE

Atme, Senior Vice President in Business Development of ATCO. Mexico’s private

Guillermo García has over 10 years

players want in on this window of opportunity and CENAGAS knows it. “Our data

of experience in the energy sector.

room now includes four depleted deposits and their inherent static and dynamic

His experience in the hydrocarbon

models. Interested companies are analyzing the information with the objective of

sector includes the entire oil industry

succeeding in their nomination process by the end of July 2018 based on viable

value chain. He headed the technical

projects to store up to 10 bcfs in any of these deposits,” Madero said.

group responsible for proposing and successfully negotiating the

Barrios insisted on continuing efforts to recover the country’s national natural

constitutional and legal changes to

gas production, even though results will take time to manifest. “The only way

build the Energy Reform. Prior to

to attend increasing demand is ensuring imported gas arrives on time, pipelines

his current position he held different

conclude successfully and the regulatory process in land access is improved.

positions at the Ministry of Energy,

The new administration led by President-elect Andrés Manuel López Obrador

the Ministry of Finance and in the

was provided the sufficient voter-credibility to legitimately approach state and

National Commission of the Savings

municipal governments to discuss the benefits of natural gas and its capacity

System for Retirement (CONSAR).

as an economic trigger,” she said. “We need to bring natural gas closer to highconsumption points, which can take different forms. Chief among them, fueling public transportation with natural gas and residential use. To date, only 7 percent of residential consumption is fueled by natural gas, versus 70 percent of LPG. Is it justified that megalopolises have to deal with pipes?” she asked. Barrios invited the public and private sectors to reflect on reducing gas consumption costs in a natural way, without state intervention through subsidies. Thinking natural gas infrastructure, CRE’s President Commissioner highlighted the social component of such developments. “At least two projects are dealing with significant social issues. We are developing the tools to address social requirements and develop human talent to answer them. So far, CRE has signed 17 agreements with public universities to train future anthropologists and sociologists to successfully deal with these issues,” García said. Madero called on López Obrador’s impulse to tackle inequality to capitalize on the social project framework developed during the incumbent administration. “We need to close agreements with the Ministry of Finance, the National Infrastructure Fund, support the development of the Special Economic Zones (ZEEs) and zones with less productivity in general to bring natural gas to their doorstep and obtain more productive projects, resume economic growth and address our lagging education system.”

P R O GR A M

JULY 19 07:30 08:30

REGISTRATION OIL AND GAS AS A SUSTAINABLE DRIVER OF MEXICO’S ECONOMY

Presentation: Rogelio Garza, Deputy MInister of Industry and Commerce

09:15

DEEPWATER OUTLOOK: AMBITIONS, CHALLENGES AND TIMELINES

Moderator:

Jesus Lamas, General Manager of Schlumberger Mexico and Central America

Panelists:

Monica Bøe, Director General of Statoil Mexico

Evelyn Vilchez, Director of Chevron Energía de México

Sergio Limardo, Country Manager of Repsol Exploración México

Erik Finnstrom, Senior Vice President at TGS

10:15

NETWORKING COFFEE BREAK

10:45

ONSHORE OUTLOOK: WHAT TO EXPECT FROM MEXICO’S ONSHORE FIELDS

Moderator:

David Enríquez, Energy Partner at Goodrich, Riquelme y Associados

Panelists:

Javier Zambrano, CEO of Jaguar E&P

Steve Hanson, President and CEO of International Frontier Resources and Director of Tonalli Energía

Roberto Mc Leod, General Manager of Petrolera Cárdenas Mora, a Cheiron Company

Glyn Jones, General Manager of Petrofac