Mexico Energy - March 2014

Investment opportunities in the new era

Gauss Energy, GE, Mexichem and Philips Capitalizing on energy projects

Energy Reform and Constitutional Amendments

Exclusive

Lourdes Melgar undersecretary of hydrocarbons for Mexico’s Ministry of Energy

Optimistic about the future Vol. 1 No. 1 March 2014

Welcoming the private sector

Business Opportunities in Mexico’s Energy Sector

1st Mexico Energy and Business Forum Presented by Mexico Energy and Business Magazine Dallas, Texas May 28, 2014

8 am- 2:30 pm InterContinental Dallas (Addison) 15201 Dallas Parkway Dallas, TX, 75001

Find out the latest developments in Mexico’s energy sector and take part in the official launching of Mexico Energy and Business Magazine.

Our panel of US and Mexico experts will provide information on business opportunities, research findings and highlight the major breakthroughs, as well as challenges facing the sector today.

Mexican lawmakers and senators will explain the latest regulatory and legislative laws approved by Mexico’s Congress.

We hope you join us and take part in these unprecedented growing business opportunities in today’s Mexican energy sector.

For more information, please contact: José Escobedo Dallas, (214) 206-4966 ext 227 jescobedo@latinoleaders.com Javier Senderos Mexico City, Sales P&E (52) 559136-5100 jsenderos@petroleoenergia.com

Editor’s Letter

Mexico Energy and Business Magazine Volume 1 March 2014 Publishers

I

Raúl Ferráez & Jorge Ferráez

Managing editor José Manuel Escobedo

In December the Mexican Congress ratified breakthrough consti-

tutional changes that would allow for the first time in 75 years private and foreign investment in the country’s energy sector.

The modification to the Constitution in articles 25, 27 and 28 opens the door to international private companies to participate in exploration, production, extraction, refining, transportation and the sale of hydrocarbons.

Considering this landmark moment in Mexico’s history, Ferraez Publications of America has decided to launch a monthly digital magazine aimed at our international readers. With great enthusiasm we present to you the first edition of Mexico Energy and Business Magazine “Investment opportunities in the new era.” Mexico Energy will include energy related articles, business and news updates, and information on investment opportunities that are most likely to occur as a result of the new legislation.

The publication is backed by the expertise of Petróleo&Energía, a leading Mexican magazine that specializes in the oil, gas and electricity sectors. The Ferráez Group, with over 25 years of experience, also publishes Líderes Mexicanos and Latino Leaders.

In Mexico Energy debut issue, recently appointed Lourdes Melgar Palacios, undersecretary of hydrocarbons for the Secretariat of Energy, highlights her career and how she ventured for the first time into the energy sector. She explains the new modifications taking place in the industry and the benefits these may bring to the economy.

The Chief Executive Officers of Gauss Energy, GE, Mexichem (the largest Mexican chemical producing company) and Philips show optimism for the changes recently made to the Constitution and testify how these modifications have already encouraged further investment.

On the grimmer side of things, we report on the Oceanografía scandal and fraudulent schemes. Representatives from the private sector and government officials express their concerns regarding the scandal and urge that this situation be clarified and whoever is responsible be brought to justice. Clarifying this conflict would give assurance to investors, especially at a time when the secondary laws are being drafted.

On an upbeat note, for the fifth year in a row, Petróleo&Energía and Ferráez Comunicación gathered the top 100 leaders of the energy sector in Mexico at an awards and banquet luncheon. Industry leaders and government officials agreed that today is Mexico’s moment to set the stage for prosperous and unprecedented economic growth.

Photography Berenice Fregoso, Elizabeth Garci, David Eisenberg, Daniel Alvarado

Editor in Chief Milton Méndez Co-editor Maribel Zavala Rivas

Translations: José Manuel Escobedo

Art and Design Fernando Izquierdo Romero Rodrigo Valderrama Viveros Carlos Cuevas Martínez Luis Enrique González Piceno

Administration Cathy Lopez Treasury Claudia Garcia Bejarano Circulation/Distribution Emilia Gaston

Sales Gabriel Torres Origel Sales and Public Relations Javier Senderos Sales and Advertising Francisco Abad Carlos Pozos

Director Diego Amauri Plaza Operations Sistems Public Relations Auditions Distribution

Alex Prida Miguel Ángel Muñoz Karen Arriaga Iván Castelán Raúl Hernández

DALLAS: 15443 Knoll Trail, Suite 210, 75248 Dallas, TX, USA Tel: (214) 206-4966 / Fax: (214) 206-4970 MÉXICO: Insurgentes Sur 1898 Siglum 12, Col. Florida. Delegación Álvaro Obregón C.P. 01020, México D.F. Tel. 91365100

Sincerely,

José Manuel Escobedo Reachi Managing Editor jescobedo@latinoleaders.com (214)- 206-4966 ext. 227 2

Reporters Carlos Huerta Durán, Fluvio Ruíz Alarcón, Esther Arzate, Maribel Zavala Rivas

March 2014 Mxe Mexico Energy and Business Magazine

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INDex

Interview with Lourdes Melgar Palacios, undersecretary of hydrocarbons for the Secretariat of Energy, focuses her career in the energy sector and explains the new changes taking place in the industry and the opportunities and challenges these may bring.

06 Oceanografía amid turbulent waters:

As a result of Oceanografía’s $400 million scandal and fraudulent schemes, representatives from the private sector and government officials have expressed their concerns and urged the situation be solved. Determining responsibilities and cleaning up the image of Petróleos Mexicanos (Pemex) is a task the current administration is ready to tackle.

12 The energy reform and constitutional amendments:

Thanks to the modifications made to articles 25, 27 and 28 of the Mexican Constitution, for the first time in over 75 years, the private sector can participate and invest in the country’s oil, gas and electric industry. In this brief analysis we will explain how contracts will be awarded - through service contracts, profit sharing, production sharing and licenses.

16 100 leaders in the energy sector: For the 2014 luncheon edition that celebrates the top leaders in Mexico’s energy sector, both government officials and industry groundbreakers agreed that today is Mexico’s moment to set the stage for prosperous and unprecedented economic growth.

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March 2014 Mxe Mexico Energy and Business Magazine

16 19 High hopes:

The chief executive officers of Gauss Energy, GE, Mexichem and Philips share their views on the benefits the energy reform can bring to Mexico and how these have already taken effect. Investment opportunities are just around the corner.

Oceanografía

a m i d t u r b u l e n t wat e r s Esther Arzate earzate2003@yahoo.com.mx

At a time when Mexico is ramping up efforts to attract private investment for its newly opened energy sector, the Oceanografía scandal of roughly $400 million presents great challenges for Enrique Peña Nieto’s administration.

Determining responsibilities and cleaning up the image of Petróleos Mexicanos (Pemex) is a task the current administration is ready to tackle.

O

ceanografía S.A de C.V., a Mexican oil service company and contractor for Pemex, the Mexican state-owned oil company, allegedly borrowed from Citigroup’s Inc. Mexican representation, Banco Nacional de México (Banamex), a sum totaling $585 million, of which only $185 million is accounted for.

In past weeks, Banamex discovered that Oceanografía appeared to have falsified invoices to Pemex that were collateral for loans. The bank wrote down about $400 million of loans backed by phony invoices.

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March 2014 Mxe Mexico Energy and Business Magazine

As a result, Mexican law enforcement officials have seized the company’s assets and implemented a fine of 24 million pesos and suspended the company from receiving any contracts for 21 months. Experts consider this a serious sanction for a company that generally receives over 95 percent of its proceeds from Pemex.

Meanwhile, Mexico’s Attorney General’s Office (PGR) initiated investigations that could lead to a case of money laundering. In the meantime, the U.S. Securities and Exchange Commission (SEC) is investigating Citigroup for the fraudulent loans abroad.

Amid the scandal, Mexican officials have voiced their concern over fraudulent practices and how the government should play a fundamental role by punishing those responsible.

The chairman of the Energy Committee of the National Chamber of Industry (Canacintra), Gilberto Ortiz, says the Mexican government is ready and willing to clarify this matter with Pemex.

“Pemex must be free of all suspicion, in order to compete and become a strong company in the international oil market. It must remain the center of support and development of the Mexican oil industry.”

It is essential that these investigations be fast and transparent, so that the irregularities that have been denounced to the public for several years are known, Ortiz says.

There must be a response to the demands of the population for greater transparency in handling all contracts assigned by Pemex, he says.

Arturo Carranza, from the firm Consultores Solana, says the alleged use of forged documents by Oceanografía to obtain credit from Banamex is a wake up call for people who are responsible for assessing the creditworthiness of compa-

nies. This is especially true, he says, at a time when Mexico’s energy sector is opening its doors to investment opportunities and financing practices will be a constant activity.

It is necessary, Carranza says, to apply a more rigorous lending process, not only to protect financial firms, but also for authorities responsible for regulating the sector, such as the Ministry of Finance and Public Credit (SHCP) and the National Banking and Securities Commission (CNBV). Carranza emphasizes that credit delivery adhere to standards.

Pemex has stated it now faces the challenge of transmitting a message of transparency, both nationally and internationally, and that any contracts will follow a timely schedule in accordance with regulations.

Secretary of Energy, Pedro Joaquín Coldwell, considers that any private capital, contained in the energy reform “has unprecedented transparency standards in the industry.” He notes that under the new legislation, all contracts for oil exploration and extraction will be audited by external bodies and will contain clauses of transparency.

Coldwell says the law is being strictly applied and that there will be no immunity.

“The energy reform will grant much power to regulators such as: the National Hydrocarbon Commission and the Energy Regulatory Commission.”

Carlos Huerta, energy consultant, says the fraud concerning Oceanografía has to be clarified transparently and the pertaining sanctions must take effect in order to give a positive and clear message both in Mexico and internationally.

When we began to skim through the pages that commemorates the 40 years of Royal Oak watch collection we saw the many faces of entrepreneurs, collectors, athletes, entertainers, and others that are passionate about Audemars Piguet.

The watch prices can range from 23 thousand dollars to 629 thousand euros.

To our surprise we saw the picture of Amado Yanez Osuna on pages 186 and 187 saying “My Royal Oak is much more than a watch. It has been my companion in the important moments of my life.

Hopefully it will also be in the difficult times as well.”

Oceanografia Chief Executive Officer Amado Yanez

To apply the law rigorously concerning this scandal is particularly relevant, Huerta says, especially when the secondary energy reform laws are being drafted. The new regulation in the sector must constrain any corrupt practices and establish penalties that go beyond fines or prohibitions, he says.

If there are implications of corporeal nature, meaning if those involved in fraud or corruption go to jail, it may inhibit these illegal procedures and the federal government will have the opportunity to send a clear message stating these practices will not be tolerated again, Huerta explains.

Cover Story

Lourdes Melgar Palacios

empowering Mexico’s energy sector While Mexico’s Congress drafts secondary laws that will dictate contract logistics and tax reforms for its energy sector, Melgar, a scholar, diplomat and energy industry expert, ramps up efforts to enable Mexico to become a sustainable producer of low cost energies, while aspiring to catch the attention of private investments and increase energy production.

By Maribel Zavala Rivas Photos: Elizabeth Garci

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March 2014 Mxe Mexico Energy and Business Magazine

J

ust days after being appointed undersecretary of hydrocarbons for Mexico’s Ministry of Energy (SENER), Melgar presented windows of opportunities the energy reform will bring to the nation (especially once the secondary legislation is passed), as well as challenges the Mexican energy industry faces today.

“What matters is producing energy that the country requires at competitive prices. This will allow Mexican families to spend their earnings more efficiently on other things, not just on gas and electric bills.”

Melgar says the energy reform will allow companies to take advantage of low cost energy prices and be more competitive and become environmentally conscious, both socially and sustainably.

Besides having a promising career in the Mexican energy sector, Melgar has two bachelor’s degrees, one in International Relations and one in Comparative Literature from Mount Holyoke College, Massachusetts, and a master and a PhD in Political Science, specializing in political economy, from the Massachusetts Institute of Technology (MIT).

Melgar first came in contact with the energy sector during Ernesto Zedillo’s presidency.

“Luis Téllez, former secretary of energy invited me to head the International Affairs Department of the Ministry of Energy. Back then, I had only been working for three days in the Ministry when oil prices tumbled.”

That was January 1998 and both the government and the country’s financial institutions had to make fast and assertive decisions. In those days, Mexico was not a key player in the international oil scene, and the country was just coming out of the 1995 economic crisis. The scenario was a difficult one, especially when oil revenue represented 40% of the country’s budget. This certainly was an unfortunate scenario, Melgar explains.

Mexico has made important strides since those turbulent times merely 20

years ago. Today, Mexico sells at 90 dollars per barrel compared to 7 dollars in February 1999, Melgar says.

“Therefore, it was very important to increase oil prices, stabilize the market and revenue for the federal government. This entailed doing business with people from other countries, like the Saudis, Iranians, Algerians, Venezuelans and Norwegians. It was during these times that I began to really enjoy what I was doing.”

These negotiations represented the first time Mexico was able to coordinate and do business with other oil producing countries. Mexico became a liaison between the OPEC (Organization of the Petroleum Exporting Countries) and the International Energy Agency at a time where dialogue and negotiations were nonexistent.

Crossing borders

for a time now. The idea is to come back and become front-runners once again.”

Melgar was fortunate to head the technical department and negotiations of the “Hoyo de Donas” (donut holes) Agreement and her experience with transboundary reservoirs led her to expand her knowledge into the hydrocarbon realm.

She was a graduate of the Institute of Diplomatic Studies Matías Romero, which gave her the credentials to be Minister to the Permanent Mission of Mexico to the OECD. After the approval of the Transboundary Agreement by the United States Senate, Melgar says the U.S. and Mexico are now

Highlights •PhD in Political Science by the Massachusetts Institute of Technology, where she also earned a master’s degree in Political Science.

•Studied International Relations at Mount Holyoke College, USA, and in the Political Studies Institute of Paris.

working on diplomatic issues in order for the agreement to take effect.

Mexico and the U.S. must exchange these policies and from there, establish a binational committee in order to jump start all the clauses that are considered in the Agreement, Melgar explains.

She considers these policies very important because they will protect the transboundary reservoirs located in the Gulf of Mexico, considered a bountiful area in oil reserves.

As far as sustainable practices are concerned, Melgar is no stranger to these. In 2010 she became founding Director of the Center for Sustainability & Commerce of Mexico EGADE Business School, Technological Institute of Monterrey.

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March 2014 Mxe Mexico Energy and Business Magazine

Current position After having served as undersecretary of electricity at the SENER for more than a year, Melgar considers her newly appointed role gave a clear signal of continuation to the team lead by secretary of energy, Pedro Joaquín Coldwell.

“The secretary of energy considers we work as a team, and I appreciate that very much. We want to be a unified team and work with a clear vision of where the energy sector in Mexico is heading.”

There have been major breakthroughs geared to replace natural gas; nevertheless, a substantial amount of energy still relies on this fuel.

•Graduate of Diplomatic Studies from the Matías Romero Institute, of the Ministry of Foreign Affairs. Between 1993 and 2007 she had various positions within the Mexican diplomacy, being the last Minister at the Permanent Mission of Mexico to the OECD.

•Member of the Energy Policy Colloquium, for the Energy Transition Network, of the Mexican Council on Foreign Affairs, of the Chapter of the International Women’s Forum of Mexico and of the Trilateral Commission.

•CEO of the International Affairs at the Secretariat of Energy.

“During this time we provided support to companies in order for them to include sustainable practices within their business strategies and obtain cleaner and efficient ways of utilizing energy.”

The undersecretary is also keen on renewable energies, especially when the goal is to generate 35% of the country’s energy from renewable sources by 2024.

“In the electricity sector, the reform plans to boost certain mechanisms to facilitate the use of renewable energies.

The Constitution defines clearly a geothermal law and this is where Mexico has a very interesting potential.”

Mexico was once a leader in this field, we now occupy 4th place worldwide and have been declining

Currently 85% of electric power depends on fossil fuels. Mexico has an important hydroelectric power sector, such as geothermal and renewables, however, fossil fuel still dominates, Melgar says.

“Without a doubt the main purpose is to substitute fuel oil, which is very costly and pollutes more than natural gas. This is something we are working on in order to become more environmentally friendly and to reduce electric rates.”

The exploitation of shale gas will take a predominant role in the future. The energetic reform considers shale gas a source that could greatly expand in Mexico. The country has vast reserves in the states of Coahuila, Tamaulipas and Veracruz. The goal is to sustainably exploit the gas in order to have steady production that will create jobs and increase development, Melgar says. ●

The Energy Reform and Constitutional Amendments Fluvio Ruíz Alarcón* y Carlos Huerta Durán** 12

March 2014 Mxe Mexico Energy and Business Magazine

On December 20, 2013, the Mexican government published in the Official Gazette of the Federation the Decree (The Energy Reform) that amended and added several provisions to the Mexican Constitution on energy-related matters.

As a result, the reform came into effect on December 21, 2013.

T

he long-awaited reform represents a big change for the energy sector in Mexico. For the first time in over 75 years, this comprehensive energy reform allows private parties to participate and invest in the country’s oil, gas and electric sectors. In the past, energy revenues were strictly controlled by state oil monopoly Pemex and the Federal Electricity Commission (CFE). As a result, both Pemex and CFE will become productive state companies.

The reform modifies the amendment of articles 25, 27 and 28 of the Mexican Constitution. Nevertheless, it is important to mention hydrocarbons found on Mexican territory will remain the nation’s property.

International and national companies can participate in the Mexican energy sector in activities related to the generation and commercialization of electric energy, as well as the exploration and extraction of oil and other hydrocarbons.

Contract models The Contracts will be awarded by the National Hydrocarbon Commission (CNH) to Pemex and to private entities, whether they are Mexican or international. These are service contracts, profit sharing, production sharing and licenses.

Profit sharing: The company will receive considerations in payments (cash), but unlike service contacts, the considerations will consist of a percentage of utilities (profits) obtained from the sale of hydrocarbons (a percentage of profits for profit sharing agreements).

Production sharing: These will allow firms to receive as considerations in payments (cash) a percentage of production (a percentage of production for production sharing contracts).

License contracts: These will allow firms to receive payment of a fee or contribution of the transferring of title of produced hydrocarbons for licenses.

Service contracts: They currently exist. Cash will be paid for service contracts.

The reform also leaves open the possibility of combining any of the contracts mentioned above (any combination of the foregoing).

An important breakthrough the current contract presents is that private firms, either through product sharing contracts or through licensing agreements, may have full accessibility of the resources once they are extracted.

The energy reform will allow private firms to benefit monetarily by exploring and extracting hydrocarbons. Nevertheless, ownership of hydrocarbons is to remain exclusive property of the Mexican state. This model of business was not available before the reform was approved, when private companies were able to participate only as service providers.

This new model will greatly benefit private firms by allowing them to cash in on their assets and therefore obtain better financing. However, this benefit will depend on the content, terms and conditions the given contract dictates.

The reform clearly represents a firm intention to allow open markets to private investment in the oil industry. For example, Pemex will no longer be the sole petrochemical production entity. Today, firms may conduct treatment and refining activities once they obtain a valid permit from the Secretariat of Energy.

Despite the recent modifications to the Constitution, Pemex is gearing up to make substantial internal modifications that will place the parastatal as a world leading oil company.

As a consequence, Pemex will benefit from the first round (Round Zero) of entitlements to extract oil and gas from fields, on the condition it proves to have sufficient technical capabilities and financial resilience in order to assume such tasks.

In order to regulate these activities, the reform establishes the following: • The reform mandates for a public trust, administered

by Mexico’s central bank, called the Mexican Petroleum Fund for Stabilization and Development. The objective of the fund is to invest, administer and distribute oil proceeds.

• The constitutional modifications dictate the creation of a new regulatory agency, the National Center of Natural

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March 2014 Mxe Mexico Energy and Business Magazine

Gas Control. The agency is to oversee operations of the national pipeline network and storage currently operated by Pemex.

• The creation of a new regulatory agency, the National Agency for Industrial Safety and Environmental Protection.

The agency will regulate and supervise industrial, operational safety and environmental protection (HSE).

The reform will grant attributions to strengthen the National Hydrocarbons Commission, regarding the exploration and extraction of hydrocarbons, and will benefit the Energy Regulatory Commission in charge of natural, petroleum and petrochemical gas. Both entities will be regulated and coordinated with legal personality, technical and managerial autonomy and will have the possibility of retaining revenue in fulfillment of their duties.

Also in the works is the creation of the National Information Center for Hydrocarbons, which will provide information regarding exploration and extraction of oil.

Marketing energético

MANOLO GUTIÉRREZ Proximity Cordinator mgutierrez@lideresmexicanos.com www.ferraezconecta.com

Pedro Joaquín Coldwell, on behalf of President Enrique Peña Nieto lead the awards luncheon for “Energetic Achievement.”

E n e r gy

Revolution For a fifth consecutive year, Petróleo&Energía and Ferráez Comunicación reunited the top industry leaders of the energy sector in Mexico.

Esther Arzate earzate2003@yahoo.com.mx 16

March 2014 Mxe Mexico Energy and Business Magazine

Daniel Alvarado y Berenice Fregoso

F

or the 2014 luncheon edition “100 Leaders in the Energy Sector” secretary of energy, Pedro Joaquín Coldwell, on behalf of President Enrique Peña Nieto lead the awards for “Energetic Achievement.”

Raul and Jorge Ferráez, executive and editorial presidents of Ferráez Comunicación respectively hosted the event that reunited industry experts from both the public, private, academic and social sectors. Among the guests of honor were Luis Téllez Kuenzler, President of the Mexican Stock Exchange (BMV), as well as special guests like Enrique Ochoa Reza, chief executive for the Federal Electricity Commission CFE, and the governor of Morelos, Graco Ramirez.

The St. Regis Hotel in Mexico City was the venue for the luncheon and awards ceremony. Jorge Ferráez announced the launching of Mexico Energy and Business Magazine, a digital publication in English aimed at our international readers. The magazine will address regulation issues for the Mexican energy sector and will showcase investment opportunities in the country. It is expected to be launched by late March.

Pedro Joaquín Coldwell, Luis Téllez and Enrique Ochoa agreed the energetic reform represents a transcendental change for Mexico, as do the amendments to the secondary legislation to be submitted to Congress.

Ochoa, head of the CFE and who took office earlier in February, said the approved legal modifications will introduce a new model for the electric industry that will allow multiple energy generators and independent and efficient operations for network transmission and distribution.

Ochoa admitted that the challenge of increasing production of natural gas is significant and important to the nation. The CFE and other private producers use this fuel to generate electricity.

He mentioned that the cost of electric generation in Texas last year was 63 percent lower than the cost in Mexico.

“We hope that with an increase in production of natural gas geared to producing electricity, generating costs will decrease,” Ochoa said.

Secretary of Energy, Pedro Joaquin Coldwell, said the energy reform will attract new players to the energy industry, and Petróleos Mexicanos (Pemex) could partner with them in order to maximize oil revenues and create an oil fund for future generations.

“If the energy reform had not been approved in December of last year, the country would have become energy deficient,” Coldwell said.

Enrique Ochoa handed the award “Mexican Enterprise” to Ricardo Kirschner from Grupo IUSA.

Miriam Grunstein won the award in the category “Academic-Scientific”.

Emerson was distinguished in the “Foreign Enterprise” category.

Luis Téllez handed the award “El Sol” to Alfredo Castillo.

In the “Trajectory” category, Edgar Rangel from the CNH received the prestigious award from Pedro Joaquin Coldwell.

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“El Sol” award, handcrafted by Israel Muñoz.

Today, Mexico imports 46 percent of its gasoline, a third of its natural gas and 65 percent of petrochemicals the country consumes, Coldwell said.

Luis Téllez, President of the Mexican Stock Exchange, said the reform placed Mexico once again in a favorable competitive situation and will allow it (Mexico) to become the new manufacturing center in North America.

The energy reform represents an important opportunity for the country to take off economically, perhaps even more today than when the North America Free Trade Agreement came into effect, Tellez said.

If these constitutional changes had not been approved, Mexico would have stayed outside North America (economically speaking) and would not have been part of this new economic process, he said.

Awards During the luncheon the following people were awarded: During the award ceremony, Ochoa provided information on Mexico’s Electricity sector.

Luis Téllez highlighted Mexico’s opportunity for economic development.

In the category “Trajectory” the award was given to Edgar Rangel Germán, from the National Hydrocarbons Commission (CNH).

In the category “Academic-Scientific” the award was given to Miriam Grunstein, professor at the Center for Economic Research and Teaching (CIDE).

In the category “Mexican Enterprise” the award was given to Carlos Peralta from Grupo Iusa. Ricardo Kirschner, sales director, accepted the award.

In the category “Foreign Enterprise” the award was given to Emerson Process Management. Alfredo Carvallo, vice-president and general director for Mexico and Central America, accepted the award.

The following companies sponsored the luncheon: Grupo Vitesse; Química Apollo; Pinturas Sherwin-Williams, Walworth and Alstom.

Maribel Zavala Rivas

David Eisenberg

The highly anticipated energy reform approved by Mexico’s Congress late last year has sparked optimism and confidence among investors, as well as an overall sentiment that the economy will improve significantly in the coming years.

The chief executive officers of Gauss Energy, GE, Mexichem and Philips say they are confident that the changes made to the Constitution regarding Mexico’s energy sector will encourage further investment and promote national economic development.

March 2014

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Héctor Olea CEO of Gauss Energy

éctor Olea of Energy Gauss, developer specializing in renewable energy, especially in solar, believes in one or two years, solar PV will be a great business opportunity in Mexico.

Olea agrees solar energy has all the elements needed to become a successful business model. “We have a growing demand for electricity in the country. Therefore, if we can establish the proper regulations and apply efficient solar technologies, then we will have excellent business opportunities in the near future.”

A prime example of solar energy at work is the Aura Solar 1 Park located in the state of Baja California Sur, and considered the largest in Latin America. Set on 100 hectares (247 acres) of land, and with a total investment of 100 million dollars, the park generates electricity for 65 percent of the population in the city of La Paz. 20

March 2014 Mxe Mexico Energy and Business Magazine

Raul Gallegos of GE says there are favorable conditions for companies like GE and the company plans to continue investing in the long term.

Gallegos adds the company will be ready to offer products and services for investment opportunities, especially for those newer projects.

In the near future GE expects a significant increase in its investments, not only financially, but also in regards to human talent.

GE offers products and services for energy technologies, specializing in coal, oil, natural gas, nuclear energy, water and air. The company manufactures an array of appliances and aircraft engines, and provides financial and health services.

For the past 117 years, GE has been present in Mexico. It employs over 11,000 people, has 18 manufacturing facilities in 9 states, 8 service centers and the country’s largest engineering center located in Querétaro, home to over 1,500 engineers.

Raúl Gallegos CEO of GE México

March 2014

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Antonio Carrillo CEO of Mexichem

Leading petrochemical company Mexichem’s Antonio Carrillo Rule, says the company is in the process of creating a business area specifically dedicated to analyzing new business opportunities that may arise as a result of the energetic reform.

“There are important changes happening that are directly related to our three lines of businesses. We are thinking of cogeneration (combining heat and power). Maybe in the next three to six months we will have a very clear energy strategy for Mexichem . . . without a doubt we will be investing in this sector.”

Last year Mexichem teamed-up efforts with Pemex in Complejo de Pajaritos, Veracruz, a $200 million investment. During that time, the company had to acquire great quantities of natural gas, electric energy, and steam, an essential component in the production chain. This is why Mexichem requires the use of cogeneration in its projects.

Mexichem is focusing its business strategy by reconfiguring Complejo de Pajaritos and OxyChem, which in turn require very large investments.

“Before the joint venture with Pemex, Complejo Pajaritos was in a very unfortunate state. This is sad because the people that work there are extraordinarily talented.”

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March 2014 Mxe Mexico Energy and Business Magazine

Carrillo Rule is a mechanical and electrical engineer from the Anáhuac University.

As far as OxyChem is concerned, Carrillo Rule says in the next three years Mexichem plans to attract $1.5 billion in investments related to the implementation of ethylene. In Texas, one of the most competitive regions in the world, 70 percent of PVC resin component is ethylene.

Carrillo Rule acknowledges the lack of raw materials available for the country’s chemical and petrochemical industry.

“There would be no way if I wanted to double the production of PVC resin using just Mexican raw materials.”

Currently, Mexichem produces over 1.3 million tons of PVC and approximately 650 thousand tons of ethylene, 550 thousand tons of which come from OxyChem in Texas, with the rest coming from Pajaritos, once the reconfiguration is finalized.

Sergio Villalón CEO of Philips

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March 2014 Mxe Mexico Energy and Business Magazine

Sergio Villalón of Philips Mexicana, says Mexico’s moment is just beginning with the historic opening of the energy sector to international investment. This (energy reform) is as relevant as the North American Free Trade Agreement (NAFTA) over two decades ago, he says.

“We strongly believe Mexico’s economic conditions will improve and therefore we are looking forward in investing in every product line. For example, the lightning sector and its components are expected to grow, including high-tech products as in the case of LED’s.”

Villalón, who recently finished his first year as head of the company, said Phillips is working on various major projects.

“Obviously we rely very much on the government’s investment process time frame. It is the electric sector, which particularly concerns us the most. We are currently waiting for a new set of bulbs that would replace the incandescent bulbs that have been used so far. So we hope we are able to participate again in projects of this sort, as we have in previous years.”●

The only key that opens business opportunities in the energy and petroleum sector in Mexico and the United States Watch the video

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EVENTS

Upcoming events...

2014 March • March 25-28 Plastics Expo 2014 Expo Guadalajara, Mexico.

• March 26-28 West Electric Expo 2014 Expo Guadalajara, Mexico.

• March 26-28 LATINVE&P – Forum and Exposition Westin Hotel, Lima Peru.

• March 26-28 IX Mining Security International Seminar Lima, Peru.

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March 2014 Mxe Mexico Energy and Business Magazine

• April 1-3 Green Connection Business & Industry Expo Guadalajara, Mexico.

April

• April 2-3 Tenth Electric Pemex-CanameCFE Expo Forum World Trade Center, Boca del Río, Veracruz, Mexico.

• April 2-3 Gas Energy Forum Mexico City.

• April 5-7 World Heavy Oil Congress New Orleans, USA. • April 8-10 Latin Refining Conference Cancun, Mexico.

• April 8-10 Pipeline Conference and Cybernetics Symposium Hyatt Regency Hill Country, San Antonio, Texas.

• April 9-11 PECOM Villahermosa, Tabasco.

• April 22-24 2º Expo Forum Pemex Mexico • April 28-30 Heavy Oil Management Mexico City

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