Mexico Energy - May 2014

I nves tm en t opportunities in th e ne w e ra

OTC Sets Attendance Record in 2014

Coverage: New Prospects for Mexico

Pemex ExpoForo

“We are transforming�

More than 25,000 visitors and close to 300 firms.

Exclusive

Enrique Ochoa Reza General Director of the Federal Electricity Commission

Private sector partnerships to expand natural gas pipelines in Mexico Vol. 1 No. 3 May 2014

Business Opportunities in Mexico’s Energy Sector

1st Mexico Energy and Business Forum Presented by Mexico Energy and Business Magazine Dallas, Texas July 2, 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 panels 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

Letter from the Editor

Mexico Energy and Business Magazine Volume 3 May 2014

Publishers

Managing editor

Raúl Ferráez & Jorge Ferráez José Manuel Escobedo

Jose Manuel Escobedo, managing editor for Mexico Energy, Javier Senderos P&E sales director and Milton Mendez editor in chief for P&E at the OTC in Houston, Texas.

F

Reporters

For our May edition we highlight Mexico’s participation at the Offshore Technology Conference (OTC) where this year’s attendance surpassed the 2013 total of 104,800 and the sold-out exhibition was the largest in show history at 680,025 ft².

It was my first time attending the event, and I must say it was an eye opener. It reminded me of the Produce Marketing Association Fresh Summit where a few years back I would write about the latest news in the fresh produce industry. Now, I write about oil and energy.

At the OTC, the word “Mexico” was definitely a “buzz word” among attendees due to Mexico’s new Energy Reform. At the panels, Mexican officials said they expect Congress to pass 21 secondary laws in an extraordinary session scheduled for June. Lawmakers expressed how modernizing Pemex and its procurement practices are now considered a mandate, with the private sector and international companies as key players.

For our cover story, “A New Beginning,” Enrique Ochoa Reza, head of the Federal Electricity Commission (CFE), shares his views on how with the participation of the private sector and an investment of more than $96 billion pesos the CFE is planning to be not only a provider of electricity but also a marketer of natural gas. The company plans to build 4,100 kilometers of pipelines that will increase the national gas pipeline system by 34 percent.

As Mexico’s energy sector begins to transform itself into a new entity, Pemex is well aware of the changes taking place. During Pemex’s ExpoForo 2nd Edition panelists analyzed how the parastatal will continue to compete in an open market on the value chain of the industry without leaving its place as a pillar of growth for Mexico.

To understand better the secondary laws about to be approved, we have provided the key points (see page 36) of what these laws may bring and how they will change the rules of the game.

Sincerely,

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

Photography

Editor in Chief Co-editor

Translations:

Art and Design

Administration Treasury Circulation/Distribution

Sales Sales and Public Relations Sales and Advertising

Director Operations Sistems Public Relations Auditions Distribution

May 2014 Mxe Mexico Energy and Business Magazine

Óscar Agis

Milton Méndez Maribel Zavala Rivas

Pamela Rogers

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

Cathy Lopez Claudia Garcia Bejarano Emilia Gaston

Gabriel Torres Origel Javier Senderos Francisco Abad Carlos Pozos

Diego Amauri Plaza 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 NEW YORK 4 Lexington Ave. Suite 1A New York, NY 10010 Tel: 646-641-5068

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Maribel Zavala, José Tepezano and Laura Sánchez Acuña

ISSN-1665-8205 Copyright © 2003 - Derechos Reservados All Rights Reserved.

Petróleo & Energía” es ® Marca Registrada Hecho en México - Printed in Mexico

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Cover story

A new beginning :

The Federal Electricity Commission is about to be transformed with federal and private investments hovering 96 billion pesos. It’s mission, not only to supply electricity services, but also natural gas. Enrique Ochoa Reza, chief executive for the CFE shares his views on how the construction of 4,100 kilometers of pipelines will represent a 34% increase to the national gas pipeline system.

06 Business Updates 10 OTC Offshore Technology Conference sets

attendance record in 2014: Over 108,300 people attended the conference making it the highest in show history. This year’s event featured nine panel sessions, 29 executive keynote presentations at luncheons and breakfasts, and 308 technical papers.

12 Mexico reform seen finalized in June:

The Mexican Congress is expected to pass 21 secondary laws in an extraordinary session scheduled for June, Pemex’s acting director of Exploration and Production, Gustavo Hernandez predicted during the OTC conference.

16 Mexican energy reform means big changes

for Pemex procurement: Newly appointed Arturo

Henríquez Autrey, Pemex’s chief procurement officer gave a presentation during the OTC about how the implications of reforms to Pemex’s procurement practices could be significant both for the energy industry and for Mexico, given Pemex’s vast size and purchasing power.

32 Pemex ExpoForo: More than 25,000 attendees and close to 300 firms gathered in Mexico City for Pemex’s ExpoForo 2nd Edition:

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May 2014 Mxe Mexico Energy and Business Magazine

“We are transforming.” During the conference, panelists analyzed how Pemex will continue to compete in an open market on the value chain of the industry without leaving its place as a pillar of growth for Mexico.

36 Key points in understanding Mexico’s sec-

ondary laws: The federal government announced details of Mexico’s secondary energy laws. Here we present some key points.

38 Calendar

Portada

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Business Updates Mexico’s Energy Reform Attracts Interested Investors - Reuters The opening of Mexico’s petroleum and natural gas industries is creating a stir among international investors, including those from China and Singapore, commented Secretary of Economy Ildefonso Guajardo in Paris.

After approving a constitutional reform in December 2013 to end 75 years of a state-run petroleum and gas monopoly, President Enrique Peña Nieto’s administration has now sent Congress the secondary laws that would dictate the implementation of the reforms.

Companies all over the world have been following Mexico’s actions to allow investment in the energy sector of the world’s tenth largest oil producer, according to the secretary.

“Companies from Singapore, China, Europe, Norway, and the Americas, obviously the United States - there’s a lot of interest,” the policymaker told Reuters TV in Paris.

He did not provide any details, but emphasized that investors have been waiting for the secondary legislation, which faced stiff opposition and postponements.

“Le Monde” Notes Strong Investment in Mexico - El Economista Paris, France - The new climate of investments as a result of recent reforms has Mexico looking toward foreign investment, according to the French newspaper “Le Monde.”

In the article published in its last edition, the prestigious newspaper highlighted that in 2013 “Mexico captured a record level of foreign direct investment (FDI) that amounted to 35 billion dollars.”

According to an interview with Mexico’s Secretary of the Economy Ildefonso Guajardo, “the return of the old PRI to power with 47-year-old President Enrique Peña Nieto benefited the economy and returned confidence to the markets.”

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May 2014 Mxe Mexico Energy and Business Magazine

Soriana Begins to Operate its First Wind Park - Reuters The company Soriana , Mexico’s second-largest chain of supermarkets, announced that it has begun operations of its first wind park based on a self-supply structure of energy and that it hopes to build at least four more wind parks in the medium term.

Soriana detailed in a press release that the park, located in the border city of Reynosa, was initiated in partnership with the Mexican company GEMEX and Swiss investor Grupo ECOS. “The energy generated annually will be 186 million KWH (kilowatts per hour) and used to supply energy to 163 stores generating significant savings in hundreds of millions of pesos,” said the chief financial officer, Aurelio Adán, according to the press release.

The Company did not provide details on the current amount of investment, but when the project started in January 2013 Soriana said that Banorte and the North American Development Bank had financed more than 130 million dollars.

Adán added that the retailer plans to build four more wind parks to supply energy to all of its current stores.

Soriana that operates close to 660 retail stores also has a 20-year contract with the company Hanwha Q Cells to install solar panels in 120 of its stores, which would provide renewable energy.

Portada

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Business Updates According to one player involved in the tendering process, Pemex will award the contract at the end of May.

OTC- 108,300 in Attendance is the Highest in Show History - OTC Communications Houston, Texas – Experts from the offshore energy industry around the world came together 5–8 May for the 2014 Offshore Technology Conference at Reliant Park in Houston.

Attendance at the annual conference reached a 46year high of 108,300 the highest in show history and up 3.3% from last year.

Attendance surpassed the 2013 total of 104,800 and the sold-out exhibition was the largest in show history at 680,025 ft², up from 652,185 ft² in 2013.

The event had 2,568 companies representing 43 countries, including 163 new exhibitors in 2014. International companies made up 44% of exhibitors.

Mexico Facilitates Arrival of Foreign Investors - EL Universal Long-term Offshore Vessel Charter Close Upstream

Mexico’s Pemex is closing in on the award of a long-term offshore vessel charter contract.

French player Bourbon Offshore, TMM of Mexico and US vessel owner Tidewater are among 10 companies prequalified for the contract that calls for a trio of platform supply vessels to work in the Gulf of Mexico.

A joint venture between Smit and SAAM of Mexico is also in the running, and would be looking to order PSV new builds were it successful.

The firm charter period is understood to be six-and-ahalf years with extension options in tow.

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May 2014 Mxe Mexico Energy and Business Magazine

Foreign investors from 158 countries will be able to set up a business in Mexico without the previous authorization of the Ministry of Economy.

Mexico’s Ministry of Economy published a resolution that will enable foreign investors from 158 countries to set up a business in Mexico without the previous authorization of the ministry.

According to the resolution published in the Official Gazette, foreign investors will only have to submit a letter through their legal representative stating their intention to operate in Mexico and their address.

They will also have to certify that they are legally established in their country of origin and that their activities do not affect public order and conform to foreign investment law. ●

OTC Communications

OTC Communications

Offshore Technology

Conference Sets Attendance Record in 2014 Houston - 108,300 in attendance is the highest in show history.

This year’s event featured nine panel sessions, 29 executive keynote presentations at luncheons and breakfasts, and 308 technical papers.

Speakers from major, independent, and national operators; federal and regional government officials; academia; and more

presented their views on a wide variety of topics while discussing views on the current challenges and future directions of the industry.

Several sessions also delved into new opportunities in Mexico, including a topical breakfast and networking event which focused on Mexico’s energy reform, and an industry breakfast co-sponsored by the US Department of Commerce.

R. Michael Haney, director, DouglasWestwood Chandra Brown, deputy assistant secretary for manufacturing, U.S. International Trade Administration LLC and Raul Mendoza, vice president of supplier alliances, PEMEX Procurement International during the Industry Breakfast on Mexico, organized

by OTC and the US Department of Commerce, covered Mexico’s oil and gas reforms and new commercial opportunities.

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May 2014 Mxe Mexico Energy and Business Magazine

Gareth Chetwynd

OTC Communications

Mexico Upstream

reform seen finalised in June The Mexican Congress is expected to unlock potential of the country’s energy reforms by approving 21 secondary laws in an extraordinary session scheduled for June, a top Pemex manager predicted during the OTC conference.

Gustavo Hernandez, acting director of E&P, also pressed the case for Pemex to govern its own fate when it comes to choosing partners for future joint venture projects.

“The challenges are great, and there will be some modifications along the way, but we expect Congress and the congressional committees to rise to their sense of higher responsibility and approve the reforms,” Hernandez told an audience at OTC. The secondary laws have been welcomed by oil industry leaders for taking a sensible and flexible approach to issues such as government take and national content, but approval has lagged behind expectations due to a weakening in cross-party cooperation.

The constitutional reforms approved in Mexico in December and the secondary legislation laid before Congress last week will allow private and international oil companies to compete with Pemex through future licensing rounds or partner the state-run company in joint venture opportunities.

A strengthened and restructured regulatory system and a fundamental shift in the business objectives of Pemex are also envisaged.

The Pemex director outlined the company’s strategy of retaining full ownership of conventional 12

May 2014 Mxe Mexico Energy and Business Magazine

onshore and shallow water assets where its own expertise is strong.

Pemex wants to open the door where joint venture partners can bring necessary technical competence and experience, particularly in deep-waters, unconventional plays, mature assets needing enhanced recovery and extra-heavy oil in shallow waters.

Pemex is particularly interested in companies with experience in the Gulf of Mexico, due to the geological similarities.

In the case of unconventional, Pemex is pursuing strong analogies with the Eagle Ford shale, with considerable potential for shale oil in the Tampico Misantla basin.

Mexico’s Energy Secretariat (SENER) is scheduled to rule by 17 September on which areas can be assigned to Pemex.

Pemex’s applications reflect these differences covering, for instance, 82% of 2P reserves but seeking more modest percentages of 3P areas.

In deep-waters, the company could only apply to areas where wells have been drilled, opening up big areas for future licensing rounds.

Acreage not retained by Pemex may be included in a first licensing round proper has been slated for mid-2015.

The content of the round will be decided by SENER, in consultation with the hydrocarbons regulator (CNH).

“This assigning of areas to Pemex is known as Round Zero and then there will be a Round One, which will be open to everyone. But there is an in-between stage when Pemex has the chance to pick its partners,” Hernandez said.

The role which the CNH should play in this selection process has been a topic of debate in Mexico.

Secondary laws proposed by the government last week included a public bid structure for the formation of joint ventures, but Pemex’s role in this process is still unclear.

“This assigning of areas to Pemex is known as Round Zero and then there will be a Round One, which will be open to everyone. But there is an in-between stage when Pemex has the chance to pick its partners”.

Hernandez defended the company’s right to manage this process.

“We know the industry and we would like to pick our own partners,” he said.

Hernandez referred to a possible solution.

“We understand that this is in debate with the secondary legislation,” he said.

“There is a possibility for us to pre-qualify some players for a bidding process that could be managed by the CNH, and limited to those approved companies.”

Gustavo Hernandez, acting director for Pemex’s Exploration and Production

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May 2014 Mxe Mexico Energy and Business Magazine

Mexican energy reform means big changes for

pemex Ryan Holeywell in Corporate governance

www.lavoztx.com

OTC Communications

Arturo Henriquez Autrey, of Pemex, delivers remarks in the Mexico Energy Reform - Transforming the Industry panel during the Offshore Technology Conference.

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May 2014 Mxe Mexico Energy and Business Magazine

procurement Houston, OTC — Officials with the stateowned Mexican oil and gas company Petroleos Mexicanos, or Pemex, have touted how energy reforms will change the way international companies will do business in Mexico.

But they’ll also mean big changes in way Pemex does business too. Arturo Henríquez Autrey, Pemex’s new chief procurement officer, said one of the first tasks facing the company is modernizing the way it spends money.

The implications of reforms to Pemex’s procurement practices could be significant both for the energy industry and for Mexico, given Pemex’s vast size and purchasing power.

Indeed, Pemex’s procurement office buys pretty much everything that’s used by the company from copy paper to medicine to drilling rings, Autrey said. Much of that spending occurs within Mexico, and Pemex’s purchasing power is so large that Pemex’s own spending represents several percentage points of Mexico’s entire gross national product, according to Autrey.

spends every year. Those inefficiencies, he said, are going to have to be eliminated if Pemex is to succeed as the country enacts reforms that open Mexico up to foreign companies.

Certainly modernizing a company like PEMEX is no easy task,” he said. But, he added, “it’s our mandate.”

In January, the company created a centralized procurement division. Past inefficiencies have kept the company from getting the most bang for its buck, despite its massive spending, Autrey said. “When you’re spending $30 billion, you should be getting the best conditions in the market,” he said.

The company is examining a plan to divvy up spending functions by category rather than business unit. The idea is to develop procurement personnel who specialize in purchasing specific types of prod-

The presentations addressed important benefits of the reform and fundamental transformations that will strengthen the industry.

Yet Autrey said those spending procures aren’t always efficient. Pemex maintains an average of 30,000 procurement contracts every year and spends about $25 billion to $30 billion annually on goods, services equipment leases and other forms of procurement.

The job of managing Pemex spending falls on more than 2,600 employees spread across more than 100 separate purchasing offices, Autrey noted, and the company lacks standardized procedures when it comes to spending. Autrey doesn’t even have the ability to “press a button” and find out how much Pemex

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May 2014 Mxe Mexico Energy and Business Magazine

ucts or entering certain types of contracts. That’s a departure from past practices that divvied up spending by business unit like refining or production.

The move should be a harbinger of other reforms within the company as it faces serious competition for the first time in decades. Autrey said the procurement reforms are the first example of how Pemex is transforming itself in the wake of changes to Mexico’s energy policy. “It’s a historic time for Pemex,” he said. “For Pemex to do this, it needs to modernize and transform the way it does business.”

Maribel Zavala Rivas

Oscar Agis

A New Beginning The Federal Electricity Commission (CFE) is on the brink of a turnaround as it becomes one of the most crucial institutions in Mexico’s history with investments around $96 billion pesos, transforming it into an energy giant.

What does this all mean? In the words of its general director, Enrique Ochoa Reza, the CFE will continue to provide electricity services but also enters a new realm in the commercialization of natural gas.

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May 2014 Mxe Mexico Energy and Business Magazine

Enrique Ochoa Reza CFE´S General Director

To accomplish this,

Ochoa indicated that the CFE is already collaborating with the private sector to expand the transportation infrastructure for natural gas throughout Mexico. With an investment of more than $96 billion pesos, CFE is building two compression stations and 13 gas ducts.

The investment will contribute to the construction of approximately 4,100 kilometers (2,546 miles) of gas ducts. “With these actions, the national gas pipeline system will be extended by 34 percent to reach a length close to 15,200 kilometers (9,444 miles) by 2016,” Ochoa tells Petróleo&Energía.

The plan does not stop there. The goal is much more ambitious as there is already in place a bidding process for five new gas pipelines that will strengthen the interconnection and redundancy of the network in the north and northwest portions of the country.

This involves Ojinaga-El Encino, Chihuahua; El Encino-La Laguna, Durango; Waha, Texas-Samalayuca, Chihuahua; Waha-Ojinaga; and Ehrenberg, Arizona-San Luis Río Colorado, Sonora.

“The projects amount to an investment close to $29 billion pesos and expand the national gas pipeline system by 1,376 kilometers (855 miles).

These five gas pipelines are among 133 projects for electricity generation, transmission, and distribution that CFE is developing and are included in the National Infrastructure Program. The projects require a record investment close to $600 billion pesos and will result in a much improved electricity service and natural gas distribution throughout Mexico,” Ochoa tells Petróleo&Energía.

Future Policy Changes Ochoa, who has also an earned doctorate in Political Science from the University of Columbia in New York, talked about CFE’s future with the Energy Reform and the secondary laws. From his point of view, he emphasized that it is worth highlighting four key policy changes:

1. The CFE will convert to a state-owned firm with budget, technical, and management autonomy. This will allow it greater flexibility and operational efficiency as well as the ability to reduce the number of technical or non-technical losses. Thus, CFE will be able to facilitate the necessary changes to offer better service, reduced costs, and benefit consumers. This is the primary objective.

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May 2014 Mxe Mexico Energy and Business Magazine

2. The CFE is changing from an electricity firm into an energy firm, continuing to provide electricity services but also commercializing natural gas for the industry. In this way, we will be able to meet the growing demand of the industrial sector for this combustible and produce cleaner energy at a lower cost.

3. The CFE will have the opportunity to establish strategic partnerships with the private sector. This will allow it to develop more electric energy generation projects based on renewable sources as well as maintain our transmission and distribution networks throughout Mexico.

4. The National Energy Control Center (CENACE) will become an independent agency outside of CFE. This will avoid a conflict of interest and all producers - public, private, or public-private - will be able to sell their energy on the open market. CENACE’s decision-making will prioritize the provision of electric energy at reduced costs.

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Ochoa points out that “all of these policy changes are already in the Constitutional Reform, but they still need to work out the details in the Secondary Laws which President Peña Nieto will present to Congress for discussion, analysis, and approval.”

Goals and Challenges In financial terms, Ochoa recognizes that the challenges are significant. “In 2013, sales reached close to $318, 500 billion pesos - a record amount. However, in 2013 we also had historic losses of approximately $37,500 billion pesos. To reverse this situation, it is necessary to take advantage of the tools that the Energy Reform offers.”

Ochoa insists that CFE’s primary goal is to reduce electricity generation costs and improve services to consumers. “First, we have to reduce production costs. The combustible used in the generation process makes up 80 percent of production costs. In 2012 Mexico’s consumers paid on average 25 percent more for electricity services than U.S. consumers despite the subsidies that were offered by the federal government. This was due in large part to the use of more expensive combustibles that are also more contaminating, such as fuel or diesel in our electricity generation processes.”

As the leading spokesperson for CFE, Ochoa promotes the use of natural gas as his preferred choice. “By using natural gas, we can reduce the consumption of other energy products such as fuel, which is not only 4 times as expensive but also emits 68 percent more contaminates in the atmosphere than natural gas.”

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May 2014 Mxe Mexico Energy and Business Magazine

“However, we still have to achieve the goal established by the General Law on Climate Change that 35 percent of electricity generated in Mexico will be from clean resources.”

“All of these policy changes are already in the Constitutional Reform, but they still need to work out the details in the Secondary Laws which President Peña Nieto will present to Congress for discussion, analysis, and approval.”

Another challenge for Ochoa is the reduction of technical and non-technical losses in transmission and distribution networks. “Today our losses total 15 percent; that is, more than twice as high as those found in OECD (Organization for Economic Co-operation and Development) countries and 5 times more than in South Korea (3 percent). Now that the Energy Reform allows the participation of the private sector in the extension, operations, and maintenance of transmission and distribution networks, we can reduce our losses and enhance the quality of service.”

Ochoa’s future strategies are directed toward generating more energy using water, sun, wind, and underground steam resources. Today, 25 percent of the energy generated in Mexico originates from renewables, Ochoa says.

“However, we still have to achieve the goal established by the General Law on Climate Change that 35 percent of electricity generated in Mexico will be from clean resources,” he adds.

Mexico Renewables Finally on the use of alternative energy sources in Mexico, Ochoa recognizes that whereas CFE is committed to their use, the participation of renewable energies in electricity generation has declined by 4 26

May 2014 Mxe Mexico Energy and Business Magazine

IMPORTANT FACTS •Electricity sector participation in Mexico’s GDP is 1.7 percent.

•With the Energy Reform GDP growth rates are expected to increase by 1 percent in 2018 and 2 percent in 2025.

•Currently the CFE generates 95,000 jobs.

•With the changes, it will generate close to 500,000 additional jobs by 2018 and 2.5 million additional jobs by 2025.

•The CFE has 186 electricity generation stations, with an installed capacity of 54,800 MW. •It has 58,400 kilometers of transmission lines.

•Distribution lines: 806,266 kilometers.

•Over 98 percent of Mexico’s consumers benefit from electric services.

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“This means that despite the fact that more electricity is being produced from clean resources, its development has not been on par with the growing energy needs of the country.” percentage points in the last 15 years, dropping from 29 to 25 percent. “This means that despite the fact that more electricity is being produced from clean resources, its development has not been on par with the growing energy needs of the country.”

He adds that to reverse this tendency, the Energy Reform establishes four key elements that facilitate the adoption of this type of resources and promote the sustainable growth of the electricity sector.

First, it (Energy Reform) has created new laws to establish simple, logical, and transparent steps to facilitate the investment and construction of geothermal, solar, and wind plants in Mexico.

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Second, the Secretariat of Energy will develop the Energy Transition Strategy, which will promote the use of cleaner technologies and combustibles, such as natural gas and renewable energy.

Third, private sector participation is open to generate electricity for all types of consumers, and mechanisms have been established so that the CFE can create partnerships with private firms to generate electricity with renewable resources.

Finally, concludes the general director of the CFE, the Reform also establishes criteria for energy efficiency, rules for clean energy, and the reduction of contaminating emissions for participants in the electricity industry.

For the past 10 years, Petróleo&Energía magazine (P&E) has been acknowledged as the leading publication for the energy sector in Mexico. Our clients and readers’ businesses have been strengthening as a result of this recognition. This is why we decided to take that extra step, instead of having eight monthly publications a year we will now have eleven.

Also, during the year we will be increasing our distribution volume, which currently stands at 25,000 copies. This will allow us to expand our coverage. Our readers can also benefit from our web page and our exclusive business community called POTENTIA. Other benefits include: • The 5th luncheon/banquet honoring the 1OO leaders in the energy sector in Mexico. (March 4).

• Two Petróleo&Energía forums throughout the year.

• The 1st. International Mexico Energy and Business forum (July2) Dallas, Texas.

• Our editorial staff reports on over 20 forums, congresses and exhibitions, both in Mexico and abroad.

• The newly created agency, Ferráez Conecta, provides PR services to companies in the energy industry, as well as organizing conferences and conventions for businesses and agencies. For two consecutive years Ferráez Conecta has organized BP’s conference of worldwide results.

• Mexico Energy and Business Magazine “Investment opportunities in the new era,” is an English monthly digital magazine specializing in today’s Mexican energy sector. The publication is aimed at international investors and leaders in the industry that would like to do business in Mexico by providing them information on current issues, business updates, legislative regulations and investment opportunities.

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Petróleos Mexicanos’s general director Emilio Lozoya Austin.

Renew or Die More than 25,000 attendees and close to 300 firms gathered in Mexico City for Pemex’s ExpoForo 2nd Edition: “We are transforming.”

The forum’s main objective - according to Petróleos Mexicanos’s general director Emilio Lozoya Austin - was to establish a dialogue with the diverse sectors tied to the parastatal.

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or three days, conference panels and working tables convened to inform firms, researchers, students, and the public at large on the new environment at Pemex, exploration and production, Pemex’s strategies, and the industrial transformation, among other themes.

In addition the panelists analyzed how Pemex will continue to compete in an open market on the value chain of the industry without leaving its place as a pillar of growth for Mexico.

According to Lozoya Austin, the most difficult challenge that Pemex has faced in its 76 years of existence is to transform itself in only two years into a productive firm owned by the state. Indeed, the Energy Reform’s goal is to create a Pemex

Pemex

Medio Oficial:

that is stronger, more dynamic, and profitable – and, of course, working closely with the financial and technological capacities of other sector firms to take advantage of the maximum use of the natural resources that Mexico has.

“What we are looking for is to promote synergy among Pemex and its suppliers and contractors, as well as with institutions of higher education,” said Lozoya.

Enrique Ochoa Reza, general director of the Federal Electricity Commission (CFE), participated on the first day of the event and emphasized that the Energy Reform will only be relevant if it benefits the sector, industry, and job creation. Ochoa announced that they will be promoting the construction of new gas ducts for transport and the production of natural gas at competitive prices.

“The CFE will take advantage of the opportunity that the constitutional reform offers so that Mexican engineering can find ways to promote development and stimulate economic growth through the creation of jobs for the country,” noted Ochoa.

Historic Budget

In the panel, “The New Environment and Energy Strategy,” Secretary of Energy Pedro Joaquín Coldwell assured attendees that never before in the history of Pemex has there ever been a transformation as profound as the one proposed by the Energy Reform. In addition to the new energy model, Pemex closes the era of the decentralized organism and begins that of the productive firm of the State.

He emphasized that the Executive Branch’s support is evident by the amount of investment authorized this year of 357 billion pesos - the largest budget in Pemex’s history and 31 billion pesos more than what it was allocated in 2013.

Coldwell considers that the new secondary energy laws will allow Pemex to plan its own activities and be included in decision making regarding exploration fields and production -

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May 2014 Mxe Mexico Energy and Business Magazine

“What we are looking for is to promote synergy among Pemex and its suppliers and contractors, as well as with institutions of higher education,” said Lozoya.

it will be able to perform as a sole producer or in partnership with other firms sharing capital and technology.

“The Energy Reform introduces substantial changes within Pemex that will allow it to continue taking a crucial role in the development of the country.”

The Secretary of Energy tated that the Federal Government has already completed the secondary energy laws, but according to legislators the priority is the Political and Electoral Reform, followed by the Telecommunications, and then by the Energy.

Improved Results

Gustavo Hernández García, general director of Pemex Exploration and Production, considers that greater autonomy in budgeting, operations, and management will allow the enterprise to face the challenges of the new reality of open markets in the energy industry and deliver improved results to society.

“The Reform represents for both Pemex and the country the possibility of monetizing petroleum resources in a swift and efficient way.”

According to Manuel Sanchez Guzman, general director of Pemex Petrochemicals, Mexico faces a paradigm shift with the Energy Reform in how it perceives the business of energy generation; precisely, the contribution of the petrochemical industry to competitiveness and development will be very crucial to this change. In this new scenario, according to Sánchez Guzmán, the goal will be to achieve cheaper and cleaner forms of energy.

Finally, the NASA (National Aeronautics and Space Administration) expert panel emphasized that with the increase in energy demand projected for 2050, it will be necessary to create alliances and share technology that will improve production in the future.

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Key Points in Understanding Mexico’s Secondary Energy Laws

R

ecently Secretary of Treasury Luis Videgaray and Secretary of Energy Pedro Joaquín Coldwell released crucial details of Mexico’s secondary energy laws.

Among the changes include 21 laws, 8 of which are new, and 13 with modifications.

We present the key points contained in the legislation:

• The nation will maintain the ownership of hydrocarbons.

• A price reduction in hydrocarbons is expected in two years.

• Increased accountability will be promoted among sector participants.

• Promotion of clean energy and care of the environment.

• Contract procurement will be an open bidding process with the publication of costs and payments via the internet.

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• Contracts will be verified by the Secretariat of Energy, the Treasury Department, the National Hydrocarbons Commission, and the National Petroleum Fund.

Secretary of Energy, Pedro Joaquín Coldwell.

• Regulatory agencies will have new functions, be self-sufficient, and renew their strategies every seven years.

• The resources obtained from petroleum revenue will be deposited in the Mexican Petroleum Fund.

• An ethics code exists for representatives of regulatory agencies in which it is prohibited to meet on an individual level with members of the private sector.

• Pemex together with the Senate will decide where to invest its resources.

• Details are provided on the new rules for Pemex and the Federal Electricity Commission.

• Pemex’s fiscal regimen will be completed in 10 years.

• There will be two new laws on fiscal matters for the energy and petroleum sectors.

• The Mexican federal government will retain the majority of revenue from petroleum contracts. ●

May 2014 Mxe Mexico Energy and Business Magazine

EVENTS

Upcoming events...

2014

JUNE

MAY

• June 4-7 Mexican Petroleum Congress (Congreso Mexicano del Petróleo) Acapulco, Gro. Mexico.

• June 8-10 Oil & Gas Business Meeting. Calgary, Canada.

• May 15 1st Networking Oil Forum (Foro de enlace laboral petrolero 2014). “Gran Salón”. Hotel Hyatt Regency, Villahermosa, Mexico.

• May 28-29 Mexican International Renewable Energy Congress.

Mexico City.

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May 2014 Mxe Mexico Energy and Business Magazine

• June 10-12 Electric and Hydraulics Expo (Expohidráulica y Eléctrica) Centro Banamex, Mexico City.

• June 10-12 Global Petroleum Show. Calgary, Canada.

• June 11-13 Expo Carga. Mexico City.