On September 27, Jacqueline Sanchez, Energy Policy Associate at the Institute of the Americas participated in a Women in Energy breakfast in Mexico City featuring U.S. Ambassador to Mexico Roberta Jacobson. Amb. Jacobson offered remarks on the importance of the energy sector and its myriad opportunities as a key element for the broader US-Mexico bilateral relationship. At the breakfast, Sanchez joined a distinguished group of female executives, government officials, and representatives from academia and civil society. The event was hosted by Chevron, an Institute of the Americas Energy Steering Committee member and featured a wide ranging discussion of key issues facing Mexico’s energy sector.
Excerpt from CalChamber article
Globally, trade is at a very interesting juncture, Ambassador Jamal Khokhar, president and CEO from the Institute of the Americas, said to the attendees.
For more than the last half century, the U.S. has led the world in breaking down barriers to trade and in creating a fairer and freer international trading system based on market economics and the rule of law. Increased market access achieved through trade agreements has played a major role in the nation’s success as the world’s leading exporter.
This trend is changing, however, to a more inward view because “large segments of the population have not necessarily benefitted from the gains of trade liberalization that were promised them in the trade agreements,” the Ambassador said.
Ambassador Khokhar explained that it is not the trade agreement’s fault for this predicament. “We are better off with a liberalized trade agenda,” he said. The challenge instead is how to make the trade adjustments in terms of education, job training, job creation, adjusting with new technologies, recognizing that some manufacturing jobs will be lost and new ones created and there’s a balance between the two sides.
Why are trade agreements so difficult to negotiate, the Ambassador asked rhetorically?
“Trade agreements are the only instrument that oblige countries to internalize, ratify into domestic law the agreements reached among countries. So, they are enforceable and there are dispute resolution systems in place,” he said.
It is this package deal that allows countries to load up a variety of topics and problems into a trade agreement. However, the biggest change in trade is new technology, and that is presenting a whole host of new problems.
Global value chains account for 80% of world trade today. Global value chains are companies selling to each other, within the company, or all the people and all of goods from around the world that go into the production of a product or a service.
“In a world where goods, or even cattle cross the border before they’re processed and delivered…how do you define a rule of origin?” Ambassador Khokhar asked. “So global value chains are extremely important and yet our trade agreements are not set up any longer to deal with sophisticated global value chains.”
The debate the world is having about trade and whether it benefits or hurts countries needs to refocus on how technology changes everything.
The Ambassador sympathized that there are people who are hurt, who have lost jobs and explained that we as a society, not necessarily just government, need to think of how to address that and we need to think about how to retrain and create new jobs in some of these new companies.
“Look backwards if you want to, but I think the rest of the world is moving on and I think countries like the U.S. and key states like California control a lot of global leadership,” Ambassador Khokhar said in closing.
Coutesy of PRODEM
En el marco del 7º Seminario Taller Prodem fue entrevistado Carlos Martínez Vela, vicepresidente de Innovación & Entrepreneurship en el Instituto de las Américas.
¿Cuál es el papel de las universidades?
Cuando era estudiante del MIT hace ya varios años, tuvimos un proyecto grande donde hicimos un análisis con 25 casos de estudio, donde consultábamos cuál era el rol de la universidad en el desarrollo económico y, en particular, el papel de la universidad en el crecimiento y transformación de nuevas industrias, de nuevos clúster en ciertas regiones, en distintas áreas.
Un proyecto muy interesante, porque no lo hicimos preguntando a las universidades qué habían hecho, sino que investigamos la trayectoria del desarrollo regional, identificando el camino tecnológico de ciertas industrias y ver a partir de ahí, cuál había sido la contribución de la universidad.
Naturalmente los 25 casos eran todos distintos, sin embargo había temas comunes, y esto se aplica también a Boston, de hecho uno de los casos fue ahí. Y encontramos que el papel fundamental de la universidad en el desarrollo económico es la educación, que si tú le preguntas a un CEO de una compañía de biotecnología en Boston, por qué están alrededor del MIT o Harvard, dicen que es por el talento, no por las patentes. Y aparte de esto, está naturalmente el tema de la investigación, la generación de ideas que son muchas veces la fuente de los productos revolucionarios, a veces no nos imaginamos en el momento actual lo que van hacer en el futuro. La resolución de problemas, la participación de los estudiantes, la facultad, investigadores, colaboraciones que ayudan a resolver problemas en la industria, en la economía o en la sociedad, la diseminación o codificación del conocimiento, a través de la transferencia de tecnología, que es la manera de llevar conocimiento hacia la economía.
Y esta idea de espacio público, el poder de convocatoria que tienen las universidades para juntar actores que a lo mejor no se juntan con facilidad y tener conversaciones sobre el futuro, sobre la economía, sobre la industria, lo cual es muy importante y reconocido.
Esto no significa… obviamente estamos aquí en Prodem con el tema del emprendimiento. Esto no significa que el emprendimiento, los startups y la transferencia de tecnología no sean importantes. Pero quería poner un contexto más amplio. Y en ese sentido, pensar que cuando queremos involucrar a las universidades de una manera más amplia en el desarrollo, hay distintas maneras de hacerlo.
¿Qué se puede se puede esperar y qué no, de una universidad?
No se puede esperar que sean agencias de desarrollo económico, no se puede esperar que salven a la economía regional. Porque son un agente entre muchos otros, sector privado, sector público, gobierno, sociedad civil, etc. Y estos cambios de economías regionales requieren una movilización de los distintos actores en conjunto, para pensar y actuar hacia un futuro económico y social distinto.
Entonces, pensar la universidad dentro de estas funciones, estos roles pero no la salvadora, como un agente muy importante pero no el único.
¿Cómo se traducen los esfuerzos de la investigación al mercado?
Hablando un poco de la traducción de estos resultados de la investigación en economía, como mencionaba en la plática, el MIT tiene un ecosistema interno, donde naturalmente está la oficina de transferencia interna de tecnología, pero está también el centro de prueba de concepto, que se llama “Deshpande Center”, están los premios, las competencias, los clubes estudiantiles, etcétera. Y toda esta infraestructura sirve para brindar este servicio, para que el investigador y los estudiantes que quieran emprender algo, que quieran crear una compañía, licenciar una tecnología, puedan hacerlo. Es un espíritu de servicio, naturalmente esto florece porque hay todo un sistema externo también. En ese sentido, Boston es privilegiada porque ahí se inventó el Venture Capital, en 1946 si no me equivoco. Tiene una concentración de universidades, tiene una cultura emprendedora, grandes compañías, pequeñas compañías, entonces es una sinergia entre lo que pasa adentro de las universidades y lo que pasa afuera de ellas.
Hay que pensar esto en distintos contextos cómo se aplica en todos los contextos. Pero hay ciertos procesos y ciertas funciones que son importantes en todas partes, entonces no necesariamente hay que pensar en replicarse, sino en aprender.
¿En cuanto a reglas?
Hay reglas muy claras y eso es parte del secreto de todo esto. Hay reglas muy claras en cuanto a lo que los profesores pueden y no pueden hacer, cuánto tiempo pueden dedicar a la consultoría versus al trabajo académico, cuánto es el porcentaje de participación que tienen en la startup, cuánto en las licencias. Entonces, esa parte es muy importante, porque parte de lo que estas reglas hacen, es brindar la oportunidad pero también preservar la integridad de la universidad y de la vida académica, que es muy importante también. Las universidades no son fábricas de startups, y es muy importante entender estas reglas para mantener una cierta cultura, porque si orientamos todo a la investigación todas las necesidades inmediatas del mercado, las necesidades conocidas, vamos a perdernos del futuro. Entonces, es importante tener esta infraestructura pero sin olvidar también el tema de la investigación básica que está orientada a cosas que no sabemos cómo se van aplicar en el futuro.
Each May, the Institute of the Americas convenes the La Jolla Conference to foster debate and dialogue on our hemisphere’s most critical energy policy and investment themes. And each year 2-3 topics dominate the conference’s formal presentations, panel discussions, off-the-record roundtables, and cocktail banter. That the uncertainty gripping the globe has not spared Latin America was crystal clear as participants gathered for the XXVI annual La Jolla Conference on May 24-25.
The arrival of the Trump administration has seen an endless catalogue of contretemps, and many that directly and indirectly affect energy policy and the broader relationship between the US and Latin America. But the winds of change and uncertainty are not only blowing through the marble and wood paneled corridors of Washington, DC.
Countries across the region have been faced with economic pressures from depressed commodity prices, and political and social unrest has served to somewhat counter efforts to attract investment or push forward major energy policy overhauls, most notably in Mexico and Brazil.
Successive panels and speakers underscored that it is not time for the fainthearted, or risk-averse investor but also pointed to opportunities. The proverbial show goes on and progress is being made.
And all of this is occurring at the same time as a major disruption of how the world generates and consumes energy, and from what sources. Nowhere was this point more evident than the spirited debate that coursed through the conference as to the most appropriate role for renewable energy.
Panelists agreed that chaos appears to be the norm for the new administration in Washington, DC and as UCSD Professor David Victor aptly noted predicting what the Trump administration will do is akin to predicting the path a box of feathers will take after being dumped off a cliff.
Fortunately, the hugely divisive rhetoric aimed at Mexico in the early days of the administration has become more tempered, including a more measured approach to NAFTA and possible renegotiations. When it comes to the burgeoning energy trade between the US and Mexico, particularly in terms of natural gas and refined products, it is an important leverage point and one that can and should continue to positively inform the binational relationship in this new era.
As the panels and discussions continued on the conference’s second day, the dominant topic shifted. Indeed, the conference went from being all about Trump to an all-out debate on how far and fast renewable energy can be incorporated across the region. Regardless of the panel, the topic of where renewables fit into the region’s energy mix, and at what percentage, what price, and at what pace percolated through the discussions.
Those advocating a very forward-leaning 100% renewable energy posture – call them the California contingent – went head to head with the more moderated energy transition view, one that in most cases includes a critical role for natural gas. But make no mistake that no one argued against renewable energy, rather it was a debate over how much renewables should we rely upon and when.
Panelists argued that the renewable wave sweeping the region, and the reason for the daylong debate over the efficacy of a 100% renewables target, are the fact that governments are seeking renewables not just for climate and emissions reductions goals, but rather for cost reasons.
Despite social unrest, a sluggish economy and the long shadow cast by the US election and unfortunate spotlight placed upon the country by the new administration, Mexico has made considerable progress with its energy reform.
Representatives from Pemex, CNH and ASEA all touted the massive regulatory reform that has in many cases been enacted from scratch, along with the continued advance and attraction of upstream oil and gas investment. By the time of the conference, more than two billion dollars had been invested by way of 34 projects tendered since the reform became law. Panelists from Mexico concurred that much work remained in order to consolidate the reform, but none shied from the demands ahead nor were they overly concerned with the impending election cycle and its populist shadows.
The Temer administration in Brazil has set in motion an aggressive reset and reform agenda for the nation’s energy sector and particularly investment in the upstream. Over the last several months, major regulations have been rewritten pertaining to oil and gas investment, and a moribund effort to draw investment via auctions at the National Petroleum Agency (ANP) has been jumpstarted.
The Director General of ANP, Decio Oddone offered a keynote address focused on the plans the regulatory agency is taking in order to attract greater investments and described this moment as historical for Brazil. Oddone outlined four variables that could serve to revitalize the sector: 1) The agenda of tenders for new exploration areas; 2) The improvement of policies in the area of energy and regulation; 3) The modernization of the supply chain; and 4) Petrobras’ divestment plan.
Guyana also figured prominently with its recent deepwater oil discoveries in the Liza and Payara fields operated by ExxonMobil. The country surely stands on the cusp of a historical and transformational opportunity. Government and society face a steep learning curve as heretofore nonexistent institutions are stood up, regulatory practices are implemented, and energy governance is developed.
A robust panel and conversation centered on regulation, the role of stakeholder engagement and balancing regulation and investment. The discussion ranged across the oil and gas sector, but also examined the electric sector and particularly large scale projects and transmission lines. Panelists agreed that companies have a social responsibility to the communities, the so-called social license to operate.
When queried as to the keys to effective regulation, one that balances investment with risks and manages stakeholder engagement, the panelists responded with a variety of thoughts: “Be consistent in the long term,” one noted. “Above all else strive for transparency, that is tell people what you are doing,” suggested another. “Be brave when you make a mistake; say how you are addressing it,” cautioned another. “Collaboration,” one responded succinctly.
“We need to show companies and convince them that we have competitive advantages,” Neuquén Governor Omar Gutiérrez said in his opening keynote address at the Institute of the America’s “Energy & the Economy in Argentina” Roundtable on March 30 in Buenos Aires. “If the conditions are not in place, then the resources will remain under the ground.”
Governor Gutiérrez’s remarks are not merely empty rhetoric. Argentina has the potential to become an energy supplier to South America, perhaps even further afield. The country boasts not only some of the world’s largest unconventional oil and natural gas resources, but vast renewable energy sources.
The question, however, is whether the government can create the economic, institutional and legal stability so that it can become economically viable for companies to develop the riches over the long term no matter a political shift in the future.
These issues were at the center of vigorous debate and discussion at the Institute of the Americas’ Roundtable in Argentina both in the formal sessions and sidebar conversations among the almost one hundred attendees from across industry, government and civil society.
There is new hope this can happen with President Mauricio Macri. His conservative administration has taken steps to rebuild investor confidence since coming to power in December 2015. It has ended a 15-year sovereign debt default and scrapped the capital, currency and price controls of his 2003-15 populist predecessors that had sparked a flight of investor dollars and a plunge in energy production that brought shortages and a surge in imports.
The resources are getting developed. Output from Vaca Muerta and a few tight plays is starting to offset the declines in conventional production that cost the country its energy independence of the late 1990s and early 2000s.
Vaca Muerta is on track for more production growth. As part of the landmark deal, BP-controlled Pan American Energy (PAE), Chevron, Dow Chemical, Shell, Total and YPF vowed to invest a combined $5 billion this year and more than double that in subsequent years to develop the play.
Daniel Montamat, executive director of Montamat & Asociados, an energy-consulting firm in Buenos Aires, estimates that the energy industry needs $20 billion a year in investments to rebuild supplies after a decade of shortages – and to keep pace with demand.
Will this come? As long as companies see that the government making progress in improving economic, institutional and legal stability and doing long-term planning, then companies will do their part, he said.
“Once the process gets on track, we are going to be surprised by the investment that will come,” he said.
A challenge for making Vaca Muerta economically viable for production is to bring down drilling and completion costs. YPF has halved its costs to $8 million per well from $16 million when it started in 2013. Most other companies are still above $10 million.
Argentina has another Vaca Muerta in its renewable energy potential, much of which remains undeveloped. While Brazil, Chile, Uruguay and other countries in the region reeled in huge investments to harness their renewable energy capacity over the past decade, Argentina did very little under the 2003-15 populist regimes.
This could be a blessing in disguise for Argentina.
“We don’t have to try new technology” but instead use what has been “proven to work,” said Sebastián Kind, the national undersecretary of renewable energies. “We can learn from the miscalculations and errors” made in other markets.
To attract investors, the Macri administration is increasing power prices and offering opportunities to build solar and wind parks.
Investors appear to be keen. In two tenders so far, Argentina snared commitments for building 2.4 GW of renewable generation capacity. More tenders are planned with the aim of reaching a target of getting 20% of power consumption from renewable sources by 2025, or about 10 GW.
A challenge is to get enough financing for projects a country with a history of economic and political instability and the threat of policy shifts when elections come round every two years, for president and then lawmakers.
Even so, there is a market for more capacity. Argentina’s power demand is expected to increase 3% to 4% per year to 175-180 GW in 2025 from a current 130-135 GW, according to Kind.
The key to satisfying this demand is diversification, said Kind.
“We need to use all of our resources. It is not just Vaca Muerta or wind or solar, or the rivers. It is also nuclear,” he said. “Argentina is a mix. It is not just the cheapest source of energy.”
Mexico ended 2016 with an optimistic trajectory as expectations were exceeded in December’s deepwater oil & gas bidding round and the concurrent auction for the Trion project in partnership with Pemex. However, the changing calendar did not alter the important questions surrounding the consolidation of the country’s energy reform measures, as well as the institutional and regulatory environment as 2017 unfolds.
Indeed, Mexico’s energy reform is, now more than ever, a subject of great importance thanks to its rapid evolution and progress. The progress to date has also meant that on several levels it has entered a critical consolidation period, particularly as Mexico heads into a presidential election cycle in 2018.
These issues spurred spirited debate and discussion at the Institute of the Americas’ annual Mexico Energy Roundtable, held on February 28 in Mexico City.
The latest phase of the unfolding energy reform in Mexico presents its own unique challenges and could be one of the most complex stages given the focus on strengthening institutions, ensuring transparency, boosting investment and continuity in the oil and gas sector in Mexico.
One of the essential issues discussed was the excessive bureaucracy that companies and operators in the energy sector must now manage. The existence of multiple regulators and regulatory overlap often means having to obtain a variety of permits and approvals, in some cases almost identical requirements are required from different agencies.
Beyond the need to strike the right balance between regulation and investment, the discussions also pointed to the critical importance and attention of dialogue among the full range of relevant actors in the country. There was consensus across the panels with speakers from government, industry and academia all noting the acute need in the country for adequate dissemination and communication strategies for reaching society as a whole and reporting on the results. Indeed, communication efforts underscoring greater transparency regarding the reform measures, decisions and actions being taken by the regulators, government and Pemex are of utmost importance.
In addition, a report released in February by the Organization for Cooperation and Economic Development (OECD) set forth a series of recommendations for regulatory agencies in Mexico. The report was frequently cited during the roundtable and particularly the key recommendations:
• The importance of consolidating the work of regulatory bodies, which should promote the operation of the Energy Sector Coordination Council (CCSE) in order to minimize duplication of work.
• The essential need to create a one-stop shop for licensing and permits.
• The need to modify the legal framework of the Agency for Security, Energy and Environment, ASEA.
• The imperative for the three regulatory agencies to develop multi-year budgets to maintain fiscal autonomy, enjoy stability and facilitate long-term planning while avoiding unnecessary political pressure or influence.
• Maintain a structured dialogue between the regulators and the congress.
Finally, industry representatives underscored that to achieve the overarching goals of energy reform and its consolidation, regulation must be clear, sensible, responsible and practical. These characteristics are the key to success and also indispensable for having the best science and technology, consultative processes, innovation and openness to change.
Mexico has moved ambitiously and expeditiously on energy reform and while there are many opportunities, there will be many additional demands and requirements placed upon all stakeholders. Clearly, the tireless efforts committed to date in Mexico to reach this point will certainly need to continue.