Mexico’s Fuels Market and Infrastructure – A Complex Transition

Mexico’s Fuels Market and Infrastructure – A Complex Transition

Mexico’s energy reforms have brought a major overhaul of the nation’s entire energy sector. Among the myriad changes being implemented, major opportunities have emerged with regards to Mexico’s fuels and liquids market, as well as infrastructure development associated with fuel sales, supply, storage and distribution. Mexico’s fuels market is the fourth largest in the world and has experienced considerable growth in the last several years making it attractive to a wide-range of companies and investors. Growth is driven by transportation, power demand and underpinned by strong population growth.

Last year saw several deregulation milestones met on the path toward a liberalized fuel market, as well as important advances in open seasons aimed at ultimately boosting related infrastructure, both in liquid fuels and natural gas.  In what has become a rapidly changing market, a growing list of international companies, traders and Mexican firms have begun to develop projects with an eye to establishing themselves in Mexico’s fuel and liquids business.

This “complex transition” was at the center of three high-level discussion panels hosted by the Institute of the Americas on February 27 in Mexico City and attended by over 90 representatives from industry, government, and academia.

Panelists generally agreed that development of the fuel market was on the right track and that the reform measures had boosted investment in energy infrastructure. The proliferation of new market players (40 brands as of this week) in the fuel retail market and the choices being created for consumers is important.

But, there was less consensus on whether Mexico would soon see a truly competitive fuels market that could fully serve the growing demand in Mexico and its citizens, not to mention what the key next steps should be before the July elections. In an interesting development, several speakers put on the table the need for further energy reform in Mexico. Panelists also argued that government and industry alike must continue to aim for efficiency, continuity, stability and long-term regulatory certainty.

Webinar: US-Mexico Energy Outlook under the Trump Administration

Webinar: US-Mexico Energy Outlook under the Trump Administration

Date: Friday, January 27
Time: 8:00am San Diego (10:00 am Houston/Mexico City; GMT/UTC – 8 hours)
Contact: Jacqueline Sanchez

As the Trump administration takes office, and with the intense spotlight on US-Mexico relations, it is important to consider and understand the energy elements of the bilateral relationship. Indeed, thanks to advances in both countries, Mexico and the US have grown increasingly interconnected in terms of oil and natural gas but also electricity trade.  There is a notable maturity and extensiveness of the bilateral energy relationship and one of flourishing trade and commercial engagement that bears assessment as we look forward.

Join us for a webinar panel discussion featuring: Carlos Sole, Partner, Co-Chair Latin America Practice, Baker Botts LLP; Joe Amador, Managing Director, Tudor, Pickering, Holt & Co.; and, Jeremy Martin, Vice President for Energy & Sustainability at the Institute of the Americas. The webinar will be held Friday, January 27 at 8:00am San Diego (10:00 am Mexico City; GMT/UTC – 8 hours).

Timed to coincide with the inauguration of Donald Trump, the panel aims to emphasize the depth, robustness, and opportunities of the bilateral energy relationship, offer market insights, and also provide some tea-leaf reading as the new administration takes office in Washington, DC.


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Government Intervention in the Natural Gas Market: The Argentina Case

This report is about government intervention in the gas sector in Argentina. The cases analyzed are the Reforms of the 1990’s and the subsequent intervention of the government in the gas market when gas supply/demand imbalance in 2004 transformed itself into a supply crisis that lasted for more than a decade. The intervention had pervasive effects on the gas deregulated market.
Government Intervention in the Natural Gas Market: The Argentina Case

Event Summary: The Trump Administration, Latin America and Energy: Mexico, Natural Gas and LNG Exports

Event Summary: The Trump Administration, Latin America and Energy: Mexico, Natural Gas and LNG Exports

Energy continues to be a bright spot in the US-Latin America relationship and new developments, like an uptick in US LNG exports, offer opportunities to increase energy security and cooperation across the Western Hemisphere, said panelists at an event co-hosted by the Inter-American Dialogue and Institute of the Americas on December 15th.

Energy plays a central role in bilateral and trilateral cooperation with Mexico and Canada. The United States is working to expand this cooperation through increased data sharing for cross-border transmission, generation, and renewable energy mapping, as well as through technology sharing for carbon capture and storage, noted Department of Energy Deputy Assistant Secretary Beth Urbanas.

The three countries work on energy issues both trilaterally and through larger multilateral efforts like APEC and the G20. Mexico also recently joined the International Energy Agency and the North American Electric Reliability Corporation (NERC), providing two additional avenues for cooperation. Mexico joining NERC benefits both Mexico and the United States, noted Mark Nelson, regional vice president and director of issues management at Sempra, as Mexico can help provide system reliability and voltage support to the United States in times of energy distress.

Investment by US companies in Mexico following its energy reformhas also strengthened bilateral energy ties. Oil majors are entering the downstream space in Mexico, even though they are largely divesting from those assets in other countries, said Carlos Sole, partner and Latin America practice co-chair at Baker Botts.

A recent uptick in US natural gas exports represents another significant opportunity for US-Latin America energy trade and investment, said John McCarrick, deputy assistant secretary at the Department of State’s Bureau of Energy Resources. LNG exports – which began in earnest just last year – reached 465 billion cubic feet in the first 9 months of 2017, already 2.5 times greater than total 2016 LNG export volumes. LNG exports are projected to reach 4.4 trillion cubic feet by 2035.

At the same time, Latin America is increasing its capacity to receive LNG. Regasification capacity in the Americas, excluding the United States and Canada, will reach 50 million tons in the next few years, said Leslie Palti-Guzman, director of global gas at Rapidan Energy Group. Central America and the Caribbean alone will account for 8 million tons of this regasification capacity, and will be a significant growth opportunity for US LNG exporters.

These terminals may see low utilization rates, however, as LNG is used more as a backup fuel in Latin America. But the flexible contract terms offered by US LNG exporters and the United States’ geographic proximity make the fuel particularly attractive as a backup to baseload power and intermittent renewable energy. In Brazil, for example, US LNG is imported when hydropower supply is lower during the dry season, said Edmar Luiz de Almeida, professor at the Federal University of Rio de Janeiro’s Institute of Economy. In Central America and the Caribbean, US LNG can also help fill the vacuum left by Venezuela’s Petrocaribe shipments, which have fallen sharply in recent years, and a decline in shipments from Trinidad.

Going forward, the US government may try to create a more favorable regulatory environment for gas exports, but the success of US LNG exports also depends tremendously on global gas demand.

By Rebecca O’Connor, Inter-American Dialogue

Gas and Power in Brazil – Disruption in a Disruptive Setting

Brazil’s offshore Pre-Salt production has been well publicized and Brazil has overtaken Venezuela as the region’s largest oil producer. The natural gas sector, on the other hand, has not received as much attention. It represents perhaps not a new resource for Brazil’s energy matrix, but rather a new approach to the country’s energy sector and Brazil’s growing role in the global energy market. Indeed, “disruptors” both globally and domestically with regards to natural gas and the electric sector from deregulation and the rapidly-changing model for production and consumption of electricity are being grappled with in Brazil.

Transición Energética en MéxicoGas and Power in Brazil – Disruption in a Disruptive Setting

Transición Energética en México

El pasado 8 de diciembre el Instituto de las Américas llevó a cabo el Desayuno Temático “Transición Energética en México: Panorama del Sector Eléctrico y el Desarrollo del Mercado de las Energías Renovables”.

Este se desarrolló en base a la Ley de Transición Energética de México, aprobada en diciembre del 2015, la cual estableció regulaciones para el uso sostenible de la energía y fijó obligaciones en cuanto a energías limpias y reducción de emisiones, que incluyen la meta del 25% de energía proveniente de fuentes de energía limpia para el 2018. Desde ese entonces, se han llevado a cabo tres subastas de energías renovables ampliamente reconocidas y aclamadas internacionalmente. El lanzamiento de la cuarta subasta se anunciará en el primer semestre del

Transición Energética en México

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