ENERGY MATTERS © VOL. 4
an opinion editorial written exclusively for ANZMEX
15 April, 2019
By Chris Sladen
Energy matters – ‘So close, but yet so far’
A long time close friend who runs a private equity fund that wants to invest in Mexico’s oil industry messaged me yesterday, saying: ‘My investment funds are ready, has the energy reform been progressing well?’
The 2013 energy reform was clearly Mexico’s single most important reform in many decades. Or at least it had the potential to take Mexico such a long way – to create a large and continual fiscal boost to the economy, whilst also creating jobs, adding Government tax and royalty income, as well as delivering new oil and gas production, new reserves, pipelines, new 21st Century gasoline stations, and full market competition with strong regulators. And perhaps most importantly unprecedented transparency.
Just 5 years later, the country has now embarked on a totally new direction, and by-and-large ignoring what the 2013 energy reform offered to create. Many now claim that the reform failed. But what might have happened if the 2013 energy reform had actually come 5 years earlier in 2008 instead of waiting until 2013?
First, we would now be more than 10 years on from the reform, not just only 5 years. Oilfields such as ENI’s Amoca, Mizton & Tecoalli fields, PanAmerican Energy’s Hokchi field and Fieldwood Energy’s Ichalkil & Pokoch fields would likely already be developed and on production plateau. Secondly, recent major discoveries such as Talos Energy’s giant Zama oilfield would likely be developed and also now on plateau. Thirdly, deepwater oilfields such as BHP’s Trion would probably have completed appraisal and a final development decision likely already be taken. Also, Murphy’s recent deepwater Cholula discovery would have been appraised and likely close to a development decision. And of course there would have been many other new discoveries made and being appraised.
New production resulting from the reform being 5 years earlier than it was could easily already total more than 300,000 barrels oil per day, approaching 20% of total production today. Mexico’s oil & gas reserves would likely be showing a healthy uptick. Shale gas production would likely be progressing rapidly, with blocks having been awarded in bid rounds, horizontal wells drilled, and beginning to produce much needed Mexican natural gas. Many gas pipelines would be completed, improving energy security. Renewable energy would be flourishing, offering some of the globally lowest cost electricity, and offering a best-in-class example for the rest of the world. Many new fuel storage facilities would likely already have been built, alleviating continual concerns about gasoline supply shortages. Last but not least, there would have been a decade of technology transfer, regulatory oversight of investors, open tendering, community engagement and social investment from a diverse global array of investors.
About the author:
Chris Sladen runs an advisory service offering insights to inform, shape a decision, policy & regulation, and guide the next steps for energy ventures, acquisitions & divestments, energy transition and climate strategies. Chris has a unique global experience having worked in over 40 countries. This is underpinned by extensive knowledge of petroleum systems and where best to find oil and gas, notably in the Gulf of Mexico & nearby areas, Europe and NE & SE Asia, as well as the development of midstream, downstream & renewables investments in many emerging economies. Chris has extensive experience acquired on the Boards of companies, subsidiaries, business chambers & organisations. Chris has a career of over 40 years in the energy sector, living in Mexico (2001-2018), Russia, Vietnam, Mongolia, China & UK. His contributions to the energy and education sectors have been recognised by the UK Government with both an MBE and CBE, and also the Aztec Eagle from the Mexican Government – the first foreigner in the energy sector to achieve this award. Chris has published extensively over five decades. Chris’ articles for Energy Matters reflect his experience and enthusiasm and are not paid for in any way.
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