ENERGY MATTERS © VOL. 1
an opinion editorial written exclusively for ANZMEX
15 January, 2019
By Chris Sladen
Energy matters, really!
Just the other day, a friend mentioned that energy security has been a topic in energy debates in Mexico over many years. Every time the topic was raised, he lamented that the audience reaction appeared to be ‘yes that is an interesting academic topic but Mexico has enormous oil & gas reserves so it is not really relevant to Mexico’.
Today there is a new reality to what energy security really means. With queues at gasoline stations across the country, and various gasoline stations run dry, many people cannot understand why?
Mexico has sufficient refinery capacity but its refineries run at only ~30% utilisation irrespective of the security situation. The refineries have not been reconfigured for the gradually changing composition of Mexico’s oil production. Hence a need to import other crudes to blend with Mexico’s oil.
At the same time, natural gas imports have risen dramatically. Partly rising demand is from new build combined cycle gas-fired power plants and some is conversion of older plants to use natural gas instead of fuel oil or coal. But Mexico has enormous natural gas resource in untapped unconventional shale. Sadly it sits underground, unused, whilst Mexico spends billions of pesos on natural gas imports. Also there are large gas LP imports too.
And Mexico’s oil production continues to falter, with the trend being decline since 2004. So now there is not enough production to both maintain exports and meet refinery needs. The pipeline network for refined products is insufficient and impossible to protect. Closing pipelines accentuates the shortages. Little storage capacity has been constructed so there are only a few days of supply stockpiled, and the rail network has limited distribution capability too.
Energy self-sufficiency is now a concept of the past. Many of my friends sit in queues at too few gasoline stations waiting patiently for an hour or two. Engines running but going nowhere, adding more and more emissions. Yes, some people opt for public transport or bicycles. But using lorries instead of pipelines to distribute oil products, not only is a slower process, also it creates transport bottlenecks and supply chain issues, and produces more and more emissions. And we all know what more emissions causes.
Why has energy security now become a big issue? The answer is very simple – insufficient investment. Whether it is public investment or private is not the issue. The issue is not enough investment. Or said in another way, how can Mexico get more investment? Perhaps double the current amounts of investment are needed, every year, for decades.
In energy, investment really matters!
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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