an opinion editorial written exclusively for ANZMEX 

18 January 2021
By Chris Sladen

Energy matters – Mexico’s signals and signposts

A former colleague phoned me last week asking, “Chris, what do you think are the most important signals and signposts in the energy sector in Mexico in 2021? What are you watching closely?”. Here is what I said:

A high profile in climate change leadership. Will Mexico be a key player in COP 26 and reassert itself as a leader in emissions reduction, carbon neutrality and the energy transition?

Alignment with OPEC+. Would Mexico be prepared to make production cuts if called upon again?

Affordable energy for public consumption. The prices of gasoline, diesel and LPG, and the extent of fuel taxes and subsidies, will impact the pace of economic recovery, jobs and energy demand, and the extent of fuel poverty in communities.

Progress of Dos Bocas refinery. The Government has staked its reputation on construction of a successful new refinery.

Consolidation of retail fuels outlets. The gasoline station market has seen the appearance of a handful of major brands, but their pace of expansion has slowed due to lengthy regulatory approvals.

Electric power blackouts and shortages. The power distribution network is unstable and creaking; with accusations, lawsuits and amparos flying, can a stable supply/demand solution be found for all producers and consumers?

Independence of the regulators. Can the regulators act to introduce greater global standards and best practices?

The outlook for oil production. Will Pemex be able to raise oil (and gas) production or will it slide again, and will nascent production from private companies increase significantly?

Discoveries from offshore frontier exploration wells. The potential of the deep-water is set to be revealed in a series of high impact wildcat wells, mostly drilled by foreign-owned operators.

Decisions on Zama field unitization. The decision to appoint either Talos or Pemex (or both) as the oilfield Operator and developer of this giant discovery will be a key signal for investor confidence.

Decision on Trion development. The ultra deep-water oilfield has been appraised and is now edging towards one of Mexico’s largest ever energy investment decisions on commercial development.

Progress in reducing flaring. Will there be meaningful reductions in gas flaring and methane venting at oil fields, gas processing facilities & pipeline networks, LNG plants, refineries, and petrochemicals complexes?

Resumption of upstream bid rounds. The Government has laid out a path to restarting bid rounds, but will there be any action?

The rise of clean power. Will geothermal, hydro, nuclear, onshore wind & solar be able to make big steps forward toward a low carbon future?

New entrants to Mexico’s changing energy mix. Options which hold potential and seek to move forward include hydrogen (both green and blue), energy storage and offshore wind.

Improved air quality. The electrification of transport in the large cities and introduction of cleaner burning fuels are key parts of improving air quality which translates into improved health with potential to save tens of thousands of lives each year.

Ability of the energy sector to manage their pandemic-related issues. The pandemic is many months from being over and the health of energy workers is a fundamental part of stable energy supplies.

Energy politics. With a variety of mid-term and local and federal elections, will the results play a role in altering Mexico’s energy policy both domestically and internationally?

Impact of President Biden’s low carbon energy revolution on Mexico’s energy security. Will Mexico continue to regard the USA both as its largest market for crude oil and largest supplier of natural gas and refined products

Funding of State-owned energy companies. Much depends on budget allocations being available and the speed of economic rebound, coupled with stable debt ratings; other State funding options could involve fiscal reforms to address their high tax and debt, or austerity.

Signals and signposts are always important indicators of what lies ahead. They herald changes in direction, strategy and uncertainties that await. In Mexico, there is plenty to look out for in 2021!


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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