ENERGY MATTERS© VOL. 49
an opinion editorial written exclusively for ANZMEX
3 June 2024
By Chris Sladen
Energy matters – What is in your in-tray?
In Mexico, the votes have been counted. The next President and her incoming Administration will face many challenges in its energy sector over the next few years. To assist you understand these, here is my A to Z quick reference guide to Mexico’s energy issues:
Air quality. Cities have major health issues; cleaner fuels, green power & better energy efficiency are crucial.
Bribery & corruption. A problem that does not go away, high profile cases continually tarnish the energy sector.
Climate change. CO2 emissions are not going down, weather events are more extreme; Net Zero is a long haul.
Dos Bocas (Olmeca) refinery. Vastly over-budget, it is yet to operate at full capacity, efficiently, and create value.
Electricity. Demand growth ~4% & blackouts show that more generation, storage & distribution are must haves.
Finance. State cos have >US$ 100bn debt, other burdens are fuel subsidies & lenders with serious ESG concerns.
Geothermal. Forming part of the Ring of Fire, only a tiny part of the potential for base-load heat & power is used.
Hydrogen. Clean power making H2 & NH3 offers low CO2 & security; clear policies, incentives & pricing are key.
Infrastructure. Expanding pipelines, cables & ports is vital to avoid gas, power, fuels & oil products shortages.
Just transition. With >40% poverty, delivering energy security & a transition affordable for all society is formidable.
Ku Maloob Zaap. The no.1 producing oilfield is in strong decline & has complex operational & EOR problems.
Lithium. Recently nationalised, the challenge is how to quickly create a thriving mining & processing industry.
Methane. Satellites have identified major gas venting & flaring raising urgent global calls for Mexico to act.
Natural gas. ~60%, 6bcf/d is from US, mostly shale; nearshoring, exports of LNG, & petrochemicals all need more.
Oil production. Over the last 12 years, daily volumes keep going down, with a State-centric policy & few options.
Politics. More use of the courts & amparos, and demise of independent regulators, adds yet more complexity.
Quesqui. The most important onshore oil find for Pemex in 30 years is HPHT and plagued by huge gas flaring.
Reserves replacement. With no O&G bid rounds, little exploring & shale off limits, Ixachi field in Veracruz is vital.
Solar. PV offers ultra-low cost clean power, but grid connection issues & policy is holding back investors.
Theft. Tapping of refined products from pipelines & smuggling are rising with daily multimillion US$ losses.
Unpaid invoices. State energy cos are destroying their supply chains of hi-tech know-how; US$ ~15bn is overdue.
Vehicles. EV & hybrid uptake is slow while congestion & pollution increase; China looks to seize the EV market.
Wind. Onshore investors face stalled permitting whilst offshore bid rounds could kick-start a new green industry.
X-Border. More gas to Mexico & less crude to USA shifts the trade balance, while oil export to Cuba adds tension.
Yet-to-find. YTF of undiscovered oil & gas is falling with poor E&P results in deepwater & many IOCs exiting.
Zama. Found in 2017 by an IOC but now Pemex operated, this giant high-value field is still years from 1st oil.
The in-tray is looking pretty full in Mexico. What the candidates and political parties said they would do if elected, no longer really matters. It is now about what the winning team are actually going to do when they take power. It will be a fascinating time as the new Government chooses its energy priorities and sets course. Maybe it will be as easy as A, B, C…?
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.
Send your feedback to:
chris.sladen@reconnoitre.ltd
