Pemex, Energy Offices to be Moved

(Natural Gas Intelligence, Ronald Buchanan, 13.Jul.2018) – Mexico President-Elect Andres Manuel Lopez Obrador aims to decentralize the government in a sweeping plan to ease the congestion of population, buildings, vehicles and pollution in the “megalopolis” of Mexico City, a strategy likely to impact the country’s energy sector from top to bottom.

The government agencies set to be relocated to the provinces include state-owned Petroleos Mexicanos (Pemex); state power utility Comision Federal de Electricidad (CFE); energy ministry the Secretaría de Energía (Sener), as well as the energy regulators, the Comision Nacional de Hidrocarburos (CNH) and the Comision Reguladora de Energia (CRE).

Under the plan, Pemex headquarters would be moved from its 51-story Mexico City tower to Ciudad del Carmen on the southeastern Gulf Coast, a base of support that supplies operations in the Sound of Campeche, where most oil and gas is produced.

Sener, CNH and CRE are slated to be moved to Villahermosa, capital of Tabasco, the state where Lopez Obrador was born.

The age of the internet should ease the transition. These days, almost all government business is conducted online.

Since the 2013-14 energy reform, sessions of the CNH and CRE have been broadcast live by Internet, and the rules of both regulators insist in keeping a distance from representatives of the companies involved in auctions.

In order to ensure transparency and avoid any hint of corruption, CNH and CRE commissioners have to provide reports to their superiors of meetings with representatives of companies, rather as diplomats of the Western and Soviet blocks did whenever they met each other at cocktail parties during the Cold War.

The Federal District of Mexico City and its surrounding conurbation currently houses a population of close to 20 million.

Public transportation is far from adequate and roads are often gridlocked. Working hours in Mexico are the longest in the Organization for Economic Co-operation and Development, aka OECD. Many people spend four hours a day — two each way — between their homes and their workplaces.

Speaking in a video produced by his Morena party, Lopez Obrador said that the decentralization plan should help improve the quality of life in the capital as well as providing more equal opportunities for the nation’s regions.

“There are islands of rapid growth in the country, but they are surrounded by areas that have been abandoned,” he said.

Yet another reason, he added, was the susceptibility of the capital to earthquakes. About 10,000 people died in the 1985 earthquake. Since then, stricter building regulations and the use of more sophisticated technology have improved safety standards. Even so, two severe tremors last September caused at least 465 deaths, and 180,000 homes were destroyed in the capital and in southern Mexico.

The plan to decentralize is to be executed steadily, in a process that is likely to take almost all of the six years of the upcoming administration and with a minimum of disruption, according to Monterrey-based businessman Alfonso Romo, who Lopez Obrador has named to be his chief of staff.

Under the plan, five key ministries would remain in Mexico City: Gobernacion, the Interior ministry; the Finance and Foreign ministries; the ministries of Defense (Army and Air Force), and the Navy.

López Obrador has said on several occasions that, as president, he will live and work in the National Palace in the historic center of Mexico City, where critics claim his presence will make even worse the gridlock that often besets the area.

For decades, Mexican presidents have worked and lived in the relatively leafy surroundings of Los Pinos, the Mexican equivalent of the White House.

The Pemex tower, in a nondescript but central barrio of Mexico City, is now one of several tall buildings that dot the Mexico City skyline. But when it was built in the early 1980s it was by far the nation’s largest building and a symbol of Mexico’s huge oil boom that ended in an equally spectacular financial crash and the nationalization of the Mexican banks.

The corporate offices of the CFE are in a much more elegant part of central Mexico City than where the Pemex tower is located. The Energy Ministry is currently housed in the south of the capital, near the Plaza de Toros, the largest bullring in the world.

***

CNH Says Mexico Must Reduce Oil Dependence

(Energy Analytics Institute, Ian Silverman, 13.Jul.2018) – Mexico must reduce its dependence on the United States in regards energy issues.

The country can achieve this goal by increasing its refining capacity, reported the daily newspaper La Jornada, citing National Hydrocarbons Commission (CNH by its Spanish acronym) President Juan Carlos Zepeda. The official added that the next administration has a good possibility to fulfill the objective of assisting Mexico gain greater energy autonomy.

Zepada agreed that construction of a new refinery to assist reduce gasoline imports – which currently represent 75% of demand in Mexico and come entirely from the U.S. – would assist Mexico in terms of gaining energy autonomy.

The official also said strategies should be sought to stop importing 85% of the natural gas used by Mexico, and which at the moment also comes in great part from the U.S.

***

FDI in LAC Region Falls for Third Straight Year

(Energy Analytics Institute, Ian Silverman, 12.Jul.2018) – Foreign Direct Investment (FDI) in Latin America and the Caribbean fell for a third straight year in 2017, reported the Economic Commission for Latin America and the Caribbean or CEPAL by its Spanish acronym.

The details were revealed in CEPAL’s annual report titled “FDI in Latin America and the Caribbean 2018.”

***

TDI Operating One Rig in Mexico

(Energy Analytics Institute, Jared Yamin, 12.Jul.2018) – Trinidad Drilling Ltd. announced its international joint venture (TDI) currently has two rigs operating, one in Bahrain and one in Mexico.

Trinidad Drilling Ltd. – which provides contract drilling and related services in Mexico – revealed the details in an official statement, but provide details about the Mexican rig.

***

Mexico’s Gov’t to Focus on Boosting Fuel Output

(Reuters, 12.Jul.2018) – Mexico’s next energy agenda will prioritize increasing gasoline and diesel production and later decide on possible changes to the industry reform championed by the outgoing government, according to a top aide to President-elect Andres Manuel Lopez Obrador.

Rocio Nahle, tapped by Lopez Obrador to be energy minister, told local outlet Aristegui Noticias on Wednesday that the country’s next government will address the “energy imbalance” in which Mexico produces less fuel at home and turns to imports to meet national demand.

Lopez Obrador won a landslide victory in the July 1 election and will take office in December.

“We will be assessing if any legislative changes (to the oil opening) are necessary,” said Nahle, adding that the transition team would not immediately propose changes to the existing laws.

The comments by Nahle, who also won a Senate seat in the election, are in line with Lopez Obrador’s pledge last weekend to end Mexico’s massive fuel imports over the first three years of his term.

So far this year, Mexico has imported an average of about 590,000 barrels per day (bpd) of gasoline and another 232,000 bpd of diesel, almost all of it from the United States, as gasoline output at the country’s six refineries owned and operated by state-run Pemex has halved since 2013, the first year of outgoing President Enrique Pena Nieto’s term.

Domestic gasoline output barely meets a quarter of national demand from the country’s legions of motorists.

During the election campaign, Lopez Obrador was sharply critical of the Pena Nieto’s policy to allow foreign and private oil companies to operate fields on their own for the first time in decades, ending Pemex’s monopoly.

The overhaul was designed to reverse a decade-long oil output slide and has already resulted in competitive auctions that have awarded more than 100 exploration and production contracts, deals Lopez Obrador has repeatedly promised to review for signs of corruption.

Nahle said the next government will also begin construction of at least one new oil refinery, which she expects to be operating by the halfway point of Lopez Obrador’s six-year term.

So far this year, Pemex’s existing refineries are producing an average of 220,000 bpd of gasoline and about 125,000 bpd of diesel, according to company data.

***

AMLO Seeks to End Mexico’s Energy Dependence

(TeleSur, 11.Jul.2018) – Mexico’s national energy demand has become highly dependent on the United States.

Mexico’s next energy minister under president-elect Andres Manuel Lopez Obrador has said that the new administration’s energy agenda will be to increase domestic gas and diesel production and reduce dependency on foreign imports.

Rocio Nahle, appointed by AMLO for the energy ministry, said in an interview with a local paper that AMLO’s government will address the “energy imbalance” that makes it dependent on foreign imports to meet national demand.

AMLO has previously made pledges along this line during and after the election, saying that ending the massive fuel imports would be a priority for his first three years.

Mexico has imported an average of 590,000 barrels per day of gasoline and 232,000 per day of diesel, almost all of which comes from the United States. While the United States profits on gas sales to its neighbor, Mexico’s domestic production has decreased by half since the first year of outgoing President Enrique Peña Nieto’s term.

Today, gasoline output by Mexican state oil company Pemex meets less than a quarter of national demand, putting Mexico’s energy system in a situation of deep dependence on the United States.

During the election campaign, Lopez Obrador was sharply critical of the Pena Nieto’s policy to allow foreign and private oil companies to operate fields on their own for the first time in decades, ending Pemex’s monopoly.

Nahle said the next government will also begin construction of at least one new oil refinery, which she expects to be operating by the halfway point of Lopez Obrador’s six-year term.

AMLO also outlined several legislative priorities on Wednesday, particularly ending presidential legal immunity, and slashing the presidential salary.

The incoming administration would also put forward a law to remove obstacles to holding public consultations, as well as create a mechanism for recalling the president, he said.

Lopez Obrador said during the campaign he could hold public consultations on issues ranging from the government’s opening of the energy sector, the construction of Mexico City’s new airport, gay marriage and even his performance as president.

***

Mexican Refineries a Must for “Energy Security”

(Energy Analytics Institute, Jared Yamin, 10.Jul.2018) – Given Mexico’s dependence on imported fuel, construction of two new refineries in the country “isn’t a business issue, it’s for energy security,” said researcher and hydrocarbons analyst Fluvio Ruiz Alarcón.

Just as recently as May 2018, Mexico imported 520,000 barrels per day of gasoline, which represented 65% national consumption during that month, reported the daily newspaper El Financiero, citing the analyst who referred to figures from state oil company Pemex.

In terms of whether it was better to reconfigure Mexico’s six existing refining complexes instead of building new ones, Ruiz Alarcón explained: “reconfiguration is basically building a refinery; just look at how long it took the projects that we’ve already done. They took years, ” added the adviser to the team of Mexico’s President Elect Andrés Manuel López Obrador (AMLO).

Ruiz said the first parts of the new president’s National Project consist of recovering the Bicentenario Refinery, a failed project of the Presidency of Felipe Calderón’s that was planned for construction in Tula, Hidalgo. The estimated construction cost of the refinery could range between $10 to $12 billion, depending on the type and size of the of refinery, he said.

***

Pemex Alerts Against Criminal Group

(Pemex, 10.Jul.2018) – The State-Owned Productive Company filed a criminal report before the Office of the Attorney General to initiate the investigation of this suspected criminal activity.

On June 29th, Petróleos Mexicanos filed a criminal claim before the Office of the Attorney General (initials in Spanish: PGR), upon detecting that a group of individuals is seeking to defraud the public by pretending to be part of the company’s senior management and claiming that they are authorized to sell all kinds of hydrocarbon products at preferential prices.

The operation of this group has the following traits:

1) Someone gets in touch with the victim (fuel marketers), whom they promise to sell hydrocarbons to, at a lower-than-market price.

2) If the person being contacted shows any interest, the caller lies and claims to introduce them to high-ranking Pemex officials for a negotiation and, if possible, sign a contract.

3) They arrange a meeting outside Pemex’s offices with false “officials” who supposedly belong to the company. During these meetings, the victim is shown counterfeit documentation, and they even sign false contracts to mislead them further.

4) They offer the delivery of tanker trucks with fuel or some other product and indicate that the payment is to be made to a bank account supposedly belonging to an “authorized third party” appointed by Pemex.

5) Of course, within a few days of receiving the corresponding payment, the victim loses all contact with those individuals, and therefore the fraud is complete.

The general public is called upon not to let yourselves be misled or participating in this kind of schemes, which only defraud persons and companies.

Petróleos Mexicanos informs that the only available process for the purchase of petroleum-based products directly from the company is through the commercial areas of Pemex Transformación Industrial (Pemex Industrial Transformation, Pemex TRI). The process involves prior undersigning of a marketing contract, which must be filled in and completed online using the Pemex TRI portal.

Our commercial advisors or account executives do not charge any amount to formalize these contracts or for any other procedure or operation.​

Pemex reaffirms its commitment to a lawful operation and asks the public to report any irregularities in the contract formalization process or other services provided by the company by calling the toll-free number: 01 800-Pemex00 or by sending an email to: contacto.combustibles@pemex.com

***

BP Opens 6 Petrol Stations in Campeche

(Energy Analytics Institute, Jared Yamin, 10.Jul.2018) – British Petroleum extended its operations in the country this week.

Today, we have arrived to Campeche, a state with an increase in tourist activity, reported the daily, citing BP Fuels Mexico General Director Alvaro Granada.

The British company initiated activities in Campeche with inauguration of an initial six of 10 planned petrol stations for this year in the state, reported the daily newspaper La Jornada.

In less than a year and a half, BP has emerged as the foreign company with the largest presence in Mexico. The company already covers an estimated 50% of the national territory, and operates nearly 300 petrol stations where it receives more than 500,000 customers daily.

“BP has come to offer a network of service stations that exceed the expectations of consumers in Campeche,” added Granada.

The inauguration of these first six petrol stations in Campeche and plans to open four more this year in the state form part of the company’s business plan to reach a network of 1,500 petrol stations by 2021.

***

Pemex Alerts on Fraud Via Identity Theft

(Energy Analytics Institute, Jared Yamin, 10.Jul.2018) – Pemex filed a complaint with the Attorney General’s Office demanding the entity investigate the alleged crimes.

In its complaint, Mexico’s state oil company Petróleos Mexicanos warned that a criminal group had been seizing the identities of officials in order to carry out the fraud.

“In early June it was detected that a group of individuals sought to defraud the public by pretending to be executives of the company, saying they were authorized to sell all types of hydrocarbons at preferential prices,” Pemex said in a statement.

***

Renaissance Approved to Develop Chiapas Blocks

(Renaissance Oil Corp. 9.Jul.2018) – Renaissance Oil Corp. received final authorizations from the relevant Mexican authorities to proceed with the development program on the company’s three 100% held producing properties in the state of Chiapas.

This development program, designed to significantly enhance production along with the exploration of new formations, comprises:

  1. Major work-overs on three existing wells, one at Malva and two at Topén;
  2. Drilling up to four Cretaceous wells, two at Malva, one Mundo Nuevo and one at Topén; and
  3. Extensive coring in new zones of interest across the Chiapas Blocks.

Major work-overs are scheduled to commence in August 2018, announced Renaissance in an official statement. The wells are tied into the existing pipeline infrastructure, allowing for immediate increases in production from the average of 1,643 boe/d for the month of May 2018.

The first of the four new wells is scheduled to spud in Q4, 2018. All three of the Chiapas Blocks have infrastructure in place with significant excess capacity to Pemex facilities, allowing for cost effective tie-ins and short cycle time to first production.

***

Renaissance Says Pitepec Block Details Attractive

(Renaissance Oil Corp. 9.Jul.2018) – Renaissance Oil Corp. recently signed a Right of First Refusal (ROFR), for the Pitepec block, adjacent to the north of the Amatitlán block in the Tampico Misantla Basin.

“As a result of our comprehensive analysis, the Pitepec block displays all of the attributes of a premier unconventional tight oil play,” said Renaissance Chief Geochemist Dan Jarvie in a company statement.

The Pitepec property, spanning over 248 km2 (61,300 acres), is currently producing 1,487 barrels per day (b/d) of light oil from the shallow Chicontepec formation and, importantly, much like the Amatitlán block, is in the main Upper Jurassic shale fairway, announced Renaissance in an official statement. While the more shallow Chicontepec formation has been the predominant producing zone for the Pitepec block to date, Renaissance’s log and core analysis from previous wells testing the unconventional Upper Jurassic shale formations indicate these deeper source rocks are high potential reservoirs for commercial development. The ROFR expires on May 31, 2019.

“The Upper Jurassic shales are organically rich with thermal maturity measurements indicative of greater than 40-degree API light oil. The high carbonate content (averaging over 50%) is indicative of a brittle rock fabric that readily fractures and releases retained oil,” said Jarvie.

***

Pemex Divests Participation in PMV

(Pemex, 6.Jul.2018) – Petróleos Mexicanos divested its participation in Petroquímica Mexicana de Vinilo through an agreement with Mexichem.

As part of Pemex’s strategy of maximizing value by focusing its resources on strategic assets, the company announced divestment of its participation in Petroquímica Mexicana de Vinilo S.A. de C.V. (PMV, Mexican Vinyl Petrochemicals), which represents 44.09% of the representative shares of this company’s capital stock.

In September 2013, Pemex and Mexichem became partners to integrate the salt-chlorine-soda ash-ethylene-vinyl monochloride value chain through the corporation PMV, in which Pemex maintained a strong participation through its affiliated company PPQ Cadena Productiva SL.

The interruption of the salt-chlorine-soda ash-ethylene-vinyl monochloride production chain results from the decision made by the PMV Board of Directors to not rebuild the Chlorates III plant within the Pajaritos Petrochemical Complex in the State of Veracruz following the accident that occurred on April 20, 2016. This turns the salt-chlorine-soda ash production chain into PMV’s main activity, which in turn motivates Mexichem into regaining full control of the salt-chlorine-soda ash production process.

The operation adds up to an approximate amount of 3 billion 436 million pesos, which includes the purchase of the share participation held in PMV by PPQ Cadena Productiva SL and the reinstatement of the assets of the Pajaritos Petrochemical Complex to Petróleos Mexicanos, which is a value that ranks within appraisals of similar companies and transactions of this kind in the petrochemical sector.

On the other hand, it is to be noted that the above amount will be adjusted as of the closing date, at which time the rights and obligations of each partner will be recognized. This is also common practice in transactions of this kind.

This transaction has already been signed off by the corresponding corporate areas of both Pemex and Mexichem and it already includes the reinstatement of the assets of the Pajaritos Petrochemical Complex, which were originally signed over to the partnership, to Petróleos Mexicanos.

***

Sapura E&P Signs PSC in Mexico

(Energy Analytics Institute, Ian Silverman, 29.Jun.2018) – Three months after being awarded Mexico’s Block 30, Sapura and its partners sign a PSC.

“We are proud to be the only Malaysian-owned company to be awarded during this bidding round, together with our partners. This is a significant milestone for Sapura Energy Group in reinforcing our position in the industry, establishing our presence in Mexico and growing our E&P portfolio,” said Sapura Energy President and Group Chief Executive Officer Tan Sri Dato’ Seri Shahril Shamsuddin in an official company statement.

Sapura Exploration and Production, a wholly-owned subsidiary of Sapura Energy Berhad and its joint venture consortium partners, DEA Deutsche Erdoel Mexico and Premier Oil, signed a Production Sharing Contract (PSC) for Block 30 with Comision Nacional De Hidrocarburos of Mexico (CNH by its Spanish acronym) on June 27, 2018.

The signing ceremony took place in Mexico City where Sapura Energy was represented by Tan Sri Dato’ Seri Shahril. Also present was His Excellency Pedro Joaquín Coldwell, Secretary of Energy, Mexico and Juan Carlos Zepeda Molina, Commissioner President of the CNH.

Block 30, within the Sureste Basin, is a proven and prolific hydrocarbon province in the Gulf of Mexico. It is located in shallow waters of about 70 meters deep, directly to the south west of Premier’s Zama discovery and to the north of the Amoca oil field. The consortium had outbid six other bidders for this most contested block during the recently concluded shallow water bid round.

The shallow water operating conditions within Block 30 are similar to Malaysia. Sapura Energy has operated in Mexico since late 2012 and has worked closely with state oil company PEMEX on a number of offshore projects, which brings familiarity to local commercial conditions in Mexico.

Sapura E&P entered into the bidding agreement with DEA and Premier based on an equity split of DEA 40%, Sapura Energy 30% and Premier 30%.

***

Linking Permian, Eagle Ford to Monterrey

(Natural Gas Intelligence, Carolyn Davis, 27.Jun.2018) – The mantra for a San Antonio, TX-based midstream operator, whose portfolio is increasingly weighted to southern destinations, could well be what’s good for Texas is good for Mexico.

Howard Midstream Energy Partners LLC, aka Howard Energy Partners (HEP), is making inroads in the Lone Star State and across the border as it builds out its multiple systems to carry natural gas and liquids to serve a growing customer base in northern Mexico, i.e. the Monterrey Energy Corridor.

Monterrey, the largest city and capital of the state of Nuevo León, has become an industrialized mecca for projects, something not lost on HEP executives, said President Brandon Seale. He discussed the myriad opportunities with an industry audience at the 4th Mexico Gas Summit held earlier this month in San Antonio.

HEP’s processing and pipeline assets extend from the Permian Basin to South Texas, and east of Houston in Port Arthur, all strategically sited to serve the “end goal,” said Seale, northern Mexico’s “growing appetite for hydrocarbons.”

Because of where HEP’s assets are in South Texas, the operator was “always going to be at the tail-end of the value chain,” he said. “We were trying to push product back to Houston or to other markets, but we wanted to be at the front-end of the value chain. So we stepped into Mexico with a very simple strategy,” to diversify and bring aboard strategic partners.

HEP about seven years ago bought the Maverick Dimmit and Zavala Gathering System, about 344 miles of pipeline in the South Texas counties of Maverick, Dimmit, Zavala and Frio.

Designed for rich and lean gas service, the system gathers for production from the Eagle Ford and Pearsall formations, and interconnects with several big pipelines that move gas in all directions, including south.

“From Day 1, we were selling gas to Mexico,” Seale said. “Mexico was always on our radar. And the funny thing is, if you don’t live and work close to the border, sometimes you look at infrastructure maps and you forget Mexico is there…It just looks like a big white space on the map. But of course, the resources don’t stop at the border and infrastructure doesn’t really stop either…The magnitude of the opportunity was always present in our minds.”

For example, Texas has an estimated 300,000 wellheads. In Mexico, there’s about 8,000. Texas has nearly 250,000 miles of gathering transportation pipelines. In Mexico, there’s around 75,000 miles.

“There’s a huge, huge opportunity there,” Seale said. “The resource is there…with some of the biggest wells ever drilled in the history of the world…Staggering, staggering numbers.”

Around the time the Maverick purchase was made, Mexico was becoming a net hydrocarbon importing country.

“The situation was quite acute on the natural gas side,” Seales noted. The country was suffering from critical power alerts and brownouts, and state-owned Petroleos Mexicanos at times would cut off service to customers with no notice. It was “exceedingly distractive,” he said.

Mexico had to turn to the Pacific markets to buy liquefied natural gas at “exorbitant” prices, when West Texas operators “would have given their left arm to sell gas at $2.50/Mcf. It didn’t make sense…”

HEP got acquisitive again, and a year after the Maverick purchase, it acquired the Eagle Ford Escondido and Cuervo Creek gathering systems to the south in Webb County, primarily 12- 16-inch diameter high-pressure gas pipelines that gave it another 83 miles of pipeline, a 102-mile lean gas gathering system, two leased amine treating plants and multiple intrastate pipeline outlets.

A 30-inch diameter pipeline was installed in 2013 to provide a direct connect to a Kinder Morgan Inc. system, which moves gas from Katy, near Houston, southwest to Laredo.

Three years ago HEP installed a direct connection with the NET Midstream system, whose affiliate NET Mexico Pipeline Partners LLC‘s 120-mile, 42- and 48-inch diameter Texas pipeline moves gas from the Agua Dulce hub in South Texas to Mexico.

“Our markets were all getting to Mexico,” but they were getting there indirectly, Seales said. “At this point too, our system was basically full…packed to the gills. So we had to find new markets.” Those opportunities led to the the genesis of Nueva Era Pipeline LLC, a cross-border system that ramped up in May.

Nueva Era, a 30-inch diameter system that is designed to carry at least 600 MMcf/d and up to 1 Bcf/d, is a joint venture between HEP and Mexico’s Grupo Clisa to supply Monterrey.

Suppressed Demand

“There was a huge market” for natural gas in the Monterrey area that “was basically tapped out” around 2013, with no new sources of supply on the horizon. HEP executives also had a theory about suppressed demand for natural gas in the region.

“Basically, if you just looked at the charts, it looked like Mexico’s gas demand was flat,” Seale said. “But if you considered the external factors…the fact that historically, there were all these subsidies” for fuel oil and liquefied petroleum gas and other alternative fuels. “And if you consider that pricing on natural gas had never really been that transparent in Mexico, there were a lot of disincentives for people to use natural gas as a feedstock.

“As the experience in the U.S. in the last 30 years has taught us, if you deregulate the product, if you make it plentiful and if you make it transparent in price and you make it liquid, people will find a lot of ways to use it.”

The United States uses 80-90 Bcf/d of gas, while Mexico uses 8-9 Bcf/d, he said. “Somewhere in there is opportunity.”

Mexico’s state power company, Comision Federal de Electricidad, is the anchor shipper on Nueva Era with 504 MMcf/d of capacity. Another 496 Bcf/d is still available.

“The pipeline is mechanically complete,” Seales said. In mid-June the partnership was “awaiting final regulatory approvals,” to go into full service by the end of the month.

While trucks and rail are adequate to transport oil and liquids, a “pipeline is really the end goal” to transport all energy products, Seale said. With its cross-border system, North America’s energy markets are becoming “truly integrated…

By connecting Monterrey via a pipeline in South Texas, there’s energy integration across “the entire North American network,” allowing a trader to “swap a barrel from New Jersey to Monterrey…That’s pretty remarkable…And we feel like we’re in a unique position because of our experience with cross-border transactions” from working with U.S., Texas and Mexico’s diverse regulatory regimes.”

For HEP, the Texas coastal community of Corpus Christi, which is near Agua Dulce, is an important piece of the puzzle. The port city, already a manufacturing hub for the Gulf of Mexico energy industry, is quickly becoming the go-to destination for oil and petrochemical exports.

In addition, Cheniere Energy Inc. is building a liquefied natural gas export project in Corpus, and newbuild petrochemical facilities, including one led by ExxonMobil Corp., are on the drawing board.

And that’s not including the pipelines destined for the region from the Permian Basin and Eagle Ford Shale.

“The importance of Corpus is obvious in the market,” Seale said. “The number of pipeline projects to link West Texas to Corpus Christi are almost too big to count…” and “almost every midstream in the space is looking at their own project” to potentially add on capacity.

“What that signals is that the same thing that’s happening in natural gas that makes Agua Dulce…the natural gas hub, the natural liquid point, is happening now with crude and other refined products,” Seale said.

“If we do our job right, Corpus Christi should become the northernmost delivery point into northern Mexico,” he said. A plethora of investments are earmarked to support energy product transport south of the border.

Mexico is no longer the “blank spot on the map…the infrastructure map is now fully connected and day by day becomes only more integrated across the border.

Consider the Nueva Era system, he said. “With our Nueva Era pipeline, we can connect to Waha with these other pipelines coming down…In a few months in theory, a Waha-Monterrey route, which HEP is calling the “WahaRey” route “is going to be a viable option for any gas shipper in West Texas.

By the same token, the Agua Dulce-to-Monterrey route, aka “AguaRey” is already available. Already there’s 500 MMcf/d going into Monterrey,” with pipeline capacity “almost tapped out,” Seale said, as the region grows and commerce builds.

“Imagine what a 20-inch diameter presidential permit pipeline across the border could do for liquids products?” he asked the audience. “It would be something very, very similar.”

HEP is creating a path, he said, “connecting the most efficient and largest points of product in South Texas with Monterrey, the most industrialized market in Latin America, the gateway to all of Latin America…

“What’s good for Texas is good for Mexico, and what’s good for Mexico is good for Texas,” Seale said, borrowing a line from an HEP executive. “I really think that the integration of these energy markets is one of the finest results of that.”

***

Geothermal a Superpower in Mexico’s Potential

(Mexico News Daily, 26.Jun.2018) – The capacity to generate geothermal energy is a veritable superpower within Mexico’s enormous energy potential but a significant barrier stands in the way of reaping its rewards: exploiting it is very expensive.

However, a New Zealand company that specializes in developing technologies to overcome earth, environmental and energy challenges is helping Mexico achieve that potential.

Since its creation in 2004, Seequent has developed a close relationship with Mexico and in April this year the company hosted the country’s ambassador to New Zealand at its Christchurch headquarters.

“Mexico is embracing the importance of developing geothermal, not just as an energy replacement source, but to future-proof base load energy needs for the future,” company CEO Shaun Maloney said in a statement issued after José Gerardo Traslosheros’ visit.

“Mexico is one of our fastest growing markets and represents a great opportunity as the world’s 13th largest economy. We’re continuing to invest in people and skills in the region,” the statement said.

Maloney subsequently told the newspaper El Financiero that Mexico has a source of energy under the ground that is “constantly flowing.”

However, he added that “to drill a hole for thermal energy, it costs around US $10 million and if you dig in the wrong place, you lose it all.”

Those high costs have held Mexico back from further exploiting its thermal capacity despite the introduction of the 2014 energy reform which enabled foreign and private companies to enter the Mexican market.

***

Mexico Considering Mechanism for Geothermal

(ThinkGeoEnergy, 26.Jun.2018) – Indicated in a recent webinar as part of the upcoming GEOLAC geothermal conference, a new price mechanism specifically tailored towards geothermal is being considered for Mexico.

As reported by ReNews, Mexico is considering a dedicated price support mechanism for geothermal energy outside its technology-neutral auctions dominated by wind and solar, as early as next year.

Under current tender schemes, geothermal essentially could not compete on the low pricing of intermittent sources such as wind and solar, a fact widely complained about by the industry. The auction system so far has not provided any value to geothermal energy and its baseload capacity offered to the market.

Mexican energy ministry SENER’s European representative Nelson Mojarro said “We understand it is more challenging for certain technologies and we are considering whether there needs to be another auction for other technologies specifically to boost geothermal,” he added.

The fourth Mexican renewables auction process for around 2,000 MW in capacity is currently being held with sealed bides and results expected to be announced in November this year. The next auction could then take place in 2019.

***

Mexico’s Presidential Elections and U.S. Energy Cos

(MarketPlace.org, Lorne Matalon, 22.Jun.2018) – Antonio Godinez Vera makes his living turning golden kernels of Mexican corn into a mash that becomes tortillas. People like Godinez, a small business owner with four employees, are part of a wave that could power Andrés Manuel López Obrador to the Mexican presidency when voters elect a new head of state on July 1.

The campaign is being closely watched by U.S. energy companies that have operated in Mexico since the country’s 2014 energy reform. That reform was an opening that allowed foreign energy companies to bid on offshore blocks in the Gulf of Mexico, onshore oil and gas development, wind and solar production and distribution and electricity generation contracts.

At a rally in suburban Mexico City, presidential front-runner López Obrador told the standing-room only crowd of 10,000 plus people that changes in Mexican energy policy haven’t produced lower prices for gasoline and electricity. López Obrador has called for a return to more state regulation of the energy industry, a prospect that could jeopardize billions of dollars in current and projected foreign investment in the sector.

“The country hasn’t gained a thing,” Godinez said as he described what he sees as the current failings of Mexico’s energy reform. Though reformers promised to narrow the gap between energy costs in the U.S. and Mexico, energy data suggest Godinez pays approximately 20 percent more for his electricity than a business does in the United States. The energy reform’s proponents are confident the benefits will be realized eventually.

In addition to studies showing voter dissatisfaction with the energy reform, high levels of violence and accusations of corruption against the current government mean Godinez will be backing López Obrador “to escape our misery.”

López Obrador has leveraged frustration over the cost of energy to highlight other campaign issues. López Obrador has stated that all that has grown since the current government assumed power in 2012 is inequality, insecurity and violence.

Violence isn’t just a campaign issue in the Mexican presidential race, it has also plagued the presidential campaign itself. A recent headline read, “11 Politicians Killed In Eight Days.” More than 100 candidates have been murdered since September 2017.

While the violence continues, voters are focused on local issues. In the southern Mexican state of Veracruz, López Obrador’s call to end privatization in the energy sector has hit a nerve. Veracruz is where much of the energy in Mexico is either produced or refined.

Ignacio Quesada is on the board of International Frontier Resources, one of the first foreign energy companies to be awarded a drilling contract after Mexico opened the doors to its energy sector four years ago.

“If they start reviewing everything, we are going to slow down, put more regulation, put more roadblocks. Things will get done but at a much slower pace,” Quesada explained. That’s the wrong direction in terms of simplifying the process.”

Much of the drilling expertise that Mexico said it needed to attract when it introduced its energy reform was perfected in the oil and gas-rich Permian Basin of Texas. Kirk Edwards, CEO of Latigo Petroleum in Odessa, Texas said some American energy companies considering Mexico are now sitting out the current election cycle before they commit millions of dollars on projects that typically take years to realize a return on investment.

“Nobody’s going start doing something like that today without the certainty of what may happen in the future,” Edwards said.

Another element is the role played by President Donald Trump.

“President Trump is a central character in the Mexican election,” explained Tony Payan, who directs the Mexico Center at Rice University in Houston. He said Trump’s anti-Mexico rhetoric has lifted López Obrador ardently nationalist campaign. Payan suggested that U.S. energy companies need be ready if López Obrador wins. “The rules of the game are definitely going to change,” he said.

The Mexican government has said foreign energy companies would ultimately contribute $200 billion to the country’s economy. However López Obrador says so far it is only those businesses, and not the people, who are seeing the benefits of that investment.
***

Uncertainty Looms Large Over LatAm Oil

(Oilprice.com, Tsvetana Paraskova, 20.Jun.2018) – While oil industry analysts and market participants are watching Venezuela closely for clues about how low its oil production will go, several other countries in Latin America are holding key elections this year, elections that will no doubt shape the countries’ short and medium-term oil policies. These developments could spell trouble for oil supply and oil investment in South America’s biggest crude-producing nations.

A populist leftist candidate pledging to undo energy reforms is widely expected to win Mexico’s presidential election in two weeks. There has been recent turmoil in Brazil’s fuel sector policies ahead of a wide-open presidential race for the October elections. A newly elected president in Colombia is vowing to amend a historic peace deal with the FARC rebels.

All these events add uncertainties to how politics will influence Latin American countries’ oil policies and investment climate for foreign oil companies, Paul Ruiz and Jena Merl write for The Fuse.

In Colombia, a conservative political newcomer, Iván Duque, won the presidential election this past weekend in the traditionally conservative country. The new president, however, has pledged to revise the 2016 deal with the Revolutionary Armed Forces of Colombia (FARC) rebels that put an end to 50 years of armed conflict. Duque wants to re-write the deal that guaranteed the rebels seats in Congress and allowed them to run in elections.

The new president, like the outgoing president Juan Manuel Santos, will have to face another rebel group, the National Liberation Army (ELN)—a Marxist guerrilla group that sabotages oil industry facilities to protest against foreign companies operating in Colombia. In January this year, Colombia suspended talks with ELN after bombings killed police officers. ELN has repeatedly attacked the second-largest oil pipeline in Colombia, Cano Limon-Covenas, causing oil spills and shutdowns.

Mexico is holding a presidential election on July 1, and a few weeks ahead of the vote, all polls point to populist leftist candidate Andrés Manuel López Obrador having a comfortable lead over other candidates. López Obrador pledges to roll back the landmark 2013 energy reform of outgoing president Enrique Peña Nieto, who opened Mexico’s oil sector to private investment for the first time in seven decades. The jury is still out as to whether López Obrador will backtrack entirely on the oil reforms, but uncertainties remain regarding the investment environment in the country—at least for this year.

Brazil is holding elections in October and the race is still wide open.

But in recent weeks, the country came to an economic standstill due to widespread truckers’ strikes over high fuel prices. President Michel Temer announced subsidies on diesel at the end of May, freezing prices for 60 days.

The recent turmoil in the country’s oil industry and renewed anxiety over political meddling in the energy sector add an uncertainty ahead of the election later this year. Pedro Parente, chief executive at state-run oil company Petrobras, resigned on June 1, after the strikes forced the government to cut diesel prices and after oil workers demanded that Brazil end the one-year-old policy to allow fuel prices be dictated by the market and international crude oil benchmarks.

Yet, some of the world’s biggest oil companies—including Exxon, Chevron, Shell, BP, and Equinor—bid aggressively in Brazil’s latest offshore bid round on June 7, snapping up acreage in three blocks in the coveted pre-salt layer.

Nevertheless, uncertainty over how Brazil will handle oil sector policies until and immediately after the October elections has increased.

Brazil is still expected to be one of the largest contributors to non-OPEC oil supply growth in the coming years. According to the International Energy Agency’s (IEA) Oil 2018 outlook from March, oil production growth from the United States, Brazil, Canada, and Norway “can keep the world well supplied, more than meeting global oil demand growth through 2020.”

According to OPEC’s latest Monthly Oil Market Report, non-OPEC oil supply in the second half of this year is expected to increase by 2.0 million bpd year on year, with the United States leading the pack, contributing 1.4 million bpd to growth, followed by Canada and Brazil.

While uncertainties mount in the political shifts and oil policy choices in other Latin American countries, there’s only one uncertainty left for Venezuela—how fast production from the collapsing oil industry will sink to as low as 1 million bpd. Some analysts reckon the plunge to 1 million bpd is imminent.
***

Why Mexico’s Energy Reform Needs AMLO

(The Council on Foreign Relations, Amy Myers Jaffe, 20.Jun.2018) – Mexico’s energy reform has taken important first steps but to come to full fruition, several additional critical reforms remain to be designed and implemented, including another constitutional reform. The task of adopting and implementing new reforms is all the more difficult because not only did the government of Enrique Peña Nieto oversell the short-run benefits of the package of reforms, including energy, adopted at the beginning of his term but also his administration is linked with other, broader political failures, including corruption scandals and the mishandling of the economy. Peña Nieto’s missteps have wrested credibility from the political system and make it unlikely that a mainstream candidate could put together a governing coalition with sufficient political support to adopt the next stage in Mexico’s energy reform. That’s why a political outsider would be more uniquely positioned to further energy reform, should that be a credible political choice. Once Andrés Manuel López Obrador (AMLO) wins the election, he could have the credibility to put together a coalition with the support of the Mexican people that could justify the next stage in Mexico’s energy reform. Whether he will do so remains an open question, but the next stage of the energy reform is unlikely to happen without him.

Stage III of the Mexican Energy Reform

The first stage of the energy reform in Mexico was President Calderon’s 2008 reform that was designed to strengthen Pemex without breaking Pemex’s monopoly position. After a fractious national debate, the reform was adopted because it was promised it would make Pemex an effective national oil company. The failure of that reform led to stage two in Mexico’s energy reform, which was the constitutional reform instituted under President Peña Nieto. This constitutional reform was intended to make Mexico’s energy sector more efficient and able to meet the power, gas and oil needs of a growing economy, with a small nod to generating more clean energy. By design, it allowed Pemex to lead the process by permitting the national oil company (NOC) to select the best properties for its own exploitation in Round Zero before opening the bidding process to companies other than Pemex.

The first auctions for oil and gas blocks did not go well, partly due to falling oil prices and partly because terms reflected Mexico’s relative inexperience with auctions. However, more recent auctions have gone extremely well. Foreign capital has committed to investment over the life of their contracts of almost $150 billion, and some new fields have already been discovered. Winning bids including seventy-three companies from twenty countries attest to the interest in Mexico’s energy future. There’s been less success in developing the infrastructure to get new energy and more imported energy to end users and the government has not solved the theft from Pemex oil pipelines or Pemex’s CAPEX and its pension liabilities.

Given Pemex’s dominant position, the company needs to develop a better business model. To generate capital, it needs to take the steps taken in Brazil, Colombia, authorized in Peru, and maintained in Argentina after the renationalization of YPF: privatize some stock in the NOC. The sale of the stock would require a constitutional amendment, but would not put Pemex in the hands of private equity holders and its stock price would provide a basis for evaluating how well Pemex was reforming. The government and Pemex have already modified the weight of the Petroleum Workers’ Union on Pemex’s governing structure and balance sheet, but the pension obligations that were made with Pemex need to be restructured and funded through other mechanisms.

Building a New Political Coalition for Energy Reform

While these necessary reforms have a technocratic nature, they cannot be adopted by technocrats or political leaders by simple decree. The first two stages of Mexico’s energy reforms rested on the backs of strong political coalitions behind them. The next stage will also require a political coalition. Unfortunately, the political system that generated the first two reforms has been discredited in the eyes of the Mexican people by actions both within and outside the energy sector. The clearest sign of disappointment with the process is AMLO’s widely expected victory in a few weeks. AMLO represents a new political coalition. López Obrador will need to convince that new coalition that when his government continues to attract private capital into Mexico’s energy sector, the benefits of a strong and efficient energy sector will benefit the Mexican people and not go into the hands of corrupt officials or the economic elite. His restructuring of Pemex needs to emphasize that the company is a means to promote the country’s interests in a rejuvenated energy sector, not to benefit oil workers and the PRI party at the expense of Mexican society.

So What Will AMLO Do?

The three pillars of the Mexican economy over the past decades have been manufactured exports under NAFTA, remittances from Mexican migrants to the United States, and oil exports. AMLO has an ambitious agenda for generating public goods as well as rewarding the groups who supported his victory. The income earned from manufactured exports under NAFTA will likely stagnate, if not actually decrease, even if NAFTA is successively renegotiated, and could decrease more substantially if NAFTA is terminated. Remittances have probably peaked because Mexico’s demographics and growing economy result in fewer Mexicans going to the United States for work; U.S. policy will likely enhance that decline. Oil exports have fallen as reserves and production have been falling, and it will take up to ten years for significant new reserves to be discovered and produced. Those efforts will require companies following through on their promised investments as well as new investment. AMLO will need an energy sector that generates revenue during his six-year term and credibly paves the way for greater future benefits that will be distributed to the Mexican people. Such nationalist messages could strengthen his political coalition as he implements his reforms of what has become an illegitimate political system.
AMLO’s political discourse radicalized when López Obrador and half the Mexico electorate believed that he had been deprived of previous presidential election victories in the extremely close and controversial election in 2006 and a close second in 2012. But when López Obrador was mayor of Mexico City from 2000-2005 he was pragmatic, worked with the private sector, and was perceived as an effective leader. Analysts say lack of technology and funds required to modernize Mexico’s oil sector could lead to an additional output plunge of 700,000 b/d by 2020, unless the next administration takes some definitive action. Output is expected to rebound slightly this year and is currently averaging 1.9 million b/d, down roughly 5 to 10 percent from 2017. Pemex is targeting 1.95 million b/d for 2018. Pemex’s natural gas production has also been declining, and fuel theft has plagued the country’s refining sector.

López Obrador has said he will not seek a constitutional change to reverse the 2014 energy reform and will respect the legitimate contracts signed under the reform. There is hope that AMLO can be like President Lenín Moreno of Ecuador and implement reforms from the left with a significant role for the private sector. Will AMLO take this path? We won’t know until he begins to govern, but the Mexican economy and the Mexican people need him to enact reforms that allow Mexico to reap the benefits produced by their energy sector.

Editor’s Note:

This is a guest post by David R. Mares, the Institute of the Americas chair for Inter-American Affairs and professor for political science at the University of California San Diego and the Baker Institute scholar for Latin American energy studies at the James A. Baker III Institute for Public Policy at Rice University.
***

Mexico Energy Sector Faces Uncertainty

(Natural Gas Intelligence, Carolyn Davis, 14.Jun.2018) – Mexico’s historic energy reform launched four years ago may hit a few bumps if, as expected, left-wing presidential candidate Andres Manuel Lopez Obrador is elected on July 1, but there’s no turning back now, experts said last week.

At the 4th Mexico Gas Summit organized by Industry Exchange LLC, cautious optimism prevailed about the outlook for the oil and gas sector. During the campaign for president, Lopez Obrador, who has a huge lead in the polls, has threatened to disrupt energy reform by freezing bidding rounds and possibly reviewing contracts with private operators already in place.
However, there’s growing evidence that the new president, who would take office Dec. 1, may become more pragmatic as he gains an understanding of how the energy sector’s growth will benefit the country.

Duncan Wood, who directs the Mexican Institute at the Woodrow Wilson Center, helmed the first day of sessions and offered his take on the road ahead. Wood, who has worked on Mexico issues for more than 22 years, including as an analyst on energy policy, told the audience he was unsure “where the heck we’re going” in regards to the next administration. However, he remains cautiously optimistic.

“We’re very much at an inflection point, and I tend to be an optimist. So I tend to think that in the long-run, everything’s going to be fine. The fundamentals are good.”

He suggested the audience not “listen to all of the noise about what’s going on right now” regarding the election or what’s happening in the United States as President Trump threatens to impose more tariffs on Mexico and potentially upend the North American Free Trade Agreement (NAFTA).

“Focus on the long-term,” Wood said. The United States and Mexico “that are coming inexorably together, and if you look at Mexico in the long-term…Mexico is on its inexorable path to openness. It doesn’t mean that there won’t be setbacks. It means that there are going to be very, very interesting times. But the fact is, that in the long term, Mexico is actually on the right path. The reason for that, I think, is looking at the potential of the country and what its people are going to demand.”

Wood co-authored a paper with IPD Latin America Managing Director John Padilla that was published in May, “Mexico’s New Hydrocarbons Model: A Critical Assessment Four Years Later,” to “give politicians, policymakers, and other relevant stakeholders a clear assessment of what has been achieved so far and what remains to be done.”

The report relied on the results of a series of forums with participants from a broad cross-section of local industry, including executives from upstream to downstream, with lawyers, academics, former senior government officials and individuals with decades of experience in Mexico’s energy sector and abroad.

“What was really remarkable, in a series of four consultations with industry and experts in Mexico City, is that they were incredibly positive about the reform, so much so that when we came to write up the report, I had to stop John and say, ‘look, we actually need to go back to take a really cool headed analysis of this to say it’s extraordinary what has happened in Mexico’…

Four years on from beginning energy reform, and, “the fact that we have seen such a bold, dramatic and profound opening in Mexico is a huge achievement,” he said.

“We should never forget where we’ve come from because there are voices out there that want to take us back to that distant past. So that report that we wrote up I had to rewrite it…to make sure that it begins with a very optimistic opening about how much has been achieved through this reform process, because it is remarkable, and it is extraordinary, and I would argue that it’s unmatched anywhere else in the world.”

There are challenges for the energy sector ahead, however. Regulatory processes still need to be finessed, and more investments have to be made to ensure there is adequate infrastructure.
“In the short term, we deal with a great deal of uncertainty,” Wood said. “Even if we know who’s going to win the election, we don’t know what that particular candidate’s policies are because he’s laid out a whole bunch of policies that are very vague and a lot of people in Mexico don’t believe that’s what he really wants to do anyway. I tend to be a little bit more optimistic because I think that pragmatism will kick in…”

The other short-term anxiety centers around the future of NAFTA. If, as Trump has signaled, it ends up in the dust bin, “there are real and profound implications for the oil and gas sector…That is one of the issues that’s on the top of people’s minds as they’re investing in Mexico at this political moment.”

Without NAFTA, Mexico’s economy may suffer, which in turn could hamper energy demand, and in particular natural gas consumption, directly from a decline in the industrial sector and indirectly through electricity demand.

“But the long-term future, as I said, is very, very bright,” Wood said. “Think about the potential of Mexico in terms of its gas reserves, 15.3 Tcf of proven reserves…If you look at the technically recoverable shale gas reserves, in the Burgos Basin alone there is 343 Tcf. Mexico is a country of 545 Tcf of technically recoverable reserves.”

On the demand side, Mexico’s growing middle class also is consuming more natural gas, which means more power plants.

“All of the headlines for the past couple of years have been on the renewables front,” Wood said. “It’s been about solar and wind. But the reality is that those two kinds of new power plants are going to contribute a significant but not overwhelming percentage of new power in Mexico.

“It’s going to be natural gas plants that are really going to do the trick.”

U.S. gas pipeline exports also are paramount.

Some infrastructure projects still are experiencing challenges connecting on the Mexican side of the Texas border, Wood said. “But we’re looking at a situation where now, Mexico is responsible for 60% of U.S. natural gas exports…In the not-so-distant future, Mexico’s gas imports will account for one-tenth of all U.S. gas production.”
***

Acciona Starts Commissioning 183MW Mexican Wind Farm

(Renewables Now, 14.Jun.2018) – Acciona SA started commissioning its 183-MW El Cortijo wind farm in Mexico, the Spanish infrastructure group said on Wednesday.
This is the first wind farm of those being developed as a result of Mexico’s energy reform to enter service, the company added.

The El Cortijo project secured a contract for 585.5 GWh of power and associated clean energy certificates in Mexico’s first long-term power auction following the country’s energy reform. In the third auction, completed in November 2017, Acciona was awarded 52.04 MW of guaranteed capacity from the wind farm, which, the company explained, is a third revenue source for the facility, in addition to the sale of electricity and clean energy certificates.

The USD-235-million (EUR 199m) wind farm is located in the state of Tamaulipas and uses 61 Nordex 3-MW wind turbines of the AW125/3000 model.

The start of commissioning comes 15 months after the wind farm entered construction. The first turbines have now been connected to the grid and commissioning work will continue over the next few weeks.

El Cortijo is the fifth wind farm that Acciona owns in Mexico, bringing its wind capacity to 740 MW. The Spanish group is also building a 404-MWp solar park in Sonora.
(USD 1 = EUR 0.846)
***

Enbridge Begins U.S.-Mexico Portion of Valley Pipeline

(Reuters, 13.Jun.2018) – Canadian energy company Enbridge Inc. said it started construction of the offshore border crossing section of its US$1.6-billion Valley Crossing natural gas pipeline between Texas and Mexico, according to a federal filing made available on Wednesday.

The company said in an e-mail the pipeline remains on track to enter service in October.

The latest filing pertains to a 1000-foot (305-meter) section of offshore pipe that extends to the U.S.-Mexico border. The remaining 165 miles of onshore and offshore pipe has been completed and commissioning activities will commence in the near future, Enbridge spokesman Devin Hotzel said in an e-mail.

The Valley Crossing project is designed to carry up to 2.6 billion cubic feet per day (bcfd) of gas from Texas to help Mexico meet its growing power needs as generators there shift away from fuel oil and imported liquefied natural gas.

One billion cubic feet is enough to fuel about five million U.S. homes for a day.

The Valley Crossing project has been under construction since April, 2017, according to the Enbridge website. In May, Enbridge said it had “substantially completed” the onshore part of the pipe and was working on the offshore part to meet a fourth-quarter 2018 in-service date.

Valley Crossing will connect in the Gulf of Mexico to the Sur de Texas-Tuxpan pipeline under construction by a joint venture between units of TransCanada Corp. and Sempra Energy. Once complete, it will be the biggest gas pipe between the two countries.

There are already about 20 pipelines that can move gas from the United States to Mexico with a total capacity of around 10.9 bcfd, according to U.S. energy data. That includes Howard Energy’s 0.6-bcfd Impulsora pipeline, which is expected to enter service this month.

Analysts have said, however, that constraints on the Mexican side of the border have so far limited a big increase in U.S. pipeline exports.

Since the start of the year, U.S. exports to Mexico have averaged 4.0 bcfd, up just a bit from the 3.9-bcfd average during the same period in 2017, according to Thomson Reuters data.

While the pipeline constraints remain, Mexican energy companies have been buying more U.S. liquefied natural gas (LNG) than any other country since February, 2016, when the first U.S. LNG export terminal opened in the lower 48 states at Cheniere Energy Inc.’s Sabine Pass in Louisiana.

Mexico bought 50 cargoes of LNG totalling 167.8 billion cubic feet of gas from the United States, 18.8 per cent of total U.S. LNG exports between February, 2016, through the end of 2017.
***

Pemex on High Alert over Hurricane Bud

(Pemex, 12.Jun.2018) – Pemex reports that, due to the arrival of Hurricane Bud to the shores of the Mexican Pacific, it is continuously monitoring the situation and preparing to activate the company’s Hurricane Emergency Response Plan (initials in Spanish: PREH).

As part of the PREH safety protocols, the company is in constant communication with officials of the Mexican Army, Port Captaincies, and Civil Protection authorities of the states that could be affected by the hurricane, in order to respond quickly and efficiently to any hazards that may damage the company’s oil infrastructure.

Pemex is also letting people know that there will be enough fuel in the storage terminals in Colima, Nayarit, Sinaloa, Sonora, Baja California and Baja California Sur.

Petróleos Mexicanos hereby reaffirms its commitment of guaranteeing the safety of its workers and facilities, and that at the moment its efforts are focused on responding to the needs of its clients and the general public.
***

Pemex Reports Rise in Illegal Pipeline Connections

(Energy Analytics Institute, Aaron Simonsky, 12.Jun.2018) – Illegal pipeline connections detected by state oil company Petróleos Mexicanos (Pemex) continue their upward trend.

 In April of 2018, the illegal connections rose to 1485, the most reported this year, which represent a 94% increase over the same month in 2017, reported the daily newspaper La Cronica.

Year-to-date, the illegal connections are up 42% from 1046 originally reported in January of 2018. In total, during the first four months of 2018, illegal connections reached 5176, up 49% compared to 3467 reported in the same four-month period in 2017.

 According to Pemex data, the city of Puebla tops the list with 284 illegal connections, followed by Veracruz (170), Tamaulipas (155), Hidalgo (151) and Guanajuato (148).

***

Mexico Addresses Social Impact of Energy Reform

(Velda Addision, Senior Editor, Digital News Group Hart Energy, 12.Jun.2018) — Working at energy sites in some parts of Mexico could mean coming face-to-face with locals wanting to see the economic benefits of projects in their communities sooner rather than later.

Companies could face land challenges from indigenous groups, farmers and other landowners, said panelists speaking during an event on the social impact of Mexico’s energy reform at Rice University’s Baker Institute for Public Policy on June 7.

These challenges could mean coping with the threat of violence or damage to property if demands aren’t met, some said. For some energy companies, it could also mean packing a ton of patience while wading through permitting processes that can drag on for months or even years.

Or it could mean little or none of the above.

“Despite the rather negative messages we have been hearing today…Mexico was a great experience personally,” said Beninga Cortés Leiss, former general director for Chevron’s Energía de México. “However, it was also a lot of hard work. …It requires the right approach,” she added, acknowledging Mexico is a complex country that has the geology but is at the beginning of a new era.

So far, Mexico has awarded more than 100 contracts to foreign and local companies since the country’s energy sector opened in 2013 to foreign investors eager to discover oil and gas offshore and onshore. But success depends on having strong engagement.

“You really need to spend the time to understand: What are the drivers? What are the values? What are the needs of the people you are going to affect or have an impact on with your project?” Leiss said.

How effective Mexican regulators are at managing concerns and properly informing all stakeholders will impact the pace of Mexico’s energy reformation journey, according to the group of energy experts who gathered June 7 to discuss the issue.

Risky Business?

Tony Payan, director of the Baker Institute’s Mexico Center, said 54 of the 110 projects at risk in Mexico today due to social conflicts are energy-related. Just more than 30 of the 54 came after the reform.

“Everybody has to benefit, and when communities do not see a benefit—at least not a direct benefit—they may then resist a project,” Payan said.

The discussion took place as Mexico approaches the five-year anniversary of Congress passing historic constitutional energy reforms in hopes of increasing production, improving the economy and adding jobs. But the future is uncertain, with the July 1 presidential election weeks away. Candidate Andrés Manuel López Obrador still appears to be the frontrunner.

“I think it’s comforting that Mr. López Obrador has become more pragmatic in this election. I don’t think he is the radical Rambo that he appeared to be 12 years ago,” Payan said.

Payan described Obrador’s nationalism as more inward-looking, focused on the conditions of the poor, with populist overtones. “I don’t see him as radically anti-America, radically anti-foreign company, radically anti-foreign investment. I think he’s going to be willing to work with them.”

Also factoring into companies’ decisions on whether to do business in Mexico is organized crime—which Payan called a type of social conflict. It has already altered the perception of Mexico.

He also pointed out how conflicts could arise concerning use of natural resources such as land and water—pitting the need for drinking water, for instance, against those needed for business purposes. Payan used as an example shale oil and gas development in some of Mexico’s most water-scarce regions.

“Should the water go to shale projects or the communities?” Payan asked. Sometimes setting priorities involves dialogue, but at other times people in the community will decide how the water may be used and the oil and gas may have to just stay in the ground, he said.

It’s one of the reasons why Lourdes Melgar, a nonresident fellow for the Baker Institute, is no longer deputy secretary for Mexico’s hydrocarbons department.

“I am against shale and that’s part of the reason why I left the department of energy in Mexico because I think we should not be doing these types of projects where we have conflicting interests,” Melgar said. “But the law is clear. Water cannot be used for any projects, including for shale, if it’s going to put at risk drinking water. … That’s why there’s a consultation with communities. If you try to impose the project, the project is not going to be developed.”

Framework Established

Earlier Melgar recalled an instance where the public blocked construction of transmission lines by state-owned companies, which she said felt were being held hostage by communities that had received payments but wanted more. The Mexican government established a legal framework in the energy reform that specifically addresses this type of social conflicts, she said, cautioning that implementation takes time and problems won’t be solved overnight.

Indigenous people, as well as other stakeholders, must be consulted on projects. Mexico’s law also stipulates the state must administer a social impact study and companies must conduct social impact evaluations. “This is an obligation because we need to have sort of an X-ray of an area, especially if we’re going to put up an area for bid for oil and gas to know what the conditions are” such as presence of indigenous populations, type of land and issues related to organized crime, infrastructure and other conditions to inform the potential investor, Melgar said.

“You have to look at the positive and negative aspects of the project and you have to communicate it to the community where you’re going to develop the project. [Companies] have to negotiate with the community what the benefits are going to be for the community,” she said.

Melgar said commercial rates must be paid for land and payments must be made for the destruction of property or assets such as agriculture. “We established an entire institutional framework to support people in terms of negotiations,” giving them access to lawyers among other support.

In addition, once an oil or gas field starts production a payment from the company’s profit (0.5% to 2% for oil and 0.5 to 3% for gas) goes to the landowner or owner of the rights to the land, she said.

“The problem we have in implementation is we have different players,” and not everyone—including local authorities—knows the new paradigm, Melgar said, adding some companies prefer it the old way.

More Work Ahead

Prior to Mexico’s energy reform, performing social impact assessments were not required for energy projects, said Jose Maria Lujambio, partner with Cacheaux, Cavazos and Newton. But now they must be conducted before oil and gas companies are allowed to get permits to begin work, he said.

Earlier this month, Mexico’s energy ministry released details on what is expected of those involved in social impact assessments. The details establish procedures for government analysis of the evaluations, formats companies have to use to fill in information to prepare their evaluations and other required information.

Such information, Lujambio pointed out, wasn’t available to companies in the early days following the reform. That likely played a role in delays. He noted one energy company filed its social impact evaluation in July 2016 and the resolution was notified June 6. It should’ve taken only 90 days.

“There are many cases that have been suffering delays,” Lujambio said. “The main problem is a lack of resources.”

Transparency and having the ability to follow-the-money, knowing who gets paid and when, are also areas that still needs work, according to Melgar. Like Lujambio she agreed the government needs funds and staff to better implement the framework. “Five people can’t take care of all of these things for an entire country,” she said.

These challenges aren’t unique to Mexico, though. The oil and gas industry has faced similar obstacles such as Dakota Access Pipeline protests or places where Arctic drilling is proposed.

“We have to rethink how we create conditions so the communities are willing to accept projects. Otherwise, there will be no more projects,” Melgar said.

Velda Addison can be reached at vaddison@hartenregy.com.

***

Observing Controls In Mexico’s Energy Sector

(Control Risk, Armando Ortega, 11.Jun.2018) — For decades, the most relevant compliance legislation for international companies operating in Mexico was the US Foreign Corrupt Practices Act. Now, as a result of major national economic and legal reforms enacted during President Peña Nieto’s administration from 2012-2018, Mexico’s compliance environment has undergone a transformation. As foreign investment pours into Mexico’s recently opened oil and gas sector, legal entities are now criminally liable for any offenses or irregularities committed in their name, making the case for a robust compliance strategy that includes due diligence investigations into possible business partners.

A changing landscape: Mexico’s Energy Reform

Mexico enacted a historic reform program in December of 2013 that opened its oil and gas sector to foreign investment following 75 years of government ownership. Mexico’s energy reform plan was part of a broader, cross-sector effort by President Enrique Peña Nieto to boost the Mexican economy. Since its implementation, there have been three bidding rounds—the latest of which closed in March 2018—that have raised a total of $161.3 billion for investments that will take place until 2025[1]. Fourteen percent of total investment is for public-private partnership projects between domestic and international companies and the Mexican state-owned oil company, Petróleos Mexicanos (Pemex)[2]. With these investments, Pemex expects to significantly increase Mexico’s current production of 2 million barrels per day to a hypothetical 3.4 million barrels per day.

There is significant international interest in the process, with 34 companies securing bids. The US, with nine companies, and the UK, with four, lead the pack. Royal Dutch Shell, Qatar Petroleum, British Petroleum and Chevron are just a few of the major multinationals that have a stake in Mexico as a result of the energy reform.

Although significant opportunities are opening up in the sector, it is key that international investors understand the complexities involved with the energy reforms, as they are occurring amid a rapidly changing regulatory environment and era of overall reform resulting from the Peña Nieto years, and as part of a broader shift in sentiment among the Latin American public in the fight against corruption.

The National Anticorruption System and the new compliance environment

In what can be best understood as a citizens’ effort, a set of new legislative and constitutional reforms have been introduced in Mexico since May 2014, culminating in the establishment of the National Anticorruption System (SNA) in July 2016. The SNA is defined as a coordinating body between various institutions, including the Superior Audit of the Federation and the Federal Court of Administrative Justice, among others, to create mechanisms of collaboration and coordination to effectively prosecute corrupt practices.

The SNA is still in its early stages; a Specialized Prosecutor’s Office in Combating Corruption has yet to be properly established, and the Mexican Congress has yet to elect the Anticorruption Prosecutor. However, despite the lack of distinct progress, parts of the legal reforms introduced to create the SNA already have far-reaching implications.

Namely, a June 2016 reform to the Federal Criminal Code—among other related legislation— introduced a major change: legal entities are now criminally liable for any offense done in their name, benefit or representation, including by employees and/or third parties.

Companies now have to install due controls, risk assessments of third parties, codes of ethics, training programs, and risk management and compliance programs, among other measures. The penalties for not observing these controls include fines, forfeiture of assets, frozen bank accounts and dissolution of any legal entity found in violation of the law.  With this in mind, international companies seeking to access opportunities in Mexico’s oil and gas sector should aim to properly understand the reputations and backgrounds of their local counterparts, providers and employees.

Conducting due diligence investigations in Mexico

One of the central challenges of any compliance program is to conduct due diligence investigations of foreign agents and third parties, particularly in complex jurisdictions such as Mexico, where a myriad of actors—including intermediaries, labor unions and even organized crime—can intervene, directly or indirectly, in any given contract or agreement. Foreign companies seeking Mexican partners for their operations in the O&G sector are particularly exposed to a wide range of risks, given that it is widely considered to be one of the most complex sectors.

Understanding a third party’s reputation requires a detailed analysis of the local context and dynamics, as well as a thorough assessment of its previous track record. Investors should also evaluate and understand the risks of doing business with politically exposed persons, and decide what level of exposure they are willing to tolerate. For example, it is not uncommon in Mexico for former high-level government officials to form their own companies shortly after leaving government positions, profiting from their connections to facilitate contracts, permits and networking. This is particularly the case with Pemex.

While it is not necessarily unlawful nor always a risk factor, it is ideal to investigate and understand the facts prior to beginning a business relationship, since legal entities are now liable for any action carried out by its partners. Partnering, knowingly or not, with a company or individual with a history of corruption or influence peddling is hardly defensible, unless the company can prove that it did all it could to investigate first.

Companies considering operations in Mexico are now expected to conduct due diligence investigations in good faith, understanding that the level of investigation conducted should be proportional to the nature of the relationship with the third party or partner. In many instances, particularly where a company expects to deal with dozens or hundreds of providers and contractors, a limited red flag investigation aiming to broadly identify major issues of concern will suffice.

In cases that involve a key partner, or where ethical or political risks are evident, a more thorough investigation is necessary. There are many intermediaries in the Mexican O&G sector with questionable or unproven backgrounds or experience. Dealing with these issues preemptively can save new and old players in the Mexican market considerable worries, particularly given the long-term nature of the projects at stake.

Compliance as a business opportunity

It is our view at Control Risks that the new legal requirements in Mexico represent an opportunity to preemptively build a solid compliance strategy that includes the adequate level of partner due diligence. Mexico’s O&G sector is one of the crown jewels of the national economy, with considerable untapped deepwater oil resources and a significant need for technological capabilities that open the door to large and small companies alike.

And the timing could not be better: the topic of corruption has been central to Mexico’s upcoming presidential election in July. Companies leading the charge in matters of anticorruption compliance are poised to reap significant reputational and operational rewards in Mexico’s new energy sector.

***

What is in store for Mexican oil under a new leader?

(Financial Times, Nick Butler, 10.Jun.2018) Among this year’s many elections — from Iraq to Malaysia to Russia — none is more important for the international energy business than the presidential race in Mexico, which will be held on July 1.

Unless the polls are all badly awry, the candidate of the National Regeneration Movement (Morena) will win easily. Andrés Manuel López Obrador — popularly known as Amlo — was ahead of his nearest opponent by at least 10 points in a recent survey by Consulta Mitofsky. However, his energy policies remain obscure.

Mexico has begun to change the sector in radical ways over the past five years under the banner of the Reforma Energetica. The monopoly position of Pemex, the state oil company, has been eroded. Exploration blocks have been auctioned in an open process that has allowed foreign companies to win access for the first time in 75 years. That has attracted more than $35bn of investment into more than 40 upstream ventures.

The initial results have been positive. A consortium led by the US-based company Talos has made a major discovery in shallow water off the coast of the Mexican state of Tabasco — amounting to 1.4bn to 2bn barrels of oil, according to early estimates. Eni, the Italian group, has also added substantially to reserves in the Amoca field after drilling new wells.

These two finds alone would enable Mexico to reverse the decline in production of the past decade and a half. But the reforms have just begun. Many of the allocated blocks are still to be explored and some 500 more are due to be auctioned over the next three years.

Change is not limited to the oil and gas sector. The electricity monopoly held by the Comisión Federal de Electricidad has been broken by creating new companies. International capital has been brought in to develop infrastructure and help build new renewables businesses, including hydro, solar and wind. The power grid is being extended and a programme of refinery construction and upgrading is under way.

There is no rational reason why Mr López Obrador should halt this process if he is elected. The country needs a strong energy sector. Pemex, once a symbol of national hope, has failed to deliver — oil reserves, for instance, have shrunk from 48bn barrels in 1996 to about 9bn. The latest discoveries underline the company’s failure.

International investors are not getting a windfall — the terms on which they have been attracted are hardly over-generous. Taxes and charges ensure that the Mexican government will secure around 80 per cent of the value of every barrel of oil produced.

But Mr López Obrador has been campaigning as a nationalist. He speaks of Mexicans being exploited by international companies and has attacked the North American Free Trade Agreement for making the country a branch plant for US businesses. His supporters, including some potential ministers, have talked of ending looting and stopping foreigners taking control of Mexico’s natural resources.

No one knows how he will translate words into action if he wins the presidency. Even if he seems unlikely to follow Venezuela’s Hugo Chávez or Nicolás Maduro in driving international capital out of the country, he could still discourage many potential investors by reasserting the role of Pemex and abandoning Nafta.

It would be much better to see Mr López Obrador focus (as he has at times while campaigning) on the endemic problem of corruption. With that on his agenda, Pemex should be broken up and new independent companies created. Pemex holds a huge portfolio of under-developed assets that could be brought into production by new management.

If the reforms endure and exploration success continues, Mexico could be a significant contributor to the goal of North American energy independence. It could be an exporter able to increase trade even more if renewables are developed systematically, replacing existing gas imports and selling more oil on the world market. Its hand in dealing with the US would also be bolstered.Mr López Obrador, a former mayor of Mexico City, has long been a leading figure in national politics, but never before has he come close to real power.

If he wins and combines a degree of populism with a determination to root out corruption, shake up bureaucracy and engage with the global economy from a position of strength, he could offer a new model for countries across Latin America disillusioned with the legacy of the left — especially in Venezuela — and with rightwing military regimes.

His challenge is to demonstrate that populism and pragmatism are not incompatible.

***

Howard Injects Natgas into Texas-Mexico Pipeline

(Reuters, 9.Jun.2018) — Howard Energy Partners told U.S. energy regulators that it began injecting natural gas into the Impulsora natural gas pipeline project from Texas to Mexico on May 30, according to a filing made available this week.

The Impulsora pipeline is part of the 190-mile (305-km)Nuevo Era system that will transport around 0.5 billion cubic feet per day (bcfd) of gas from the Eagle Ford shale region of Texas to Mexico to supply power plants in the Monterrey area.

One billion cubic feet of gas is enough to supply about five million U.S. homes for a day.

There are already about 20 pipelines that can move gas from the United States to Mexico, including Impulsora, with a total capacity of around 10.9 bcfd, according to U.S. energy data.

Analysts have said that constraints on the Mexican side of the border have so far limited a big increase in U.S. pipeline exports.

Since the start of the year U.S. exports to Mexico have averaged 4.0 bcfd, up just a bit from the 3.9-bcfd average during the same period in 2017, according to Thomson Reuters data.

To quench its growing demand for gas, Mexican energy companies have bought more U.S. liquefied natural gas (LNG) than any other country since February 2016 when the first LNG export terminal opened in the lower 48 states at Cheniere Energy Inc’s Sabine Pass in Louisiana.

Mexico bought 50 cargoes of LNG totaling 167.8 billion cubic feet of gas from the United States, 18.8 percent of total U.S. LNG exports between February 2016 through the end of 2017.

Later this year, Enbridge Inc expects to finish its 2.6-bcfd Valley Crossing pipe and connect it in the Gulf of Mexico to the Sur de Texas-Tuxpan pipeline under construction by a joint venture between units of TransCanada Corp and Sempra Energy. It will be the biggest gas pipe between the two countries.

***

Pemex, Hidalgo Govt to Partner to Boost Development

(Pemex, 5.Jun.2018) – The CEO of Petróleos Mexicanos, Carlos Treviño Medina, and the Governor of the State of Hidalgo, Omar Fayad Meneses, signed a memorandum of understanding, to promote and boost economic development in the region and strengthen the activities of the oil industry in the State.

During a meeting held at Pemex’s Corporate Tower, both officials agreed to promote regional content programs within their scope of action and thus, jointly create and execute projects that promise to have high social impact.

During the meeting, they also analyzed the measures set in place to fight fuel theft, which is a criminal activity that harms the security of the communities where it occurs, as well as Pemex.

Petróleos Mexicanos and the governments of all Mexican States maintain a close working relationship to coordinate their efforts and obtain mutually beneficial results that further not only the economic development of the country’s regions, but which will also allow the State-owned Productive Company to continue growing and developing more projects.
***

Pemex Says JV Wins Bid to Rehabilitate H-Oil Plant at Tula Refinery

(Energy Analytics Institute, Ian Silverman, 31.May.2018) – The partnership Saipem S.P.A / Saimexicana S.A. de C.V won the bid to rehabilitate the H-Oil Plant at the Miguel Hidalgo refinery.

Mexico’s state oil company Petróleos Mexicanos announced in an official statement results of the bidding process for rehabilitation and commissioning works at the H-Oil Plant located in the Miguel Hidalgo refinery in Tula, in the state of Hidalgo.

Nine consortiums participated in the bidding process. However, it was the Saipem S.P.A / Saimexicana S.A. de C.V partnership that made the most favorable bid, with technical and financial conditions agreeable to Pemex, for 779.11 million Mexican pesos. The winning bid was 9% lower than the second place bid, announced Pemex.

This project aims to boost production of ultra low sulfur gasoline, in compliance with environmental regulations in effect, and handling of crude oil for production of other fuels, such as diesel and jet fuel.

***

Energy, Education, and Learning Through NRG ED

(Energy Analytics Institute, Aaron Simonsky, 24.May.2018) – Energy Analytics Institute, formerly LatinPetroleum Inc., continues to promote its “Energy Education Initiative” in the Americas, also known as “NRG ED.”

NRG ED is structured to work with K-12 schools, community colleges, four-year colleges and universities, workforce training programs, communities and businesses, and aims to promote reduction of non-renewable energy usage in favor of renewable energies. However, the core of the initiative is education, without which the NRG ED initiative would not be.

“At its core the initiative is really focused on education,” said Chad Archey, Editor-in-Chief at Energy Analytics Institute from Atlanta, Georgia.

EAI views basic education as most important in the overall learning process and also promotes educational initiatives and research from grade school to the professional level related to the energy sector. EAI aims to foment constructive dialogue regarding energy usage as well as ways to reduce the carbon footprint left by non-renewable energy resources through the following: 1) educational consultancy, 2) development and distribution of educational and training materials, and 3) promotion of debate and discussion regarding renewable energy alternatives.

Energy Analytics Institute (EAI), formerly LatinPetroleum Inc. (dba LatinPetroleum.com), is a Houston-based independent company focused on producing non-biased news, updates and special reports for investors interested in the Latin America and Caribbean petroleum sectors.
***

Mexico’s Vista Oil & Gas Signs Onshore JV with Jaguar

(Reuters, 23.May.2018) – Mexican energy investment firm Vista Oil & Gas will tie up with Jaguar Exploracion y Produccion on three onshore projects, the company said on Tuesday, acquiring 50 percent stakes with an initial payment of nearly $27.5 million.

Vista will pay Monterrey-based Jaguar a further $10 million to compensate the firm for past investments in the projects, or so-called carry costs, the firm said in a statement.

The three onshore projects were won at auctions last July by Jaguar, an upstart oil firm owned by Mexico’s Grupo Topaz, and are located in the Gulf coast states of Tabasco and Veracruz.

Two of the blocks will be operated by Vista, while the other will be run by Jaguar, in what Vista described as Mexico’s first joint venture between two private oil firms.

The joint venture between the two must still be approved by the National Hydrocarbons Commission, the Mexican oil regulator that supervises exploration and production contracts.

Last year, Vista became Mexico’s first publicly traded oil firm, four years after a landmark energy reform ended the decades-long monopoly enjoyed by state-owned Pemex.

Vista, which has targeted assets for possible acquisition in Mexico, Brazil, Colombia and Argentina, is backed by private equity firm Riverstone Capital.

***

Building Momentum – Oil and Gas in Latin America

(By Rodolfo Guzman, Paola Perez, Paola Carvajal, Roberto Imperatore, Arthur D. Little, 22.May 2018) – Unconventional oil production has grown these past few years despite low oil prices since 2014. Although production in the US decreased in 2015, stabilization of prices and improvements in several operational areas allowed unconventionals to maintain a relevant role in the global supply. Last year, Arthur D. Little published a viewpoint analyzing the perspectives for unconventional resources in selected Latin American countries. While our outlook for Latin American opportunities remains positive, there are new factors to consider. The key shale players have stayed strongly focused on the US, the moderate oil price recovery expectations persist, and concerns about fracking operations are increasing. Therefore, host countries, especially in Latin America, are now under greater pressure to create conditions that favor the development of these resources.

In recent years, countries such as Mexico, Colombia and Chile with potential in unconventional hydrocarbons have been evaluating their prospective resources. However, these activities have not been enough to build momentum and attract resources to speed up the de-risking process for unconventional hydrocarbons. Building momentum requires a strategy for aligning technical, regulatory, and economic conditions to boost the de-risking process of the greenfield plays prior to the take-off of massive developments. Two major forces can, in our opinion, help build momentum: national oil company leadership and/or government promotion & incentives. Besides these levers, a deeper understanding of the local conditions of the oil & gas industry is fundamental for defining the strategy and tactics for building momentum.

In our view, the development of unconventional hydrocarbons in different geographies will continue shaping the global oil and natural gas markets. Countries with high potential and interest in expanding their production, such as Mexico, Colombia, and Chile, still need to build momentum to ensure the inflow of capital investments to speed up the exploration/evaluation phases. Although there is still uncertainty regarding the feasibility of large developments, the growing demand for hydrocarbons presents an opportunity for oil companies.

As the energy industry continues evolving, trends in supply and demand could change the incentives to develop the unconventional plays (growing share of renewable, peak of oil demand, etc.). Therefore, there is a closing window of opportunity for adopting a strategy to provide the required support to oil & gas players and take advantage of unconventional developments.

Download the full report here: http://www.adlittle.com/en/BuildingMomentum
***

Mexican Drillers Sign 1st Deal Without State Oil Giant

(Bloomberg, Amy Stillman, 22.May.‎2018‎) – Two upstart Mexican drillers have signed the first farm-out deal in Mexico’s oil sector that doesn’t include state company Petroleos Mexicanos.

Jaguar Exploracion y Produccion agreed to sell a 50 percent stake of three onshore areas in Tabasco and Veracruz to Vista Oil & Gas for $37.5 million, plus contingency payments if oil prices rise above $65 a barrel in the next two years. Vista, Mexico’s first listed crude producer following a $650 million share sale last year, will pay and operate two of the areas that are already in production, while Jaguar will remain the operator of the third exploratory block.

The deal will help Vista “position ourselves in Mexico,” said Chief Executive Officer Miguel Galuccio, former head of Ypf SA and the architect of Argentina’s shale boom. The areas Vista will operate in Tabasco are already known to Galuccio from his prior experience as a Schlumberger executive, he said. “These areas have a lot of potential. This year we are going to conduct a lot of studies, and next year we will drill eight wells.”

Jaguar, a subsidiary of Mexico’s Grupo Topaz, won the blocks last year in competitive bid rounds. Sharing the financial burden of the development of the blocks will allow Jaguar “to grow and participate in other rounds,” said Dionisio Garza Medina, founder of Grupo Topaz.

Jaguar will bid in Mexico’s upcoming onshore auction in September, said Medina, which could be among the country’s last should presidential front-runner Andres Manuel Lopez Obrador win elections on July 1. The leftist candidate, who is leading in the polls, has said he would cancel new oil contracts and review those already awarded. That could see farm-outs, or joint ventures in which help in developing an oil area is exchanged for a stake, become one of the only alternatives for oil drillers seeking to enter Mexico.

Other companies are considering farming out areas won in Mexican oil auctions, including Italy’s Eni SpA, which could sell a stake of its two-billion-barrel oil discovery in the Campeche Bay. China’s Cnooc Ltd. has also said it will seek to farm out blocks it won in Mexico’s first deep-water oil auction in 2016.

Galuccio shrugged off market concerns that Lopez Obrador could derail the reforms that opened the country to private investment several years ago, ending three-quarters of a century of state monopoly over the oil market.

Vista could participate in Mexico’s onshore and unconventional auctions in September, and will probably sell shares in New York by the end of the year, he noted. “If you ask me, pragmatism will come first,” he said. “There are always alternatives.”

***

PEMEX Seeks Partners for Seven Onshore areas

(Energy Analytics Institute, Aaron Simonsky, 3.May.2018) – Mexico’s state oil company PEMEX is seeking partners for land grouped into seven onshore areas containing light and super light crude oil as well as wet gas, announced the country’s National Hydrocarbon Commission (CNH by its Spanish acronym). The seven areas are located in the Mexican states of Tabasco, Veracruz and Chiapas.

The contracts with PEMEX will be assigned in an auction to be held on 31 October 2018, according the CNH.
***

ECLAC Ssays Venezuela’s Economic Activity to Fall 8.5% in 2018

(Energy Analytics Institute, Aaron Simonsky, 1.May.2018) – The United Nations Economic Commission for Latin America and the Caribbean, also known as ECLAC or CEPAL by its Spanish acronym, projects economic activity in troubled Venezuela will contract 8.5% in 2018.

Gross domestic product or (GDP) estimates for other important countries and regions follows:

TABLE 1: ECLAC GDP ESTIMATES FOR 2018

Country/Region —————————- GDP (Est.)

Argentina ———————————— 2.5%
Bolivia ————————————— 4.0%
Brazil —————————————- 2.2%
Chile —————————————– 3.3%
Colombia ———————————— 2.6%
Ecuador ————————————– 2.0%
Paraguay ————————————- 4.0%
Uruguay ————————————– 3.0%
Venezuela ———————————– (8.5%)

Latin America and Caribbean (LAC) —- 2.2%
South America —————————— 2.0%
Central America and Mexico ————- 2.6%
Central America —————————- 3.6%
Latin America ——————————- 2.2%
Caribbean ———————————— 1.4%

Source: ECLAC, April 2018
***

Pemex Turns $6 Bln Profit On Oil Prices

(Reuters, 27.Apr.2018) – Mexican state-run oil company Pemex said on Friday its net profit rose 29 percent in the first quarter compared with the year-earlier quarter, helped by higher crude prices and currency movements.

The company, one of the largest in Latin America, reported a profit of 113.3 billion pesos ($6.2 billion) in the first three months of the year. Revenue rose 14 percent to 397.4 billion pesos.

Pemex said the company benefited from growing crude prices, which rose to $56.42 from $44.15 in the quarter, helping push export sales up 23.8 percent.

Sales in Mexico, particularly gasoline and diesel, also rose 9.2 percent due to higher prices.

Mexico’s peso also strengthened more than 7 percent against the dollar in the first quarter.

In a subsequent conference call with analysts on Friday, executives said Pemex expects to process around 1 million barrels per day (bpd) domestically toward the end of this year, and that the company processed an average of 598,000 bpd in the first quarter of 2018.

Pemex executives also told analysts the troubled Salina Cruz refinery in southern Mexico was processing 243,800 bpd at the end of March.

President Enrique Pena Nieto’s government enacted a wide-ranging reform in 2013-2014 to encourage foreign energy investment and boost the slackening oil output, ending Pemex’s monopoly in the sector.

Pemex’s crude and natural gas production were both lower in the first quarter than the same period last year.

($1 = 18.303 pesos at end-March)

(Reporting by Christine Murray and Ana Isabel Martinez; writing by Gabriel Stargardter; editing by Chizu Nomiyama and Jonathan Oatis)
***

Sapura, Partners Awarded Mexico’s Block 30

(Energy Analytics Institute, Ian Silverman, 1.Apr.2018) – The consortium, comprised of three companies, was awarded a block in the southeastern basin of the Gulf of Mexico.

“This is a formidable partnership of like-minded companies with significant worldwide experience, which augurs well for future success in Mexico,” said Sapura Energy Berhad President and Group Chief Executive Officer Tan Sri Dato’ Seri Shahril Shamsuddin in an official company statement.

Sapura Exploration & Production, a wholly-owned subsidiary of Sapura Energy Berhad (formerly known as SapuraKencana Petroleum Berhad), together with its joint venture partners DEA Deutsche Erdoel Mexico and Premier Oil were awarded Block 30 in Sureste Basin, a proven and prolific hydrocarbon province in the Gulf of Mexico.

Block 30, located in shallow waters at about 70 meters, is located directly to the south west of Premier’s Zama discovery and to the north of the Amoca oil field, was the most contested block in the bid. The consortium outbid six other bidders for the block.

OTHER LEADS

The consortium has identified material leads and prospects on Block 30 in the tertiary clastic plays, typical of the Sureste Basin and in which Premier made the Zama discovery in July 2017. The main prospect exhibits DHIs (direct hydrocarbon indicators) on the existing 3D seismic across the southern edge of Block 30, significantly de-risking a potentially material oil play there. These anomalies are similar to those seen at the Zama and Amoca oil fields. Sapura plans to purchase 3D seismic in 2019 ahead of firming up drilling locations in 2020, the company said in the statement.

Sapura E&P entered into the bidding agreement with DEA and Premier based on an equity split of DEA 40%, Sapura Energy 30%, and Premier 30%.

“Sapura Energy has been operating in Mexico since late 2012 and has worked closely with PEMEX on a number of offshore projects. The Sureste Basin is not unknown territory, the shallow water operating conditions are similar to Malaysia and our team is on familiar ground,” said Tan Sri Shahril.

***

Mexico Awards Blocks In Final Oil Auction Before Election

(Reuters, David Alire Garcia & Marianna Parraga, 27.Mar.2018) — Mexico awarded just under half of the 35 shallow-water blocks it tendered on Tuesday, in an auction muddied by the promises of the presidential frontrunner to review contracts awarded under a historic energy opening if he wins the July 1 election.

The country’s oil regulator awarded 16 blocks in the Gulf of Mexico to firms including Spain’s Repsol, France’s Total, Italy’s Eni, Britain’s Premier Oil and Mexico’s state-run Pemex, which was the biggest winner overall.

A final, competitive round of bidding in the Southeast Basins improved what started as a patchy showing, with little interest in fields believed to contain high amounts of natural gas.

About $8.6 billion in investment is expected from the projects to be developed in the awarded blocks, Mexico’s Energy Minister Pedro Joaquin Coldwell said, with early production starting in 2022 and a production potential of 280,000 barrels per day (bpd).

Andres Manuel Lopez Obrador, who has a comfortable lead in most polls, said that if he wins the July vote, he would review more than 90 contracts signed since Mexico passed legislation in 2013 ending Pemex’s 75-year monopoly, looking for signs of corruption.

Running for office for a third time, Lopez Obrador has also said he would hold a referendum on the future of the reform, and ask President Enrique Pena Nieto to cancel two auctions planned for the second half of the year.

Mexico’s next president takes office in December.

Despite the political uncertainty, Tim Davis, the group exploration manager for Premier Oil, said he was bullish about the future of the oil and gas opening.

“I think you could see a slowdown (if Lopez Obrador wins). But … I think they will see the benefits,” of the investment that’s coming in and the invigoration of new ideas and new companies arriving.

Repsol and Premier Oil individually claimed two areas each in the shallow-water fields offered in the Burgos basin, where less than a third of blocks were awarded. Premier won another block in a consortium with DEA Deutsche Erdoel and Sapura Energy.

Consortia made up of state-run Pemex, Mexico’s Citla Energy, Spain’s Cepsa, Britain’s Capricorn Energy and Germany’s DEA Deutsche Erdoel posted winning bids for four blocks in the Tampico-Misantla-Veracruz basin further south along the Gulf. There, around a third of blocks were awarded.

In the final Southeast Basins tender, competition was higher, and the oil regulator awarded all eight of the shallow-water blocks it tendered to consortia including Total, Eni, Royal Dutch Shell and Pemex.

“This is very high percentage (of awarded blocks),” said Coldwell.

Mexico’s government collected $124 million in cash payments from the auction, below the $525 million collected in a January deepwater auction.

The Southeast Basins areas are located in a portion of the Gulf where many of the companies that won blocks on Tuesday had already secured areas in earlier shallow and deepwater bidding rounds.

By securing neighboring blocks in the Gulf, companies are able to build clusters in order to reduce infrastructure costs.

Mexico’s Deputy Secretary for Hydrocarbons Aldo Flores blamed the weaker early interest on the quantity of natural gas areas in the auction, saying companies were more interested in finding crude.

“This will continue to be a challenge for us given the abundance of natural gas in Texas at very low prices,” Flores told Reuters on the sidelines of the auction in Mexico City.

Mexico is also competing for private companies’ interest with Brazil, which is holding its own auction this week, with another scheduled in June.

Brazil holds its own election in October, with the most likely leftist contender in the presidential race, Ciro Ferreira Gomes, warning he would expropriate energy assets bought by investors if he wins.

(Reporting by David Alire Garcia, Adriana Barrera and Marianna Parraga; Writing by Gabriel Stargardter Editing by Frank Jack Daniel, Susan Thomas and Diane Craft)
***

Pemex Signs Shale Contract With Lewis Energy

(Reuters, 26.Mar.2018) — Mexican state oil company Pemex said on Monday it had signed a contract with U.S. firm Lewis Energy for the exploration and extraction of a shale gas deposit in the north of the country, in the Eagle Ford formation.

Pemex said it expected the contract, in the Olmos field in the northern border state of Coahuila, to yield investment of $617 million, aiming to reach daily production of around 117 million cubic feet of gas by 2021.

Lewis Energy is a privately owned oil and gas operator based in south Texas. It has already drilled on behalf of Pemex in the Olmos field.

Earlier this month, Mexico announced a September auction for development rights to shale blocks, the first time the country has offered private oil companies the chance to develop the resource, which has been booming in the United States for years.

The National Hydrocarbons Commission, Mexico’s oil regulator, launched a call for bids for its first shale tender, including nine contractual areas to be awarded on Sept. 5.

The blocks are in the Burgos Basin in the northwestern border state of Tamaulipas, where Pemex has drilled some 20 exploratory wells.

(Reporting by Gabriel Stargardter Editing by James Dalgleish)
***

Process for Pemex Second Farm-Out Begins

(Pemex, 7.Mar.2017) – The approval of the bidding process for the selection of a partner for the exploration and extraction of the Ayin and Batsil fields in the coastline of Tabasco, it strengthens the Petróleos Mexicanos strategy to establish associations to stabilize the oil production and to begin increasing it in a profitable, safe, and sustainable manner.

The National Hydrocarbons Commission published the terms of the said bidding process in the modality of a shared production contract in shallow waters. This is the second association or farm-out entered into by Pemex, with which it will have strategic associations in both shallow and green waters.

As it occurred for the Trion field, Pemex joins the bidding rounds of the CNH, as this process will be a part of Round 2.1, the results of which will be disclosed on June 19.

So, the Pemex Business Plan continues to be applied, which considers that it is fundamental to take advantage of the instruments provided by the Energy Reform in order to make alliances and associations. This way, it will be possible to increase the availability of resources to increase production and accelerate the financial recovery of the company.

The Ayin and Batsil fields contain total 3P reserves of nearly 300 million barrels of crude oil equivalent. They cover an area of 1,096 square kilometers with a waterway of 82 meters in the Batsil field and of 176 metres in the Ayin field, a depth that surpasses that of all the fields that Pemex has developed in shallow waters.

The block includes a total of 12 wells (10 exploratory wells and two development wells), mainly of heavy crude, as well as medium crude and dry gas. The exploration success probability is greater than 50 per cent.

It is estimated that initial production will occur in 2020, with a maximum of almost 80 thousand barrels per day over the following years.

These fields are located 50 kilometers from the port of Frontera, Tabasco, and 70 kilometers of great fields, such as Ku Maloob Zaap and Cantarell. They have a nearby preexisting infrastructure, such as Dos Bocas marine terminal in Tabasco and the island of Ciudad del Carmen, in Campeche, as well as an established supply chain. Due to the above, it is a very attractive block for its commercial and expedited development.

***

Mexico Tops BP Growth Plans

(Reuters, Jessica Resnick-Ault, 17.Jan.2018) – BP is expanding its retail presence with plans to open 3,000 branded retail stations globally in the next five years, half in Mexico, as that market becomes increasingly open to international business.

The company already has over 100 retail outlets in Mexico, many operated by distributors that previously worked for Mexico’s state-owned oil company Pemex.

Energy reforms ended Pemex’s nearly 80-year monopoly several years ago and opened Mexico’s gasoline stations to international investment from the likes of Exxon Mobil Corp, Valero Energy Corp and Andeavor. Trading firm Glencore announced plans last year to start importing fuel for Mexico’s domestic market.

“We are looking at all different kinds of operations there,” Rick Altizer, BP senior vice president of sales and marketing said on Wednesday. He said they are open to waterfront terminals, rail operations or other logistical assets to supply its stations.

BP is also in the process of opening 10 stores in the U.S. Northeast under the Amoco brand, which it had previously retired. The Amoco label allows BP to expand in areas already saturated with BP stations, and appeals to customer nostalgia for the older label, Altizer said, speaking at an Amoco station in Pelham, New York. The label will also be used in other parts of the country.

The company expects global demand growth of 2.4 percent this year and 1.7 percent in 2019 even as automotive efficiency improves, he said.

***

Peña Nieto Presides Over Commemoration Ceremony

(Pemex, 18.Mar.2017) – Mexican President Enrique Peña Nieto presided over the commemoration ceremony on March 18, 2017 at the maritime terminal of Ciudad del Carmen, Campeche. He assured that Petróleos Mexicanos is the most representative company of Mexico and an important part of the country’s national identity.

“We are,” he said, “on the right path to turn Pemex into a synonym of operating efficiency and financial reliability so that, with its invaluable human capital, it can spearhead the global oil industry.”

The General Director of Pemex, José Antonio González Anaya, affirmed that Pemex is being transformed with the advantages and opportunities provided by the Energy Reform, which was promoted by the president and approved by congress. He pointed out that Pemex has set its course, and for the first time, has prepared a Business plan that has become the axis of this transformation.

“Today, we celebrate the birth of the national oil industry and the strength that lies behind this great company: its workers, who push it forward day to day.” Thanks to their hard work and efforts, he added, we are turning Pemex around with direction and determination.

During this event, the President instructed Pemex to build the Peninsular Project this year. With the installation of ducts and storage terminals, Progreso and Mérida will be connected with Cancún to supply fuels in the cheapest, most efficient way for the states of Quintana Roo and Yucatán, with an investment of $185 million.

The president made a symbolic handover of the modern habitational vessel “Reforma Pemex”, with a capacity for housing 700 workers who operate on platforms in the Sonda de Campeche.

González Anaya remarked that the Energy Reform is changing the way that business is made, because with the alliances, the company can now do more with the same resources.

“The great oil companies have also been looking to Pemex’ transformation, as proven by the recent associations that have been established. The Energy Reform goes forward and Pemex, which has been a part of the modern history of Mexico, becomes stronger,” said Anaya. “The development of our country cannot be understood without Petróleos Mexicanos, which will continue, for many years to come, being the flagship company of Mexico,” he emphasized.

The General Secretary of the Union of Oil Workers of the Mexican Republic, Carlos Romero Deschamps, pointed out that the workers have never ceased to honor their commitment to Pemex and to México. There is no doubt, he said, that together, we will once more go down the road of progress.

During the ceremony, the first great alliance established by Pemex with the Australian company BHP Billiton to develop the Trion field in the deep waters of the Gulf of Mexico, which will entail an investment of $11 billion. Likewise, for the first time, Pemex competed for an oil field that was not assigned to the company in Round Zero and, as a consortium with the U.S. company Chevron and the Japanese company Inpex, it won the bidding process for the exploration of Block 3 North in the deepwater field of Cinturón Plegado Perdido.

Pemex also grows stronger in matters of refining, with the first alliance to modernize the hydrogen plant in the Tula refinery. This will allow for savings of 30 percent in the supply of this product, and to increase production based on operating improvements. In this way, the company will be able to transfer part of the risks to a third party and thus absorb the most advanced technology of the industry.

***

Pemex Director Visits Families of Salamanca Accident

(Pemex, 17.Mar.2017) – José Antonio González Anaya, General Director of Petróleos Mexicanos, met with the family members of the workers who were injured in the explosion of the Dispatch Terminal in Salamanca. He visited the family of the worker who is being cared for at the Hospital in Picacho in Mexico City. He reassured all of them that they will continue to receive all the support that they should require as the best possible care.

Together with the governor of Guanajuato, Miguel Márquez Márquez; the senator Carlos Romero Deschamps, General Secretary of the STPRM, and the mayor of Salamanca, Carlos Antonio Arredondo Muñoz, the head of Pemex walked through the filling area of the TAD (Dispatch and Storage Terminal) where the accident occurred.

He ratified the commitment of the company to fully support the investigations currently being made by the Safety, Energy and Enviroment Agency (ASEA, as per its Acronym in Spanish), the Ministry of Labor and Social Security, and the Office of the Attorney General of the Republic, which seek to find the root cause of the accident.

On his part, senator Romero Deschamps also expressed is solidarity and support for the families of the injured workers.

Governor Márquez gave his deepest condolences and highlighted that there has been a close and permanent communication with Pemex regarding all the matters connected to the accident.

Regrettably, two hours after this visit, one of the workers from the private company, who was receiving healthcare at the Regional Hospital in Salamanca, passed away. Pemex expresses its deepest condolences to his family and friends.

The three workers who are currently receiving care at the Pemex Hospital in Picacho in Mexico City, the Regional Hospital in Salamanca, and the Burns Hospital in Salamanca, shall continue to receive appropriate care, and their families will continue receiving the company’s full support.

***

Mexico’s First Open Season Auction

(Pemex, 15.Mar.2017) – Last December 20th, the application period for those interested in participating in the first Open Season auction, was opened. From March 10, they submitted their financial proposals for the capacity reserve for storage and transport by duct. According to the Schedule, the winners of this auction for the states of Baja California and Sonora will be announced. The services to be offered again are: nine storage systems (Rosarito, Ensenada, Mexicali in Baja California, and Hermosillo, Guaymas, Ciudad Obregón, Navojoa, Magdalena and Nogales en Sonora), as well as four duct transport systems (Rosarito to Ensenada, Rosarito to Mexicali, Guaymas to Hermosillo and Guaymas to Ciudad Obregón).

Petróleos Mexicanos and the Energy Regulatory Commission have informed that this Open Season auction will be replaced with a new procedure before the current month is over. This, due to problems encountered with the methodology. Those companies that have already been prequalified will participate in this new process, without the need to hand in any new documentation or securities.

Pemex and the CRE will indicate the steps that are to be followed during the replacement of the proceeding, in order to guarantee máximum transparency and certainty for both the participating companies and the general public.

***

Mexico’s Fuel Consumption in January 2017

(Energy Analytics Institute, Fidencio Casillas, 12.Mar.2017) – Mexico consumed 193 million liters of fuel in January 2017, state oil company Petróleos Mexicanos (Pemex) Gasolinera wrote in a twitter post. Of the total consumption, approximately 130 million liters or equivalent to 817,000 barrels per day (67 percent of total consumption) corresponded to PEMEX Magna and PEMEX Premium grade gasolines. The remaining 63 million liters or equivalent to 396,000 barrels per day (33 percent of total consumption) corresponded to PEMEX Diesel.

***

Pemex Director Meets Oil Sector Leaders

(Pemex, 8.Mar.2017) – The General Director of Petróleos Mexicanos, José Antonio González Anaya, had an intense activity during CERA week, the most important event of the oil industry globally, which is held annually in the city of Houston. Throughout three days, he met with directors of various oil companies and financial institutions.

During the event, he held a fruitful meeting with the Governor of Texas, Greg Abbott, with whom he reviewed alternatives for the development of joint projects and businesses with entrepreneurs from that state, which concentrates some of the largest oil activities in the world.

Likewise, the head of Pemex undersigned two memoranda of understanding with British Petroleum and the Colombian Ecopetrol to establish a framework of cooperation that will allow for the exchange of technical knowledge, information and experience. Business development opportunities with diverse segments of the hydrocarbon industry will also be explored.

During the event, González Anaya was invited as keynote speaker, and in his speech, he referred to Pemex’ progress in the implementation of its Business Plan and its perspective in looking ahead. He also detailed the alliances strategy in the different business lines, both with regards to exploration and production and in industrial transformation.

He highlighted the undersigning of the first contracts of Pemex in deep waters, with Chevron and Inpex in block 3 North, and with BHP Billiton in the Trion Block, both located in the Cinturón Plegado Perdido. He pointed out that these achievements have been made possible thanks to the advantages granted to the company by the Energy Reform.

The Director of Pemex held a meeting with the presidents of BP, Bob Dudley; Ecopetrol, Juan Carlos Echeverry; Total, Patrick Pouyanné; Statoil, Eldar Saetre; Petrobras, Pedro Parente; Conoco Phillips, Ryan Lance; Anadarko, R. Al Walker; Vopak, Eelco Hoekstra; Honeywell, Darius Adamczyk; Tesoro, Gregory Goff; Hunt Oil, Hunter Hunt; Energy Transfer, Kelcy Warren; Air Products, Seifi Gasemi, and Enesa, Jaime Chico Pardo.

He also held talks with the president of Chevron for Latin America and Africa, Clay Neff; with the executive director of the International Energy Agency, Fatih Birol, and with the directors of Goldman Sachs, Maria Jelescu; of Apollo Global Management, John Bookout, and of the Massachusetts Technological Institute, Robert Armstrong.

The purpose was to tighten the bond with global leaders of the sector and to analyze the possibility of establishing future alliances and collaboration that will help to strengthen the State Productive Company.

As part of the activities of his tour, he also visited the Deer Park refinery that Pemex holds in partnership with the Anglo-Dutch oil company Shell. He held a work meeting with the directors of both the company and the refinery, where he witnessed how well this association, which has held for 24 years, is progressing.

***

Pemex, BHP Billiton to Develop Trion Block

(Pemex, 3.Mar.2017) – Petróleos Mexicanos and the Australian company BHP Billiton signed an agreement to develop the deep-water Trion Block during an event hosted by the President of Mexico, Enrique Peña Nieto.

This is the first farm out agreement that Pemex has undertaken to explore and produce and is the result of a greater degree of flexibility and mechanisms stemming from the Energy Reform. The Trion Block, discovered by Pemex in 2012, has 3P reserves totaling 485 million barrels of crude oil equivalent, meaning that this is a commercially viable venture.

President Peña Nieto commented said that the Energy Reform not only opens new investment possibilities to private companies, but that it gives Pemex an opportunity to modernize itself. This type of association that Pemex kicks off will allow Pemex to reinvent itself in the next years, he emphasized.

Also, he recognized the workers of Pemex for the efforts undertaken to date, which has allowed the company to improve its financial situation.

With regard to this partnership, the CEO of Pemex, José Antonio González Anaya, commented on how it represents a milestone in the history of this State-run company, given that, for the first time ever, a field, which was assigned during Round Zero by the Ministry for Energy, will be developed in partnership with a global leader in the industry.

He explained that this partnership will enable Pemex to continue aligning its operations with international best practices, in addition to sharing financial, technological and geological risks. This alliance strengthens Mexico, he added.

The CEO of BHP Billiton, Andrew Mackenzie, stated that this agreement was a historic moment for Mexico and the beginning of a new chapter in the working relationship between BHP Billiton and Pemex.

“It is an honor to be the first international company to work alongside the people of Mexico in developing their oil resources, ensuring mutual benefit for all,” said Mackenzie.

BHP Billiton is the one of the world’s biggest mining-oil company in the world, with more than 15 years of history and presence in 12 countries. It has successfully developed oil fields on the US side of the Gulf of Mexico and has one of the lowest accident indexes in the industry.

PEMEX is the world’s number 9 company, internationally recognized for its results in shallow waters and onshore fields. It has more than 70 years of experience exploring Mexican territory, and 15 years systematically exploring Perdido.

In June, Pemex’s Board of Directors approved the development of the Trion Block, which Pemex had been assigned, with this partner. On July 27th, the Mexican National Hydrocarbons Commission (CNH) approved the terms and conditions for the bidding process, which took place on December 5th. The winner of this transparent and competitive process was BHP Billiton.

Trion has a depth of more than 2,500 meters, and is located 200 kilometers east of Matamoros, Tamaulipas, and 40 kilometers from the maritime boundary of the Gulf of Mexico.

The development of the project, as a whole, will require an investment of $11 billion, and it is estimated that primary production will begin in six or seven years, with more than 100,000 barrels of crude oil equivalent per day.

The exploratory studies will be undertaken jointly by the Pemex-BHP Billiton consortium and will provide further information about the existing and potential reserves.

The event, held at the President’s Official Residence, Los Pinos, was attended by the Minister for Energy, Pedro Joaquín Coldwell; the Chairman of the CNH, Juan Carlos Zepeda; President Operations, Petroleum at BHP Billiton, Steve Pastor; the President of BHP Billiton Mexico, Timothy Callahan; the Director of Pemex, Exploration and Production, Javier Hinojosa; the Australian Ambassador to Mexico, David Engel; and the Secretary General of the STPRM, Carlos Romero Deschamps.

As Pemex takes on new challenges in deepwater exploration and production, the company begins a new era.

With these type of alliances Pemex advances the implementation of its energy reform, which allows us to work together in favor of Mexico.

***

Mexico’s Gasoline Price Lowest in LAC Region

(Energy Analytics Institute, Fidencio Casillas, 16.Jan.2017) – The average gasoline price in Mexico, the largest Spanish speaking country in the Americas, is still the lowest amongst select countries in the Latin American and Caribbean (LAC) region.

Mexico’s average gasoline price of 15.9 Mexican pesos per liter remains the lowest among select countries in the LAC region, according to data published by state oil company Petróleos Mexicanos S.A. de C.V. (Pemex). Uruguay, with an average gasoline price of 29.3 Mexican pesos per liter, is the Southern Cone country in the LAC region with the highest average gasoline price, followed thereafter by Cuba in the Caribbean and then Belize in Central America.

Country ——————— Gasoline Price in Mexican Pesos per Liter

Uruguay ——————– 29.3

Cuba ———————— 27.3

Belize ———————- 24.4

Brazil ———————– 23.7

Dominican Republic —- 23.3

Chile ———————– 23.1

Argentina —————– 23.1

Costa Rica —————- 20.2

Peru ———————— 20.2

Paraguay —————— 20.0

Honduras —————— 19.6

Nicaragua —————– 19.0

Mexico ——————– 15.9

Source: Pemex

Gasoline prices in Mexico increased — effective as of January 1, 2017 — as part of a plan by the government to boost fuel prices in line with international oil prices, said Mexican President Enrique Pena Nieto in a speech broadcast on Mexico’s Televisa television station.

***

Renaissance, Lukoil to Partner in Amatitlán Block

(Renaissance Oil Corp., 11.Jan.2017) – Renaissance Oil Corp. announced that PJSC LUKOIL, one of the world’s largest oil producers, has chosen Renaissance as their partner for the Integrated Exploration and Production Contract for the 230 km2 (56,800 acres) Amatitlán block, near Poza Rica, Veracruz, Mexico.

Highlights

— Renaissance acquires 25% indirect interest in Amatitlán contract for US$1,750,000 — Finalizing options to acquire up to 62.5% — Renaissance will take the lead role in operations — Amatitlan holds 4.2 billion barrels of oil and 3.33 trillion cubic feet of natural gas originally in place in shallower Chicontepec formation1 — Deeper oil-rich Upper Jurassic shales are highly prospective for development

About the Amatitlán Block

The Amatitlán block is located within the Tertiary aged Chicontepec paleochannel formation, in East Central Mexico. The Chicontepec formation, referred to as Aceite Terciario del Golfo in Mexico, covers approximately 3,800 km2 and contains the country’s largest hydrocarbon resource, with certified original oil in place estimated at 59 billion barrels of oil equivalent.

“The Upper Jurassic shale interval is widely considered to be the major carbonate source rock for the oilrich Chicontepec formation but the Upper Jurassic formations have not been commercially developed,” stated Renaissance Chief Geochemist Dan Jarvie. “Renaissance’s analysis indicates the Upper Jurassic interval is an oil-rich, hybrid system in the Amatitlán block and is highly prospective for targeted stacked pay development of this thick unconventional resource.”

“Innovations in drilling and completion techniques have dramatically improved recoveries in tight oil formations and shales throughout the United States and Canada”, said Renaissance Drilling and Completions Advisor Nick Steinsberger. “Our goal is to apply modern oilfield development technologies in Amatitlán to re-establish production in the underdeveloped Chicontepec formation and to commercialize the Upper Jurassic shale formations.”

Discovered in 1962, and still largely undeveloped, the main field Amatitlán has produced over 175,000 bbls of light oil ranging from 34° to 44° API with peak production of 650 bbl/d in 2005. As a result of the lack of recent drilling and development activities on the Amatitlán Block, production has currently declined to negligible volumes. The Comisión Nacional de Hidrocarburos evaluation of resources effective January 1, 20161 estimates Amatitlán contains, in the Chicontepec formation only, 4.2 billion bbls of crude oil and 3.33 trillion cubic feet of natural gas originally in place. Previous exploration wells on the Amatitlán block have shown the presence of oil and natural gas at various depths of drilling throughout the block. The Integrated Exploration and Production Contract for Amatitlán allows for the development of the full stratigraphic column, however, to date oil has been produced only from the Chicontepec formation.

Transaction Overview

Renaissance has entered into a definitive agreement with LUKOIL and Marak Capital S.A. whereby the company will acquire an indirect 25% interest from Marak in Petrolera de Amatitlán S.A.P.I., the contractor of the Integrated Exploration and Production Contract for the Amatitlán block for $1,750,000. Marak currently owns a 50% indirect interest in Petrolera, with the remaining 50% held by LUKOIL.

The company and LUKOIL have agreed that Renaissance will take the lead role in operations for Petrolera for joint development of the Amatitlán block currently held by Pemex-Exploración y Producción. The Integrated Exploration and Production Contract is expected to migrate into a Contract of Exploration and Extraction in Q4 2017 with an improved fiscal regime, pursuant to the constitutional amendments of December 20, 2013 reforming the Mexican Energy Industry. Upon closing of the Transaction, and with the expected migration to a Contract of Exploration and Extraction (“CEE”), the Amatitlán CEE will join the existing portfolio of four CEEs now held by Renaissance.

Renaissance is finalizing separate option agreements whereby Renaissance will have an exclusivity period to increase its participating interest in Petrolera up to 62.5%, by acquiring a further 12.5% from Marak and 25% from LUKOIL, upon migration of the Integrated Exploration and Production Contract to a CEE.

Renaissance expects the closing of the Transaction to occur in late January 2017.

“Renaissance, while playing the lead role in operations, is delighted to be working alongside LUKOIL in order to fully develop this high potential property,” stated Renaissance Chief Executive Officer Craig Steinke. “Amatitlán is a strong strategic fit for Renaissance as the leading independent on-shore oil field operator in Mexico with a solid technical team of global experts in shale resource development.”

***

Mexico’s Double-Digit Gasoline Price Increase

(Energy Analytics Institute, Fidencio Casillas, 5.Jan.2017) – The prices of gasoline in Mexico is set to increase gradually and up to 20 percent on average, effective January 1, 2017, although the increases were originally planned to take place in 2018, reports La Radio del Sur.

With the stipulated price increases the different octane grades of gasoline in Mexican pesos per liter will reach the following price ranges:

– Magna 87 octane: currently 13.98 pesos, to increase 18.2 percent to 16.52 pesos – Premium 93 octane: currently 14.81 pesos, to increase 24.2 percent to 18.40 pesos – Diesel: currently 14.63 pesos, to increase 17.8 percent to 17.24 pesos

In Mexico’s principal cities the price increases will be higher than the national average, La Radio reported. In cities such as Mexico City, Puebla, Monterrey and Guadalajara, the price increases will be higher as well as in certain municipalities such as the state of Mexico as revealed by Mexico’s Regulatory Energy Commission (CRE by its Spanish acronym).

Puebla will be the city with the highest gasoline prices as of January 1, 2017. In this city, located about 131 kilometers southeast of Mexico City, the price of Magna gasoline will reach 16.59 Mexican pesos per liter, up 18.7 percent or 2.61 pesos compared to 13.98 pesos before the implementation of the price increase.

The new gasoline prices in Mexico will now surpass prices in other selected countries as follows: USA (13.67 pesos/liter), Colombia (14.61 pesos/liter), Bolivia (10.77 pesos/liter), and Iraq (13.05 pesos/liter), according to La Radio.

***

Wood Group, Grupo Diavaz Form Engineering JV

(Wood Group, 9.Jun.2016) – Wood Group Mustang and Grupo Diavaz, a Mexican oil & gas operator and services company, created a joint venture engineering business to capitalize on Mexico’s energy reform.

MUSTANG DIAVAZ is based in Mexico City and will provide engineering, procurement and construction management services to onshore and offshore facilities, and pipelines for the upstream and midstream oil & gas markets in Mexico.

“We are making a long-term commitment to Mexico that includes investing in its people, growing our local project expertise and sharing our global knowledge to form a Center of Engineering Excellence,” said Wood Group Mustang CEO Michele McNichol. “Grupo Diavaz’s knowledge of the Mexican oil & gas industry combined with Wood Group Mustang’s global engineering experience will enable MUSTANG DIAVAZ to provide unmatched expertise to companies operating in Mexico.”

“MUSTANG DIAVAZ is also committed to leveraging our extensive experience and expertise to provide customers with predictable project delivery and industry-recognized safety records,” said Grupo Diavaz Chairman and CEO Luis Vazquez. “We intend to deliver exceptional services that meet or exceed our customers’ strategic objectives, providing value without sacrificing safety or quality.”

***

Pemex to Make Peso Payment to Suppliers

(Energy Analytics Institute, Fidencio Casillas, 6.Jun.2016) – Pemex is preparing to make payments of nearly 30 billion Mexican pesos to its providers, announced a company executive.

The Mexico City-based oil company paid 95 billion Mexican pesos to providers in late May 2016, reported the daily newspaper LaJornada, citing Pemex General Manager Antonio González Anaya.

“The debt with the providers was inherited from last year and will soon no longer be a problem,” said Anaya on the sidelines of a BBVA Bancomer national council meeting.

***

Pemex Gasoline Consumption At 22% of Total Vs. 8% in 2011

(Energy Analytics Institute, Fidencio Casillas, 5.Jun.2016) – The consumption of premium gasoline in Mexico has evolved favorably over the last six years with the Premium grade gaining territory on the Magna grade.

Between 2011 and 2016, the consumption of Pemex’s Premium grade gasoline within the Mexican border increased to 22 percent as of April 2016 compared to 8 percent in 2011, reported Pemex in a twitter post. Conversely, the consumption of the Magna grade gasoline was decreased to 78 percent compared to 92 percent.

Table 1: Consumption of Premium and Magna Gasoline in Mexico (% of Total)

Year —– Premium —- Magna

2011 —– 8% ——— 92%

2012 —– 11% ——– 89%

2013 —– 15% ——– 85%

2014 —– 18% ——– 82%

2015 —– 20% ——– 80%

2016 —– 22% ——– 78%

Note: Data for 2016 through April. Source: Pemex

***

Alfa Assumes $1 Bln Loss in Pacific E&P

(Energy Analytics Institute, Jared Yamin, 21.May.2016) – Mexican conglomerate Alfa considers its entire $1 billion in investment in Pacific Exploration & Production — the Canadian oil company with operations in Colombia — as a total loss after the oil company announced plans to restructure its debt with a private fund, reported Reuters, citing an unnamed company executive.

In April of 2016, Pacific reached an agreement with its creditors and Catalyst Capital Group investment fund related to its financial restructuring. The deal, expected to conclude during the third quarter of 2016, left Alfa out of the process.

The agreement with creditors practically made them owners of Pacific by diluting the stockholder’s participation down to zero, said Alfa General Director Álvaro Fernández.

Alfa’s investment in Pacific fell to $38 million in the first quarter of 2016 due to the fall in oil prices. Alfa invested $1 billion in the Pacific in 2014 to acquire a 19 percent interest in the company.

***

Pemex To Boost Crude Exports to Japan

(Energy Analytics Institute, Fidencio Casillas, 11.May.2016) – Pemex plans to boost its shipments of crude oil to Japan after reaching agreements with clients including Cosmo Oil, JX Holdings and TonenGenera, reported Reuters citing an anonymous company contact and commercial data.

Pemex normally sends close to 1 million barrels per month of Maya crude to Cosmo Oil under an existing supply contract. However, the company plans to send various extra export shipments in May and June of 2016, said the contact.

Shipments of Maya crude were destined to arrive to Japan in mid-to-late May 2016 after loading at the Dos Bocas and Salina Cruz terminals in Mexico, according to the data.

***

IFC, China-Mexico to Invest $200 Mln in Citla

(IFC, 21.Apr.2016) – International Finance Corp. (IFC), a member of the World Bank Group, and the ChinaMexico Fund (CMF), a $1.2 billion private equity fund managed by the IFC Asset Management Company (AMC), will invest $200 million in Citla Energy, SAPI de CV (Citla or Citla Energy), a Mexican independent oil exploration and production (E&P) company sponsored and controlled by affiliates of ACON Investments, L.L.C. (ACON).

IFC will commit an equity investment of $60 million and CMF will commit $140 million. The $200 million investment is IFC’s and the CMF’s first investment in Citla Energy as part of a greater equity financing package provided by ACON, which includes capital from Mexican pension funds through a CKD managed locally by ACON.

Founded by ACON in 2015, Citla is actively building a portfolio of selected E&P assets in Mexico, both independently and in partnership with other industry participants.

Mexico is one of the leading oil and gas producers in the world, yet faces a consistent decline in output due primarily to underinvestment. A groundbreaking constitutional reform passed in 2013 aims to promote private sector involvement in the Mexican oil industry through an unprecedented market liberalization coupled with the mobilization of resources by Pemex, among other measures. This investment is a result of the attractive economic conditions fostered by the reform.

Citla is uniquely positioned to develop a balanced portfolio of oil and gas assets, thereby opening up new hydrocarbon discoveries in the region, spurring broader participation of local companies and triggering economic stimulus and growth for the country. Citla’s portfolio expansion and growth will be achieved through bidding awards, acquisitions, farm-ins and partnerships with other operators.

“This investment reinforces Citla’s position as an independent and institutional platform with resources to access carefully selected opportunities of the Mexican Energy Reform,” said Citla CEO Alberto Galvis.

As Mexico opens its oil and gas sector to private competition, IFC’s goal is to support new players that combine strong sector expertise, local and global know-how, and adequate capitalization, and Citla Energy reflects all them. With this investment, IFC, AMC, Citla Energy and ACON send a strong signal of confidence in the Mexican Energy Reform agenda, said IFC Mexico Country Manager Ary Naim.

IFC’s strategy in Mexico focuses on supporting private sector investment to accelerate growth, improve competitiveness, foster social inclusion, and reduce poverty. As of Fiscal Year 2015, IFC’s portfolio in Mexico totaled $1.4 billion representing investments in 57 companies. Mexico ranks seventh for IFC in terms of investment volume in a single country.

***

Pemex and Mexichem Inform the Loss of 13 Workers

(Pemex, 21.Apr.2016) – Pemex’s CEO, José Antonio González Anaya; Civil Protection National Coordinator from the Ministry of the Interior, Luis Felipe Puente, and Mexichem’s CEO, Antonio Carrillo, covered the Clorados 3 Plant of Petroquímica Mexicana de Vinilo (PMV) located in Coatzacoalcos, which is operated by Mexichem and co-owned by Pemex.

Unfortunately, 13 workers lost their lives during the incident. As of this moment, 88 people remain hospitalized at Pemex and at the Mexican Social Security Institute facilities, 13 of which are in critical condition.

Once the affected equipment cooled down, the executives verified safety conditions. After this, they visited hospital units to supervise that injured are receiving the appropriate care.

Expert parties have begun investigations to determine what caused the accident.

Moreover, air quality continues to be monitored in order to determine the existence of toxic substances that could endanger health, which continue to be ruled out.

***

Pemex: PMV Plant in Coatzacoalcos Under Control

(Pemex, 20.Apr.2016) – The current situation in the Clorados 3 Plant of Petroquímica Mexicana de Vinilo’s (PMV) in Coatzacoalcos, is under control and presents no risk to the population.

This was pointed out during a press conference by Pemex CEO José Antonio González Anaya; the Governor of Veracruz, Javier Duarte; the National Coordinator of Civil Protection of the Ministry of the Interior, Luis Felipe Puente, and Mexichem CEO Antonio Carrillo. Mexichem operates the plant in partnership with Pemex.

In total, 136 injured workers were admitted to different Pemex and IMSS hospitals, of which 48 have already been discharged and 88 remain hospitalized.

Immediately after the explosion, safety protocols were activated, shutting down all pipes and valves, and proceeding to the evacuation of the plant.

In addition, the air quality was monitored to determine the existence of any substance that could represent a health risk, which was ruled out.

Medical care for the affected was established in close coordination between Pemex, the IMSS and the Ministry of Health, as well as between federal and state authorities.

Governor Duarte acknowledged the professionalism and quick response from security crews and civil protection systems, as well as Pemex brigades.   In turn, the National Coordinator of Civil Protection said that 2,000 people were evacuated from surrounding areas, which have already returned to their homes, and highlighted the support of the Army, Navy, Federal Police and state and municipal police who cordoned off and secured the area.

***

Finance Ministry, Public Credit Support Pemex

(Pemex, 13.Apr.2016) – Given the difficult situation of global low oil prices, Pemex faced a liquidity problem, while not a solvency one. In this context, Pemex continues to focus on two main courses: the adjustment of its cost structure and the implementation of a business strategy based on the Energy Reform’s new instruments to attract investment.

In this context, the Federal Government, through the Ministry of Finance and Public Credit (SHCP), announced the following mechanisms to support the company:   1) The injection of liquid instruments by 73.5 billion comes at an opportune time for the company given the difficult situation being experienced by the global oil industry.

Pending authorization by its Board of Directors, Pemex has committed to use said support for the following:

— In this and subsequent fiscal years, reduce and regularize payments to suppliers and contractors to maintain an adequate current liabilities level given the company’s operations.

— And coupled to the 15 billion pesos credit obtained from Mexican development banks, fulfill the company’s 2015 pending accounts payable to suppliers, based on the agreed payment schedule.

2) Reduction of the fiscal burden by approximately 50 billion pesos to diminish the company’s financial deficit, which will allow to reduce the funding needs in the same amount, improve liquidity indicators by strengthening the cash balance and the company’s capital structure, in addition to improving the debt trajectory for the year.

The budget adjustment plan approved by the Board of Directors and undertaken by the company last February, combined with the support measures recently announced by the Federal Government, set the ground for the company’s profitability and enable it to fully meet its obligations and decrease its future liabilities.

All of these actions strengthen Pemex’ outlook and consolidate it as an attractive and reliable partner to develop the national energy industry.

***

Searcher Working on South Campeche 3D Seismic

(Searcher Seismic, 7.Apr.2016) – Searcher Seismic announced the South Campeche Ultracube 3D seismic reprocessing project offshore Mexico.

The seismic project, totaling approximately 6,834 square miles (17,700 square kilometers), is a merge of three existing surveys. The Holok Alvardo 3D (2003), the Cequi 3D (2010) and the Boloi Norte-Balche-Xulum 3D (2003).

Rachel Masters, global sales manager for Searcher, said the project is located in one of Mexico’s most prominent offshore exploration areas, with several proven oil and gas discoveries.

“The new 3D Ultracube extends over 162 miles (260 kilometers) in the southern part of the Campeche Bay area and will provide new depth imaging of the Southern Campeche — Sigsbee Basin and also parts of the offshore Comalcalco Basin,” said Masters. “The southern part of Mexican Ridges in the Veracruz Basin are also covered by the new South Campeche Ultracube. An important factor to note, in this low oil-price environment, is 75 percent of the South Campeche Ultracube is located in waters less than 3,281 feet (1,000 meters) in depth; with the shallowest water depth being approximately 98 feet (30 meters).”

The South Campeche Ultracube includes coverage of areas in Rounds 2 and 3 and is competitively priced for oil companies to utilize in their exploration efforts.

The project incorporates a very thorough pre-stack imaging and post-stack processing sequence staged in two parts.

Searcher Seismic announced the South Campeche Ultracube 3D seismic reprocessing project offshore Mexico. Wood Group Mustang and Grupo Diavaz created a joint venture engineering business to capitalize on Mexico’s energy reform.

Firstly, the pre-processing produces high S/N ratio, broadband data and secondly, imaging using TTI Kirchhoff and RTM technologies to properly image the subsurface, often with extensive salt pillows and diapirs.

ARES B approval has been granted and processing of the project will commence shortly.

Fast track products are expected to be available in approximately 6 months and final volumes will be available in second quarter of 2017.

***

Keppel FELS Delivers Another Two Rigs

(Keppel FELS, 27.Mar.2016) – Keppel FELS Limited (Keppel FELS), a wholly owned subsidiary of Keppel Offshore & Marine Ltd (Keppel O&M), delivered two jackup rigs to Mexican company, Grupo R.

Built to Keppel’s proprietary KFELS B Class design, the rigs, CANTARELL I and CANTARELL II, will be chartered to PEMEX, Mexico’s national oil company, for operations in the Cantarell oil field in offshore Mexico. They are the first two of five jackup rigs that Keppel FELS is building for Grupo R.

“Despite the current low oil price environment, the market continues to prefer safe and efficient rigs with a proven track record like our KFELS B Class,” said Keppel O&M (Offshore) and Keppel FELS Managing Director Wong Kok Seng.

With the two rigs delivered, there will be 10 KFELS B Class rigs working in Mexico, two of which are directly owned by Pemex. It is the dominant rig design in the region, with those already in operation turning out robust, efficient and economical, performances for Mexico.

The KFELS B Class jackup is designed to operate in water depths of up to 400 feet and drill to depths of 30,000 feet. Developed by Keppel’s Offshore Technology Development (OTD), the KFELS B Class jackup is equipped with an advanced and fully-automated high capacity rack and pinion jacking system, and Self-Positioning Fixation System. It has accommodation with full amenities for 150 persons.

Keppel has delivered projects to Mexico since 2004 when it was awarded a contract to build two accommodation modules. Besides building new jackup rigs for Mexico, Keppel has also repaired and serviced a total of 18 rigs that have been deployed in Mexico.

With the deliveries, Keppel FELS has delivered three rigs in 2016 to-date.

***

Launching of Floatel for Pemex

(Pemex, 28.Aug.2015) – The vessel will have the capacity to accommodate 700 platform workers.

The accommodation vessel (floatel, floating hotel) built to service Pemex’s platforms, was launched at Navantia’s shipyard in Ferrol, Galicia. It will be completed and delivered next year.

The current progress of the construction of the floatel is 65%, which means an advancement of 2months from the date stipulated in the agreement signed in Mar.2014.

The work will focus now in completing the installation of piping, wiring and commissioning of systems for energy generation, propulsion, communications as well as subsequent tests at sea.

The Chairman of the Board of Directors of Pemex Comercio Internacional, (PMI) and Corporate Director of Partnerships and New Business of Pemex, José Manuel Carrera, noted that the launching represents a significant event for Pemex, as part of its strategy to maintain and, in the medium term, increase its production in oil fields at the Gulf of Mexico.

He recalled that this floatel is one of two vessels for Pemex to provide accommodation to workers, which began construction in March of last year at the shipyards of Navantia and Hijos de J. Barreras, in Galicia.

In the event, José Manuel Revuelta, president of Navantia, asserted that this shipyard is leader and world reference in the design, construction and integration of high-tech vessels.

The floatel, whose construction involved more than one million hours of work, is a multipurpose ship with high technology and dynamic positioning DP3, with capacity to accommodate approximately 700 workers from the oil rigs over long periods of time. It has cabins, dining rooms, recreation rooms, as well as a telescopic gangway to allow the direct passage of personnel to the supported platforms.

***

Pemex Responds to Moody’s Press Release

(Pemex, 25.Aug.2015) – Moody’s Investors Service placed Pemex’s global foreign currency and global local currency A3 ratings under review for a possible downgrade. In this regard, Pemex makes the following remarks:

Pemex, along the entire oil and gas industry has been affected by the substantial decline in international oil prices that began in Jun.2014. Particularly, the Mexican Mix recorded its lowest level since 18.Feb.2008 ($33.71/bbl). In this regard, during that past twelve months, eight of the main global oil and gas companies have either been put to review for downgrade in their credit ratings or on negative watch.

In response to an environment of lower oil prices, Pemex announced in Feb.2015 a MXN 62 bln cut to its 2015 budget, always committed on minimizing the potential effects on production and reserves replacement. And as an example, on 10.Jun.2015, Pemex announced the discovery of new oil deposits, with estimated reserves of 350 MMboe.

Additionally, the company has also been working on several fronts to contain and reduce costs, including the renegotiation of contracts with suppliers, and reductions in costs of personnel services.

Furthermore, and regarding our pension liability, Pemex and the Union met in a timely manner the requirements set forth in the Third Transitory Article of the decree by which several provisions of the Federal Law of Budget and Fiscal Accountability, and the General Law of Public Debt are amended, supplemented and abrogated, having reached an administrative agreement with the Union on 11.Aug.2015, that sets forth the foundations to reduce the pension liability of the company within a period not exceeding 90 calendar days.

Savings generated due to these changes will represent a substantial improvement in the capital structure of the company, not only due to the result of the modifications to the pension scheme, but also by the amount of said liability that will be covered by the Federal Government, in accordance with the Third Transitory article referred to above.

It is important to highlight that Pemex will address the decrease in its revenues with the different instruments made available by the Energy Reform, and with the responsible use of its debt. In particular, the Reform allows the company to associate with third-parties in several ways to carry out its investment projects while maintaining control and ownership of the associated operations.

As part of this strategy, we are working with the Federal Government to carry out the migration of assignments to contracts, and partnerships with third-parties in the areas of exploration and production (farm-outs), as well as new incentivized contracts for the development of fields. Similarly, there are important partnership projects in other areas of the value chain, such as industrial transformation and logistics, which will be disclosed in the upcoming months.

To address the challenges associated with the fall in oil prices and the uncertainty of its duration, Pemex will use every tool available by means of the Energy Reform to improve the financial condition of the company, minimize the effect of current adverse conditions, and reaffirm itself as a pillar of national development.

***

Pemex Looks to Improve Diesel Production

(Pemex, 14.Aug.2015) – The exchange of light crude between the U.S. and Mexico will improve the production of diesel and gasoline in the country.

Pemex has been notified of the approval of the application submitted to the Bureau of Industry and Security, Department of Commerce of the United States, earlier this year for a proposed exchange of crude oil, in order to import up to 100 Mb/d of light crude and condensates that will prove highly beneficial to the country since it will allow Pemex to mix them with local heavy petroleum and improve the process of fuel production in the Salamanca, Tula and Salina Cruz refineries.

Mexico produces mostly heavy crude oil, while the refineries mentioned above are configured to process light crude. This affects the industrial performance of these refineries, leaving Pemex with a high residual of fuel oil that is difficult to place at a good price in the international market and its consumption in domestic power plants is poorly competitive and inconvenient for the environment.

With the availability of light crude from the U.S., Mexico will be benefited, since Pemex will make mixtures of light and heavy oils which will result in increased production of gasoline and diesel, less volume of fuel oil, and will have better quality fuels that will benefit the environment.

The oil agreement will exploit logistical synergies which will reduce the transportation costs of raw materials.

Pemex will continue exporting oil to the U.S. for processing in US refineries that specialize in heavy crude, such as the one mostly produced by Mexico. In the first 7-months of 2015, total exports to various countries was 1.164 MMb/d, including just over 700 Mb/d to the U.S.

This exchange of crudes will strengthen trade relations between Mexico and the United States.

***

Pemex, STPRM to Review Collective Agreement

(Pemex, 11.Aug.2015) – Pemex and the Petroleum Workers Union of the Mexican Republic (STPRM, Sindicato de Trabajadores Petroleros de la República Mexicana) agreed to a 1-month extension for the review of the Collective Bargaining Agreement (CCT, Contrato Colectivo de Trabajo) that will regulate the employment relationships in the biennium 20152017; thus, the Joint Hiring Commission will continue in session.

As part of this review, both sides agreed to continue the meetings within a framework of harmony, analyzing different topics in order to provide viability to the company in the future, ensuring its growth in a competitive environment arising from the Energy Reform.

Pemex has demonstrated to be, at all times, sensitive to the uneasiness and concerns raised by the workers, as it seeks to preserve the balance between the legitimate rights of the workforce and the financial situation of the company.

It is worth noting that the Joint Hiring Commission was installed on 16.Jun.2015 and on 30.Jul.2015 an extension for the review of the Collective Bargaining Agreement was requested.

***

Pemex Reports on Pipeline Fire

(Pemex, 11.Aug.2015) – The fire registered today in the Escobedo-Santa Catarina pipeline, in the municipality of García in Nuevo León, was caused by a blow from machinery that belonged to a private company at a construction site outside Pemex.

Unfortunately, the death of 5 employees of the contractor has been confirmed.

The fire remains under control and will continue burning while the remaining gas that was enclosed in the section of the duct after the isolation valves were shutoff, is consumed.

***

BOD of Pemex Drilling and Services Installed

(Pemex, 11.Aug.2015) – At the installation session of the Board of Directors of the new Productive State-owned Subsidiary (PSS) Pemex Drilling and Services (Pemex Perforación y Servicios), the organic statute containing its organization and functions was approved, and it will come into force once it is published in the Official Gazette of the Federation.

This is an important step in the approval process of new Productive State-owned subsidiaries of Pemex, which were established as business lines with the purpose of generating economic value.

In previous days, the Board of Directors of Pemex approved the appointment of José Serrano Lozano as CEO of Pemex Drilling and Services, a company that will provide services for drilling, completion, repair and well services complying with quality, time, cost, safety, health and environmental protection standards.

For its part, the Board of Pemex Drilling and Services approved the appointments of the heads of the areas of the new PSS: José Gilberto Silva Garcia as Deputy Director of Operations and Interventions to Wells, and Pedro Virgilio Sánchez Soto as Deputy Director of Wells Engineering and Business Development.

In this regard, and with the consolidation of the Energy Reform, we have identified great potential for activities that require the services of the new company both in Pemex Exploration and Production as in the operators that undertake activities in the country.

Pemex Drilling and Services’ projects are part of Pemex’ business strategy of creating value and profitability. The company faces the challenge to improve its operations and provide quality services, as it is designed to be a major competitor in the industry, with both a national and international perspective, and being evaluated primarily on the basis of its financial results.

***

Court Grants Appeal to Pemex

(Pemex, 10.Aug.2015) – The Second Joint Civil Court of the Third Circuit, based in the city of Guadalajara, granted the appeal filed by Pemex thus declaring the absence of damages claimed by the company Bardahl de México SA de C.V.

The above sentence is of utmost importance in the context of the Energy Reform, providing legal certainty to trade relations in the sector.

In 2007, Bardahl promoted a lawsuit against Pemex-Refining claiming, among other benefits, payment of damages resulting from monopolistic practices in the market of oils and lubricants.

After 8-years of litigation, the Joint Court ruled unanimously that there were no damages, nor was their existence credited, therefore Pemex must be absolved of carrying out any payment.

***

Pemex Dismantles Group With Conflict

(Pemex, 6.Aug.2015) – Pemex dismantles group composed of companies and public officials that had a conflict of interest in million-dollar contract.

An investigation carried out by the Unit of Responsibilities of Pemex’ Internal Control Unit, led to the identification and acknowledgement of the participation in unlawful acts of Pemex Exploration and Production (PEP) personnel.

Since the beginning of the investigation, Pemex CEO’s Office instructed to provide support and full cooperation to the Unit of Responsibilities of the Ministry of Public Administration (Secretaría de la Función Pública, SFP) in the name of fighting corruption and conflict of interest.

The investigation revealed that the official José Aroldo de Hoyos Morales was responsible for overseeing the work of the contract signed by PEP and the consortium Chamsa Grupo Corporativo S.A. de C.V. and Mava Group Inc., and that he is a partner in the subcontractor company, Encino Integrated Services LLC, along with Eduardo Javier Natividad Maqueda, who is also the president of Mava Group.

This contract consisted of the installation of coiled tubing bonding and operations with coiled tubing equipment in oil wells at assets in the Northern Region, amounting to over MXN 100 mln and just over $21 mln, not including VAT.

Despite the obvious conflict of interest that De Hoyos Morales faced, he did not apologize for intervening in overseeing the contract that benefited his partner; furthermore, he did not report this to Pemex, nor in the declarations submitted to the SFP.

Therefore, the Unit of Responsibilities decided to dismiss José Aroldo de Hoyos Morales and disable him for ten years, in addition to presenting the corresponding criminal complaint before the Office of the Mexican Attorney-General (Procuraduría General de la República, PGR) for conducts possibly constituting as crimes committed by former public officials and active workers in the State-owned Productive Company. Likewise, an audit is carried out for all the work performed and paid to the company in order to determine responsibilities.

***

Pemex, Union Agree to Review Collective Deal

(Pemex, 30.Jul.2015) – Pemex and the Petroleum Workers Union of the Mexican Republic (STPRM) agreed to an extension in reviewing the Collective Bargaining Agreement (CBA) that will regulate the employment relationships in the biennium 2015-2017.

All topics of the CBA stated by both parties have been reviewed and agreed upon, with emphasis on aspects that help to increase productivity and competitiveness of the state-owned productive company.

The Company-Union negotiation table will continue and its activities shall conclude by August 12, 2015.

***

Pemex Signs With Santander for Banking Services

(Pemex, 28.Jul.2015) – Pemex and Banco Santander signed a collaboration agreement to provide credit and banking services to gas stations comprising the network of service stations nationwide.

The agreement will provide Pemex franchisees access to banking services as Point of Sale (POS) systems, referenced deposits, electronic banking, payroll, transfer and management of securities.

Pemex, through the Commercial Managing Direction of Refining, has been working with the national banking system to join forces in the new context derived from the Energy Reform; and, specifically, in the field of banking services in support of the station network of franchised services.

In that sense, a central element in the new competitive environment is the possibility of partnerships with other companies, in this case of the national banking sector, in which all parties win.

Thus, this agreement is one of the efforts of partnership between Pemex and the national banking system, which resulted in the signing of the first agreement of collaboration with financial institutions that will be beneficial to more than 11 thousand service stations and will be extended to other banks.

Consequently, Santander becomes a strategic partner for gas stations, with banking products specially designed to meet their needs, stated Chief Executive of Grupo Financiero Santander México, Marcos Martínez Gavica, who mentioned that these financial schemes will boost entrepreneurs in the industry.

He stressed that to be able to meet the credit needs of Pemex franchisees, there is a starting fund of 20 bln pesos, which adds to the resources of more than 130 bln pesos announced by this financial group to support investment projects related to the structural reforms that are being implemented in the country.

Likewise, credit letters will be offered to entrepreneurs to ensure fuel supply to Pemex.

***

Pemex to Supply Isthmus Crude to Japan

(Pemex, 24Jul.2015) – Pemex, through P.M.I. Comercio Internacional (PMI), and the largest refining company in Japan, JX Nippon Oil & Energy Corporation, agreed to ship 6 MMbbls of Isthmus crude oil through 6 cargoes beginning in Aug.2015 and until Jan.2016, from the Salina Cruz maritime terminal located in the state of Oaxaca.

The contract is additional to the occasional cargoes shipped during the 1H:15 for an approximate volume of 4 MMbbls to JX Nippon, which has a total refining capacity of 1.3 MMb/d in its 7 refineries located in Sendai, Kashima, Negishi, Osaka, Mizushima, Marifu and Oita.

These operations contribute to the consolidation of Mexico as an important oil supplier in the Far East, region with the highest growth globally, where Pemex provides alternative sources of supply through contracts with refiners in China (Unipec/ Sinopec) and South Korea (Hyundai).

***

Pemex, Sedatu Sign Cooperation Agreement

(Pemex, 22.Jul.2015) – Pemex and the Ministry of Agrarian, Land and Urban Development (SEDATU), through the Agrarian Attorney’s Office (PA), signed a Cooperation Agreement to establish mechanisms for information, advice and training so that the hydrocarbon exploration, extraction and transportation projects are carried out according to the legal framework and in full compliance with the rights of agricultural subjects.

The agreement emphasizes counseling and conciliation tasks that the Agrarian Attorney’s Office will carry out pursuant to the powers and authority conferred to it by the Hydrocarbons Law and, in its capacity as agrarian ombudsman, to safeguard the rural assets in the contracts and agreements to be entered into by the community land owners and Pemex.

The Agreement also determines that the Agrarian Attorney’s Office, together with the members of Pemex’s Work Operating Committee, will have the actions and mechanisms available for settling, preferably by conciliation, any dispute derived from the relationship developed by the agrarian subjects with Pemex.

The event was led by the Head of the Agrarian Attorney’s Office, Cruz López Aguilar, and the Corporate Director of Administration and Services of Pemex, Víctor Díaz Solís, who emphasized the importance of the Agreement, stating that, although it has been crystallized after 11 years of procedures, this is the most opportune moment to promote investment and economic development of communities and communal lands orejidos.

The Attorney’s Office will provide information on the legal status of land ownership in order to prevent possible conflicts with the agrarian communities in the development of hydrocarbon-related projects and works. Pemex may request the intervention of the Agrarian Attorney’s Office to support conciliation and other alternative means of settling possible disputes.

López Aguilar said that the Agrarian Attorney’s Office has promoted, throughout this administration, different actions of training and professionalization for the officials who make up its territorial structure, as well as through specific courses at the National School for Agricultural Development Studies (ENEDA), in order to meet the challenges derived from the Energy Reform.

Meanwhile, Díaz Solís said that this Agreement takes place at the right time, as Pemex is changing at a rapid pace and developing new business lines, such as those of ethylene, fertilizers and power cogeneration, among others, therefore, it will be crucial to have the support of the Agrarian Attorney’s Office, he stated.

***

Pemex, OECD Promote Best Procurement Practices

(Pemex, 20.Jul.2015) – Pemex, through its Corporate Office of Procurement and Supply, signed an agreement with the Organization for Economic Cooperation and Development (OECD) that will enable Pemex to adopt the best international practices in procurement, and promote the efficient and transparent management in its processes.

This agreement comprises a comparative study on the efforts undertaken by Pemex in this area, as well as its procurement and supply business model.

The study will be conducted in three stages, focusing on: i) the analysis of the regulatory framework and business rules approved; ii) the analysis of practices to promote transparency and ethics in procurement; and iii) revising Pemex’s relationships with suppliers and contractors.

The agreement also considers training Pemex personnel by the OECD on transparency and ethics matters, designing procurement procedures and collusion-risk mitigation.

Pemex’s Corporate Director of Procurement and Supply, Arturo Henriquez, emphasized that this agreement would contribute to the creation of a work culture focused on creating value, in compliance with the transformation process adopted by Pemex.

In addition, Jacobo Pastor García Villarreal, Senior Specialist in Integrity and Public Procurement Policies of the OECD said that public procurement is a crucial pillar of corporate governance. Given the volume of expense they represent, he said, they should have an important role in public sector efficiency and generate public confidence.     Well-designed public procurement systems also contribute to achieving other public policy objectives, such as environmental protection, innovation, job creation and development of Small and Medium Sized Enterprises (SMEs), he said.

***

Pemex Cogeneration and Services BOD Installed

(Pemex, 30.Jun.2015) – The organic statute containing the organization and functions of the new productive state¬-owned subsidiary Pemex Cogeneration and Services was approved during the installation session of the Board of Directors.

The statute will become effective after its publication in the Official Gazette of the Federation.

This is one of the first structures approved for the new Pemex’s productive state¬-owned subsidiaries that were established as business lines with the purpose of value creation. On previous days, the Board of Directors of Petróleos Mexicanos approved the appointment of Eleazar Gómez Zapata as CEO of Pemex Cogeneration and Services, which will be responsible for exploiting the cogeneration potential of the company in order to increase operational efficiency and reliability in the production processes, and benefit from the economic, energy and environmental perks of the new electricity market derived from the Energy Reform.

In addition, the Board of Directors of Pemex Cogeneration and Services approved the appointments of the heads of the areas of this new subsidiary: Raquel Buenrostro Sánchez in Planning and Development; Alberto Elizalde Baltierra in Project Execution; Roberto Osegueda Magaña in Operations, and Rodrigo Sánchez Revilla in Marketing.

In this regard, a potential for cogeneration close to 5,000 megawatts has been identified in several areas of Pemex. Projects are currently being developed in the Cactus Gas Processing Complex; the Tula, Cadereyta, Salina Cruz and Minatitlán refineries, as well as in the Cangrejera and Morelos (Coatzacoalcos) petrochemical complexes in, with an estimated total investment of 6 billion dollars.

Cogeneration projects are part of Pemex’ business strategy oriented toward the mitigation of greenhouse gases. With the startup of operations of the aforementioned projects, an annual reduction of 15 million tons of CO2 is estimated nationally.

***

Pemex Attends Contingency at Akal-H Platform

(Pemex, 22.Jun.2015) – Specialized Pemex staff is taking care of the oil and gas leakage incident that occurred in the satellite platform Akal-H in the Campeche Sound. Fortunately, there are no injuries to report.

The three workers carrying out a routine inspection were evacuated in a timely and secure manner from the platform, which is an unmanned facility operating automatically.

Four firefighting boats are on-site and extinguished the fire immediately.

Pemex Exploration and Production’s authorities are at the Response and Emergency Care Center (CRAE: Centro de Respuesta y Atención de Emergencia, for its acronym in Spanish) in Ciudad del Carmen, Campeche, coordinating the control tasks.

An analysis will be carried out to determine the cause of the incident.

***

Pemex, STPRM Review Collective Labor Deal

(Pemex, 16.Jun.2015) – Petróleos Mexicanos (Pemex) and the Petroleum Workers’ Union (STPRM, Sindicato de Trabajadores Petroleros de la República Mexicana, for its acronym in Spanish) started negotiations for the revision of the Collective Bargaining Agreement 2015-2017, which will come into force on 1.Aug.2015.

Emilio Lozoya, CEO of Pemex, stated that the company’s employees are its greatest asset, who, he affirmed, have stood out for their dedication, professionalism and commitment.

He pointed out that this is the first revision of the Agreement after the approval of the constitutional reform that has transformed the structure of the Mexican oil and gas industry. In this regard, he acknowledged that the challenge lies in adjusting labor relations to the new reality.

The challenge we face today is to transform Pemex into the most competitive company in the industry and an international benchmark; and for this, he said, we will have the active participation of workers.

After indicating that through the institutional and responsible dialogue in this revision process of the Collective Bargaining Agreement Pemex will be strengthened, Lozoya assured that the labor rights of the workers will be fully respected.

In turn, the Secretary-General of the Union, Senator Carlos Romero Deschamps, reiterated the willingness of the oil workers to support the transformation of Pemex and he emphasized that they are prepared to face the challenge of competition in an open market.

We have come, he stated, with full willingness, a constructive spirit and deeply interested in Pemex’s great performance; which today, as a productive State enterprise, will be consolidated as a highly competitive entity. “We are convinced that the greatest asset to achieve these goals is the quality of its human capital.”

Romero stated that in face of the interests that have tried to devalue the responsible stance of the oil workers at this stage of transition, the Union reiterates its willingness to engage in an open and purposeful dialogue. We know, he stressed, that there are others who would like to see in us the stridency of those who, unable to agree, opt for scandal.

Likewise, he argued that the Union has been a factor of labor stability and will now be an essential support in this new stage of Pemex, in which it will remain a pillar of development.

Both Lozoya and Romero expressed confidence that the company and the Union will lead this revision to fruition in order to improve the labor conditions of workers.

The Collective Bargaining Agreement governing Pemex was first signed in 1942 and has been revised 34 times.

***

Environmental Protection Key Pemex Element

(Pemex, 14.Jun.2015) – Maintaining or improving competitiveness in the oil industry will increasingly require a better environmental performance. Therefore, environmental protection is currently one of the key elements in the company’s business strategy along the value chain, Emilio Lozoya, CEO of Petróleos Mexicanos (Pemex), stated at the “Pemex-2015 5th Environmental Conference.”

In the presence of Mexico’s Secretary of Energy, Pedro Joaquín Coldwell, and Mexico’s Secretary of Environment and Natural Resources, Juan José Guerra Abud, Lozoya stated that in addition to the progress in the mitigation of greenhouse gases, guidelines are being carried out to implement the integrated management of waste, prevent leaks and spills, promote an efficient use of water, and remediate contaminated sites.

“We must be fully aware that in the current circumstances, in today’s world, competitiveness unquestionably includes an environmental aspect, both by regulatory requirements and by society’s demands,” he declared.

For his part, Pedro Joaquín Coldwell, Secretary of Energy, assured the federal government’s commitment to environmental sustainability, as one of the main pillars of the country’s economic growth.

Therefore, he specified, the Legislature included within the provisions of the Energy Reform, the National Agency for Industrial Safety and Environmental Protection for the, Hydrocarbons Sector (ASEA), a specific regulator for the sector, will oversee that the rules for safety and environmental protection are strictly complied. “We have clear rules so that the exploitation of hydrocarbons complies with environmental and social criter”ia.

He highlighted the work of Pemex in this area, because it is not only committed to competitiveness and modernization, but, he assured, has prioritized the social and environmental responsibility as a fundamental pillar of development.

During his speech, the Secretary of Environment and Natural Resources emphasized that solving global climate change is one of the most important challenges humanity faces; he pointed out that the present administration has taken steps to reduce greenhouse gases emissions, undertaking them by the same energy sector under the leadership of the Ministry of Energy and Pemex.

Likewise, Guerra Abud congratulated Pemex for its actions against climate change, and emphasized that the company has always given priority to safety and environmental care.

The challenges to evaluate the emergency responsiveness, sustainability as a business strategy in the energy sector and environmental regulation in shale gas, were among the topics discussed during the conference. Moreover, legal panels were featured in which the challenges and opportunities of the takeover of ASEA, and the initiative of National Water Law were analyzed.

In the event, Pemex’s production assets and workplaces’ achievements in terms of environmental protection and sustainable development during the 2013-2014 period, were recognized.

***

Pemex Finds New Oil Deposits in GOM

(Pemex, 10.Jun.2015) – Emilio Lozoya, CEO of Petróleos Mexicanos, announced the first hydrocarbon discoveries made took advantage of the new tools provided by the Energy Reform. This is the first tangible result in exploration activities, after the approval of the reform in Aug.2014.

Taking into account the short period for its development and the size of the deposits found, these discoveries represent the greatest exploratory success of Pemex in the last 5 years after the TsiminXux and Ayatsil discoveries.

At the opening of the Mexican Petroleum Congress, Lozoya specified that there are four new fields with important hydrocarbon potential in shallow waters of the area known as Litoral of Tabasco and to a structure near the Cantarell complex to start production within approximately 16 months and achieve a stable production platform 20 months later.     In this sense, an incremental production of at least 200,000 b/d of crude oil and 170 MMcf/d of gas is expected.     From the aggregate amount mentioned, 100,000 b/d and about 80 MMcf/d could be produced in the Campeche sound which could be incorporated into production in the short term due to their proximity to other fields’ infrastructure, and will help revert the declining trend of this area.

Furthermore, the discoveries made in the Litoral of Tabasco provide an additional production of about 100,000 b/d of light oil and 90 MMcf/d.

The CEO of Pemex stated that the characterization studies estimate the existence of total reserves in these oilfields of nearly 350 Mmboe.

Lozoya pointed out that these discoveries are a result of recent exploration works carried out by Pemex, using cutting edge technology both desk and field with better seismic definition.

Petróleos Mexicanos is achieving one of its strategic objectives by increasing inventory reserves based on sustainability criteria and competitive discovery costs, said Lozoya.

***

Mexican Petroleum Congress Opens

(Pemex, 10.Jun.2015) – The Ministry of Energy (SENER), Pedro Joaquín Coldwell, opened the 10th Mexican Petroleum Congress at the Guadalajara Expo, which brought together 270 national and international companies with more than eight thousand participants from 12 countries.

The event was attended by the CEO of Pemex, Emilio Lozoya, and the governor of Jalisco, Aristóteles Sandoval.

“We, Mexicans, are now facing a new paradigm in the oil and gas sector where new players are taking part in the production chains of hydrocarbons,” said the head of SENER, who claimed that this trend will intensify in the coming months.

After announcing the first discoveries of hydrocarbons made taking advantage of the tools provided by the Energy Reform, Emilio Lozoya stated that Pemex is transforming from its very basis the in which it operates, in order to focus on generating economic value throughout its activities.

In this sense, he outlined four main lines of actions for this change to become effective: create a corporate cultural change to achieve high performance; drive operational practices to optimize the use of resources; establish a process management that eliminates inefficiencies and duplication; and maximize the profitability of activities, increasing competitiveness.

Additionally, the Congress President and Operating Chief of Pemex Exploration and Production, Gustavo Hernández, pointed out that the Energy Reform will enable an increase on production of hydrocarbons, improving costs in a scheme in which private companies will complement the investment of Petróleos Mexicanos through contracts for exploration and extraction of oil and gas.

Likewise, he observed, that better results will be obtained on competitive conditions in the refining, transportation and storage of produced hydrocarbons.

Thus, he added, Pemex will be strengthened by being able to associate with national and international companies to develop new projects or optimize developing projects that are already being operated on its own.

Afterwards, the Governor Sandoval Díaz thanked the Congress in Jalisco and noted that the event will enable the exchange of ideas and experiences for the benefit of the oil industry.

The organizations that combine efforts in order to conduct the Mexican Petroleum Congress are the Association of Petroleum Engineers of Mexico, the College of Petroleum Engineers of Mexico, the Society of Petroleum Engineers (Mexico), the Mexican Association of Petroleum Geologists and the Mexican Association of Exploration Geophysicists.

***

Pemex, Blackrock Sign MOU to Develop Infrastructure

(Pemex, 6.Jun.2015) – Petróleos Mexicanos and BlackRock signed a Memorandum of Understanding (MOU), in order to accelerate the development and financing of energy infrastructure projects that are considered a strategic priority for Pemex. The agreement was signed by Pemex’s CFO, Mario Beauregard, and the Global Manager of BlackRock Infrastructure, Jim Barry.

During the event, José Manuel Carrera, Corporate Director of Alliances and New Ventures of Pemex, pointed out that Pemex will push for new projects with efficient financing solutions, in which BlackRock will provide its financial experience, risk management capabilities and funding sources.

***

Pemex Presents Safety, Health Strategy for 2015-2025

(Pemex, 28.May.2015) – Petroleos Mexicanos presented its Safety, Health and Environmental Protection Strategy 2015-2025 (SSPA, for its acronym in Spanish) which outlines actions to strengthen safety and reliability culture of operations in a safe and efficient manner enabling greater productivity.

After pointing out that Pemex is on the verge of a new phase of its history, Pemex CEO, Emilio Lozoya, asserted that safety, besides protecting workers welfare, is essential to compete in current and future markets.

“We are determined, he emphasized, in promoting an ambitious transformation process of Pemex to address the new reality in which we operate,” said Lozoya.

In the context of SSPA Day, he stated that Pemex’s activities are focused on maximizing oil value for the benefit of Mexicans, which means competing with the best companies in the world.

Pemex must be the most competitive company in the Mexican oil and gas industry and an international reference. To achieve that, he explained, four strategic areas have been defined: developing the most profitable activities, implementing a business model based on process management, establishing a system for operational excellence and creating a culture of high performance.

He noted that we can never let our guard down on security, and said that knowledge and root cause analysis of accidents should lead to establish practices that help prevent all accidents.

“Safety measures are not optional in oil activities development but are to be complied and enforced by all workers and officials,” he said.

When presenting the SSPA strategy, Pemex Manager of Planning, Coordination and Performance, Rodulfo Figueroa, reported that since the system was implemented 10 years ago, accident frequency rate improved by 75% and reached its lower level in 2014 to 0.38 accidents per million man-hours of work performed, below the international standard.

Specifically, he emphasized that during that period there has been a decrease of 40% on serious accidents, while unscheduled shutdowns rates in plants in 2014 was below 1%, which represents a 17% decrease, as compared to the previous year.

***

Pemex’s Successful Petroleum Coke Auction

(PEMEX, 22.May.2015) – Petróleos Mexicanos carried out, for the third time, an online auction of partial lots of petroleum coke from the “Gral. Lázaro Cárdenas”, refinery located in Minatitlán, Veracruz.

Pemex Refining carried out the auction along with the support of Regional Market Makers de México, S. de R.L. de C.V. (Aklara).

A volume of 40 thousand tons was auctioned, which was divided into eight lots of five thousand tons each one, at a price of $46/ton. After the presentation of the bids, five lots were assigned to Cycna de Oriente, S.A. de C.V. and three to Cementos Apasco, S.A. de C.V.

The purpose of this auction is to maximize the economic value for Pemex through a modern mechanism, which’s favors transparency, the cornerstone for the transformation of our company. This auction model ensures the equitable participation of companies of any size.

***

Mexico Sweetens Terms to Entice Development

(First Titan Corp., 26.Mar.2015) – As First Titan Corp. targets undervalued energy assets across North America for acquisition and development, Mexico is sweetening its tax terms to help attract energy companies south of the border. The Financial Times reported this month that the country is holding its first competitive tender for contracts to explore and develop its hydrocarbons.

Mexico put its nationalized oil fields up for bid to private companies for the first time in 75 years in 2015. With oil prices lingering at depressed levels, the country is working hard to woo foreign oil and gas investors to develop its considerable unconventional reserves. Favorable tax adjustment mechanisms and other possible enticements from the government could spell big opportunity for First Titan Corp.

“The Mexican government appears willing to do whatever it takes to put the country back on a path to rising oil output,” said FTTN CEO Sydney Jim. “Market forces are colliding to produce bargain rates on Mexican assets. We’re constantly scouting new opportunities there right now, ready to pounce.”

FTTN owns a portfolio of oil and gas assets in the southern U.S., and the same unconventional assets now being developed in West Texas continue on beyond the Rio Grande. The company has plans to capitalize on low oil prices by adding promising new wells in Mexico to its collection.

FTTN is building a competitive portfolio of oil and gas properties and remains dedicated to the continued development of energy assets throughout North America alongside companies such as Lucas Energy, Inc. (LEI), Earthstone Energy, Inc. (ESTE), Fieldpoint Petroleum Corp. (FPP) and Evolution Petroleum Corp. (EPM).

***

McDermott to Install Pemex’s Ayatsil Platform

(McDermott International, Inc., 6.Jan.2015) – McDermott International, Inc. has been awarded a contract to install the offshore jacket, deck and piles for the Ayatsil-A drilling platform for PEMEX Exploracion y Produccion (PEMEX) in the Bay of Campeche Ayatsil field offshore Mexico. The value of the award is included in McDermott’s fourth quarter backlog.

“The Ayatsil-A installation award from PEMEX is a direct result of the substantial local capabilities and operations of McDermott in Mexico, and our demonstrated track record of safe and reliable platform installations for PEMEX in the Bay of Campeche,” said Dominic Savarino, vice president and general manager, Americas. “Our unique ability to mobilize our versatile marine resources including the heavy-lift vessel, Derrick Barge 50, capable of lifting surface loads up to 4,400 tons, and the Intermac 600 transportation and launch barge was a critical component of the successful award for this fast-track installation project.”

The Intermac 600 will launch the 8,400-ton jacket and the heavy-lift Derrick Barge 50 will complete the installation of the jacket, a 3,400-ton deck and other platform components in waters 400 feet deep. The total weight of the facility is approximately 15,800 tons.

The Ayatsil field is the largest discovery for PEMEX to date and is expected to boost production for the country by 150,000 barrels of oil per day. This contract award follows the successful delivery of the Ayatsil-B eight-leg jacket and deck by McDermott in July of 2014.

***