Government of Singapore Investment, one of the two ventures owned by the Singaporean government, is planning a number of investment opportunities now that Mexico has opened up its energy sector. One of the GIC’s upcoming projects is a partnership with Mexican oil company Pemex, the latter which was forced to give up most of its oil field to end up its 70-year monopoly in this sector.
“We think Pemex is being transformed by inspirational leadership,” said Anthony Lim, GIC’s president for the Americas. “We are open. We will explore any investment opportunity that is brought to us.”Lim also showed interest in approaching public company such as the state electricity company CFE, which is also being transformed to become more productive and up to the new government’s standards.
GIC’s decision to venture into the Mexican oil industry is one that will be welcomed by the government. President Enrique Peña Nieto’s government has been trying to attract foreign investors since 2013 before the energy reforms were passed. In fact, foreign secretary Jose Antonio Meade had met with a group of businessmen in October 2013 and signed a memorandum of understanding between the Mexican infrastructure and construction company ICA and the Singaporean company KS Energy. Both planned to form a company in Mexico to provide drilling services and equipment, boosting oil and gas exploration.
However, the reforms have been receiving much resistance, especially from the left which believes that foreign oil majors will control Mexico’s resources. To that, Lim from GIC comments, “We don’t seek control. We are long-term investors. We are very, very patient.” Lim also pointed out that this level of skepticism actually makes it worthwhile as he believes that opportunities will thrive in any business “where we see there could be a valuation mispricing gap between what the market thinks and what we think the new management brings to the table… that’s why we’re interested”.
While the first project of GIC in the country may be partaking in a tender for a new airport in Mexico City, Lim says that it intends to be very careful while picking its points of entry. GIC has already started adding to its 3% of assets invested in Latin America to come close to the 40% belonging to the U.S. and the 25% of Europe. However, it hasn’t disclosed the size of its assets yet. In addition, the government-owned organization is considering Brazil to increase its presence in Latin America.
Singapore is currently Mexico’s second largest investor from the Asia Pacific region and the fourteenth largest internationally. It is also the fourth largest trading partner in Asia, with its trade amounting to USD 2.095 billion.
Originally posted in my Twitter Account @DoBusinessMX on June 24, 2014, this is a collection of tweets trying to explain the Energy Reform in detail. Well, as much detailed as possible within the 140 characters constrain. Flexibility on style and spelling is understood. One tweet per topic block, as presented by the Executive Branch to the Congress. Currently under discussion. I welcome any RT, fav and reply.
Im making a 9-tweet analisys of 21 energy laws under discussion @ the Mex Congress (659 pgs) HT #EnergyMX RT please. Thx.
1 #EnergyMX PEMEX w/o monopoly on hydrocarbs or ducts. Keywords>1st refusal Sep21 DFI contracts profit/prod sharing MexicoEagleFord!!!
2 #EnergyMX Electricity opens. Pub&priv: Gen, Trans/Dist, Supply (priv>big users / pub>basic users), Trade. CENACE to admin the grid.
3 #EnergyMX Geothermal opens for recon (8mo permit), exploration (3+3 yrs) and exploitation (30 yrs + renewal). Big data analytics biz.
4 #EnergyMX Industrial Security and Environment Hydrocarbons Agency gets more powers to oversee PEMEX, CFE, oilers and gas companies.
5 #EnergyMX PEMEX & CFE 2yrs to become gov corps under private law. Leave gov proc laws. Flexible contract&JVs. +Governance.
6 #EnergyMX Hydrocarbs (upstream) and Energy Commisions (mid-downstream) regulate in coord. Res challenges in court. No suspension.
7 #EnergyMX hydrocarbs incomes from licenses (explor quota, royalty, signing bonus, consideration) and contracts (explor quota, royalty).
8 #EnergyMX sovereign fund will receive all oil&gas incomes for savings, investment and protect public finance.
9 #EnergyMX if sovereign fund is 3%+ of DGI can be applied to universal pension, renewables, infra and ed (% spending rules apply).
Renewable energy in Mexico plays a major role in the country’s electricity generation. In fact, hydro power, geothermal power, and solar power contribute up to 26% to the country’s national grid. However, a Mexican congressman believes that the North American country’s natural energy sources will power more than just the grid; they will boost the economy.
Congressman Gerardo Villanueva from the Movimiento Ciudadano Party said that a bill on energy secondary legislation has been making the rounds in Congress. Once passed, the bill will allow Mexico to make the most from its strategic geopolitical location. According to Villanueva, “We must consider the issue of renewable energies that might substitute for oil.” This is because Mexico apparently has only 10 years worth of oil reserves. “This is not the oil century any more… There will be other alternative resources besides shale gas,” he added.
The government is also showing its support for the generation of alternative energy. In addition to possibly funding studies on alternative energy sources in the future, the Mexican delegation to the Fifth Clean Energy Ministerial (CEM5) in Seoul has announced that the country plans to grow its renewable energy sources to 33%. Mexico’s Secretary of Energy (SENER) Pedro Joaquin Coldwell believes that a 33% increase will be achievable under the light of numerous energy sector reforms that took place in 2012.
During CEM5, the Mexican delegation also mentioned that it has a revolutionary energy model in the pipeline. The changes featured in the new model will make use of the USD 300 million worth of changes President Enrique Pena Nieto has made to improve Mexico’s infrastructure since he came to power in December 2012.
Coldwell is quite optimistic since he believes that its benefits will attract numerous investors. “Both large companies with cutting-edge technology and those who want to put a solar panel on the roof of their house to do so, to acquire a solar heater or to lease a part of their land for wind generation,” he said.
Mexico is currently the fifth in a list of 24 countries that rely on geothermal resources to generate electricity. However, it still gets 80% from fossil fuels, while the remaining 20% is divided between renewable resources (17%) and nuclear fission (3%).
The energy legislation is currently in debate at the Mexican Congress. Among those laws, a brand new law of geothermal is being discussed too, along with regulation for use of waters with the purpose of energy generation. The generation of other renewable energy sources is currently allowed, under some restrictions. However, liberalization of generation, supply and trading will boost opportunities for that industry to thrive.
Photo credit: Oil Rig Promet by Jay Phagan
December 2013 marked the opening of Mexico’s state-monopolised energy industry after 75 years. The reforms that led to the change will allow international investors to become part of this lucrative sector and ultimately boost Mexico’s economy. NAFTA, the North American Free Trade Agreement, partners will also be able to enjoy the benefits of an integrated energy market in North America, which include more job opportunities and economic equality.
Canada, which first feared that its investors would shift their investment flow to Mexico, is now surer that its energy exports will still be in demand. This is due to an open trade and investment strategy that was established between Canada and the US in the 1980s and still works today. With its fears mitigated, the country is ready to play a major role in Mexico’s revolutionised energy sector.
Canada will be providing its capable energy companies, pipelines and ancillary services, three things President Enrique Pena Nieto believes his country needs. The Mexican energy sector has become a challenge on the economy due to ageing oil refineries, lack of deep water drilling equipment and expertise, and unstable oil production. Canada’s energy companies would have the opportunity to set up their operations in Mexico to try solving these issues.
The U.S., which experienced its biggest oil boom this year, will also be one of the major contributors to the industry. State-owned oil company PEMEX is eyeing U.S. independents that produce 54% of domestic oil, 85% domestic gas, and drill 95% of domestic oil and gas wells. By entering into joint ventures with these companies, PEMEX will be able to develop half-exploited fields or develop them before drafting a new contract with private companies. That aside, PEMEX will learn the techniques and technologies it lacks and needs to drill Mexican oil wells.
With these contributions, the three countries forming NAFTA will become a powerful energy front and their relations are bound to grow stronger. For starters, Canada will not consider Mexico to be its top competitor. In addition, issues like the immigration of Mexicans to the U.S. will be reduced. In fact, the U.S. is optimistic that the debate over the immigration reform will end. Governor Rick Perry commented, “I think immigration reform is going to be very passé. It’s going to be part of the past. And one of the reasons is that when Mexico liberalises the energy policy down there and the Mexicans who are here illegally go home. And as a matter of fact there might be a lot of folks who maybe are U.S. citizens going to Mexico looking for jobs in the energy industry.”
The new energy regime is bound to bode well for Mexico and its people. Current Administration is trying to set up programs to consolidate the middle class, decrease the poverty, and improve the education system. If these reforms succeed, will ultimately benefit the U.S. and Canada, as they will gain an economically stable NAFTA partner.