Another energy revolution is stirring in Mexico - by Javier Treviño

http://tribtalk.org/2014/06/15/another-energy-revolution-is-stirring-in-mexico/

Another energy revolution is stirring in Mexico

By Javier Treviño, June 15, 2014

As Mexico prepares to unveil laws that will draw the roadmap for the country’s most ambitious energy overhaul in decades, Texas and the United States should prepare for an energy future that embraces their neighbor to the south.

An energy revolution is already underway in North America. The meteoric rise in production in Texas’ shale oil fields has helped boost U.S. output by 60 percent in the past six years. Resources seem abundant right now. But we can secure a better energy future for North America — and move us closer to energy independence — now that the Mexican oil and gas industry is on the cusp of revival.

It’s no secret there are substantial reserves in our country, including in the northeastern parts that share a border with Texas. Research shows that Mexico has 545 trillion cubic feet of recoverable shale gas resources, the sixth-largest reserve in the world, and vast deep-water oil fields in the Gulf of Mexico.

While production in the U.S. has spiked in the last decade, output in Mexico has steadily dropped, from 3.5 million barrels per day in 2004 to 2.5 million in 2012. Mexico was on track to become a net energy importer in a matter of years.

But in December, we approved a historic and transformational reform to Mexico’s Constitution that will open our country’s energy sector to private foreign and domestic investment for the first time since 1938. The reform will allow Pemex, Mexico’s national oil company, to compete with major international players. 

Under the reform, which was proposed by President Enrique Peña Nieto, Mexico could produce nearly 4 million barrels of oil and 10,400 million cubic feet of natural gas every day by 2025.

Texas and Mexico each benefit when the other is more prosperous. Ties between our countries have been strengthening, but increased cooperation will be key to ensuring that we both benefit from the reform. To that end, I’ve invited delegations of public officials, such as Railroad Commissioner David Porter, to visit with Mexico’s energy leaders. In recent trips to Texas, I’ve seen firsthand the strong interest among business leaders in investing in Mexico. The state also has offered a good model for how to foster cooperation between communities, industry and government to accommodate fast-growing oil plays, like the Eagle Ford Shale in South Texas.

Together we can also foster a stronger talent pool. Several Mexican colleges are launching new academic programs, tweaking their syllabi and creating internship opportunities to prepare students for the changing energy market. Texas has a number of prestigious universities that would be ideal partners in this effort, too.

We realize there may be hesitation about entering a market like ours for the first time. Some have asked: Is it worth it?

The short answer is yes. As Mexico works to implement the reform in the coming weeks, we will be firmly committed to establishing a strong legal framework that will provide certainty and transparency to all investors interested in entering the Mexican market. We examined the best practices in the world and carefully gauged their impact. We are setting clear rules for contracts and strengthening the power of regulators, as well as giving them much-needed independence.

To attract investment within the industry, our model also provides flexibility in allowing companies to team up to share risks and benefits in production, profits, services and contracts.

Some investors worry about drug violence in the regions where shale oil and gas lie. But Mexico has made significant progress in combating organized crime, and we’ve launched new public safety initiatives near the Texas border.

Twenty years ago, the United States, Mexico and Canada together signed the North American Free Trade Agreement. While it was first met with skepticism, the unprecedented treaty has increased trade fourfold over the past two decades, and Texas has reaped the benefits.

We look forward to partnering with our neighbors and allies to bring about similar benefits in the energy industry. Tapping into this new potential will encourage energy independence in North America and allow our communities to thrive.