The Energy Mexico 2016 Oil Gas Power event took place in Mexico City from January 26-28. We hope you learned as much as we did and were able to enjoy some of the lovely Dutch waffles at our stand in the exhibition room!

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Photo courtesy of Mexico Business Publishing

 

In case you missed some of the talks or could not attend the event, we invite you to revisit the highlights with us.

DAY ONE

The first day of the event was dedicated to the oil and gas industry, and despite the cold morning weather, many people gathered at the Centro Banamex from 9am onwards to listen to the prestigious speakers.

The morning covered the state of the global oil and gas industry, before narrowing down to that of North-America. The main topics covered included the drop in oil prices, the entrance of Iran into the oil and gas market, consumption patterns, of course without forgetting the polemic issue of the day: shale oil production in the US. One of the most interesting analyses came from Kyle Chapman, Termination and Production President at Weatherford International, who described the way in which oil companies should rework their priorities to remain competitive in the new low-price environment.

Industry Priorities at US$100/b Industry Priorities at US$30/b
1.       Manage Risk and Complexity 1. Minimize Costs
2.       Increase Reserves 2. Optimize Production
3.       Minimize Costs 3. Manage Risk and Complexity
4.       Optimize Production 4. Enhance Recovery
5.       Enhance Recovery 5. Increase Reserves

 

After a short break and an inaugural lecture, attendees were able to listen to a variety of topics surrounding the opening of Mexico’s oil and gas industry. The first topic to be addressed was the interaction and relationship between NOCs and IOCs, before Carlos Morales, Director General at Petrobal, Iván Sandrea, Director General at Sierra Oil and Gas, and Juan Carlos Zepeda Molina, President Commissioner of CNH spoke about Mexico’s energy transformation.

The ensuing hearty Mexican lunch provided speakers and participants with the energy needed to tackle more specific topics, such as Mexico’s transition to electricity, new technologies revolutionizing the energy sector, and innovation in the upstream sector. During the panel of Mexico’s energy transition, César Hernández Ochoa, Undersecretary of Electricity at SENER informed the public that for the first electricity auction, which will take place in March 2016, CFE has set a buying price of US$70 per megawatt-hour coming from clean sources. While CFE’s average generation costs for clean energy averages US$45.24 (MXN$830), developers of renewable energy projects voiced their concerns, warning that that price was 20% below international reference, which can cost up to US$90 per megawatt. On another occasion, Alfredo Betancourt, Director General of Eolectric explained that this would hinder the implementation of technologies with a generation cost exceeding US$100 per megawatt.

 

DAY TWO

Back on their feet after a good night’s sleep, industry experts and participants were ready to talk business, as the second day focused on the downstream sector and financing. The first event of the day was a magisterial conference on the country’s pipeline network expansion, which is part Mexico’s efforts to transition to gas-based fuel, an environmentally friendlier alternative to oil. Starting the day with a bang, Carlos Ruíz Sacristán, Director General of IEnova announced that after 15 years of financial struggles, Mexico would finally be accelerating its investment in this undertaking. He also highlighted the importance of the transition to natural gas, and the advancements in the pipeline network, pointing out that its appellation as such was only a recent possibility. This lively talk preceded a more general one on Mexico’s midstream industry. It included a presentation by Alejandro Sánchez Garcia, Senior Director at FTI Consulting who explained that Mexico was preparing for the integration of new technologies aimed at protecting energy infrastructure. This would involve the prevention of biometric data from suspected fuel thefts, which is currently a significant problem in the local oil and gas industry, and the use of drones in conflict areas.

Attendees were able to catch their breath and catch up on breakfast during the short break, before being thrown into Mexico’s most underdeveloped oil and gas sector, namely, the downstream one. Speakers covered the refining sector and petrochemicals, before addressing the environmental issues in the energy industry. As part of the talk on Mexico’s refining sector, Alejandro Martinez Sibaja, Director General of PEMEX Industrial Transformation explained that the division would further its growth through partnerships and joint ventures with the private sector, as he believes that the refining sector is now more attractive than it was 15 years ago.

During the magisterial conference that followed, Luis Videgaray Caso, Minister of Finance, announced that the government was considering injecting capital into PEMEX to boost its capital, which has been suffering as a result of the drop in oil prices. The government is already negotiating with the NOC to implement a plan that would reduce costs, increase partnerships with the private sector, and eliminate unprofitable assets. Videgaray announced that the parastatal’s fiscal regime would also be revised.

One warm and invigorating lunch later, attendees and panelists were back in the conference room looking at the bottom line. The main issues surrounding the credit needed for the financing of Mexico’s energy expansion, and the private equity required for developing projects were examined. Thankfully, Mexico’s oil and gas industry remains an attractive one, and the private sector has not yet shied away from it, despite unfavorable oil prices.

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Photo courtesy of Mexico Business Publishing

DAY THREE

Rushing in after being caught in typical Mexico City traffic, attendees began their Power-dedicated day with an energizing cup of local coffee. They then made their way to the conference room to attend a magisterial conference led by Dr. Enrique Ochoa Reza, Director General of CFE. He guaranteed that the first type of energy to be distributed through the wholesale electricity market that opened this Friday 22 January would be the cheapest, before announcing the tendering of 26 pipelines worth US$15.2 billion, allowing for the expansion of the network by 700 km.

Afterwards, Jaime Hernández Martínez, the Financial Director of CFE, spoke about the restructuring of the State productive enterprise into different subsidiaries and affiliated enterprises. He explained that the separation of CFE is intended to serve different segments and described the investment potential that each has to offer to private investors, highlighting the opportunity to enter into joint ventures with those subsidiaries dedicated to electricity transmission and distribution. In this same panel, Alberto Elizalde Baltierra, Project Execution Manager of PEMEX Cogeneration and Services, announced the current and planned projects that this arm has for the next few years. During the Q&A section, the audience praised the advancements that both parastatals have made so far, but they also expressed their concerns about certain aspects that remain unclear, for instance, the division of shared physical assets within CFE or the development of cogeneration projects in plants owned by other PEMEX subsidiaries. Both speakers explained that all of these topics would become transparent in time.

After a short break, the audience proceeded to the next panel, which was dedicated to transmission and distribution activities. Nemorio González Medina, CENACE’s Market Operations Manager opened the panel explaining the core activities of this technical system operator and the challenges that the entity faces in performing its duties. Marcelino Madrigal Martínez, Commissioner at CRE, followed up and shared the methodology that CRE is using to calculate the tariffs in the first stage of the wholesale electricity market. In this regard, he pointed out that this is not a definitive methodology, but it will be adjusted according to the market’s development, while ensuring that the process is always transparent. Pedro Luna Tovar, CFE’s Director of Programming, finalized the talk highlighting the potential of storage technologies for incorporating renewables into the grid by reducing the voltage variations that these technologies cause.

Even though the participation of public entities and productive enterprises of the State was highly anticipated in the event, the audience was also eager to hear the perspective of the private sector. The third panel provided that opportunity, as it included the participation of Miguel Ángel Alonso Rubio, Director of Acciona Energía Mexico, and Guy DeLeonardo, Director General of Gas Power Generation Systems at GE. Both speakers mentioned that the attractiveness of the Mexican market rests on the expected growth that energy demand will experience in the country during the next decade and the new sets of regulations that facilitate the integration of renewable and cogeneration projects into the national grid. However, Alonso voiced his concern about how the practical implementation of these regulations will take place in the wholesale market. Furthermore, he mentioned that the future of energy will be in the integration of intelligent systems and the optimized communication with the end user. “I imagine that the end user will be able to choose the company and the type of technology supplying its electricity in the same way that he can now choose a movie online,” he said.

The energy conferences cycle closed with a panel dedicated to the potential and challenges that renewable energy faces in the Mexican electricity sector. Speakers discussed the role that clean energy certificates will have in boosting the incorporation of these technologies into the country’s energy mix. Nevertheless, they also mentioned the limitations that a last minute change in the Law of the Energy Transition, pushed by industrial interests, could have in the successful implementation of this mechanism. This modification in the law allows companies to avoid the responsibility of complying with a mandatory share of clean energy during the first four years of the wholesale market. Nevertheless, Odón de Buen, Director General of CONUEE, highlighted that the lobbying of private companies was essential to achieving the legislative changes that were needed to further push the development of wind energy projects in the country.

After the conferences, most attendees decided to stay at Centro Banamex and take part in the networking cocktail hour, which took place in the exhibition area. Attendees had the opportunity to speak with exhibitors and other attendants, such as the heads of leading companies and other stakeholders. Music, food, and drinks contributed to concluding the event on a high note.

 

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