The potential for new revenue channels in the energy sector is attractive and very much feasible. At a macro-economic level NAFTA will be adjusted. If done well, North-America could see increased trade flows and better alignment of energy-driving policies. The possibility to invest and compete in Mexico's energy market (one where labour costs are significantly lower) should not be overlooked.

The power market has created impressive numbers in its first two auctions. The outlook of the required investment is equally eye-popping.

- First Power Auction: $2.6B USD
- Second Power Auction: $4.0B USD
- Generation: $98.7B USD in expected spend throughout 2030
- Transmission: $15.3B USD in expected spend throughout 2030
- Distribution: $17.7 USD in expected spend throughout 2030

If a new firm or participant wanted an active economy, look no further. Mexico is open for business. Local projects are well under way and many are in need of expertise or financing given the learning curve of a newly deregulated market.

The oil&gas industry in Mexico still carries the level of complexity and capital intensity that similar markets experience. Mexico is not excluded from the commodity price pressures that have prevailed during the last 3 years. However much of the country's reserves potential has remained unexplored for years. Management, transportation and processing of waste sub-products is for instance a fairly undeveloped sub-industry. The first four tenders of Round One have seen multi-billion dollar investments. If due diligence is done correctly, the prize can be significant. In March 2017, Italian firm Eni became the first ever international company to discover light crude oil reserves since the energy reform was enacted. Round 2 will be conducted in five different auctions, of which the first two have already been published; the third auction has been published recently. This oil and gas auction includes blocks and fields in different oil producing areas of Mexico: deep-water blocks, unconventional field blocks, extra-heavy crude and mature fields. The second phase of Round 2, published on 24 August, will auction 12 onshore exploration and production contracts. Nine of the contracts are located in the Burgos basin (Nuevo León and Tamaulipas states) and the remaining three in the Sureste basin (Chiapas, Tabasco). The total surface area of the 12 contractual areas is approximately 5,066 km2, with prospective reserves of around 643.2 Bboe (http://rondasmexico.gob.mx).

           

Exploring domestic and international alliances was never more important. Those companies that take advantage of existing relationships in Mexico are already ahead of the game. In exchange, the country welcomes new ideas and expertise from new and existing market participants. Do you have an innovative product or service? Then we need to chat. It is important to know how to do business in Mexico. Once you are in, you will not get enough. Did we mention doing business here also comes with amazing perks (beach, tacos anyone?) The time is now…

Tagged in : Energy, Mexico, Renewables, Oil&Gas

Juan Herroz Betancourt

Juan Manuel Herroz Betancourt holds a Bachelor’s degree in Industrial Systems Engineering from Monterrey Tech Institute (Tecnológico de Monterrey) and an MBA with a Finance specialization from the Haskayne School of Business (University of Calgary). He has more than 16 years of experience in Oil and Gas, Energy, and Renewables. Juan has spent his career in Supply Chain Management, Information Technology and Management Consulting roles optimizing strategic sourcing, procurement, materials management, inventory management, contract negotiation, tariff rate design, supplier relationship management, accounts payable and accounts receivable processes. Juan's most recent position was as a member of Tervita’s executive team under the role of VicePresident of SCM and Real Estate. This portfolio managed approximately a billion dollars in vendor spend annually with a category management framework that supported the firm's comprehensive array of solutions for customers in the oil and gas industry that utilize the firm’s disposal facilities, waste transfer stations, bioremediation facilities, and salt water disposal facilities.