Mexico's energy reform of 2013 opened both of the country's energy sectors: Oil and gas as well as electricity. As the industry moves to take advantage of the new market opportunities, a new administration is set to take over for a six-year term on Dec. 1, 2018.
Energy companies have been closely following the steps of President-Elect Andrés Manuel López Obrador to assess the actions that his administration will take in respect to the reform, and to define business strategies of their own. This week, the President-Elect added outlines for the new administration's plan by describing the following four strategic programs and announcing a total investment of nearly US$26 billion for now.
During the first year of López Obrador's government, $4 billion will be invested in exploration and production of oil wells. The target is to increase the production by an amount of 600,000 production barrels per day in a two-year span.
During the first two years, $2.6 billion will be invested to enhance six refineries for gasolines that are currently operating at 30 percent, in order to meet part of the daily needs of Mexico (800,000 barrels per day).
During the first three years, a new refinery will be built in Dos Bocas, Tabasco, in southeast Mexico, with a total investment of $8.6 billion. Oil and gas investment was already projected by the current administration at the Port of Dos Bocas. (See Holland & Knight's alert, "Mexico's Port Authority of Dos Bocas to Tender Oil and Gas Terminal, Two Facilities," July 5, 2018.)
During the first year, an investment of $10.75 billion in Comisión Federal de Electricidad (CFE) will be used to enhance power plants, starting with hydroelectric, in order to reduce the cost of the power.
In addition, a number of key appointments to the energy sector were made by the new administration, including Rocío Nahle, Minister of Energy; Alberto Montoya, Under-Secretary of Energy; Octavio Romero Oropeza, General Director of Pemex; Manuel Bartlett, General Director of CFE; Carlos Morales Mar, Deputy General Director of CFE; and Luis Abelardo González, Coordinator of Policy for Renewable Energies.
From a political perspective, the chosen persons have a conservative background in terms of participation of private investors in the energy sector. However, it would be prudent to analyze all of the changes to come in the administration's energy policy to determine how such participation will happen and what will be the new model of business. A lot of private investment is ready to be built and deployed, and the government is certainly in need of such help.