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Mexicos energy reform def-2014

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Slides from the presentation: Building Competitiveness in Green Energy given at Copenhagen Business School on 28 May 2014

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Mexicos energy reform def-2014

  1. 1. EMBASSY OF MEXICO IN DENMARK THE MEXICAN ENERGY REFORM Ambassador José Ignacio Madrazo
  2. 2. AGENDA 1. Why was the Energy Reform Introduced 2. Oil Production 3. Gas Demand 4. Electricity Rates 5. Forecast 6. Relevant Aspects of the Mexican Energy Reform 7. Main Benefits 8. Authorities and Estate-Owned Companies 9. Private Participation and Regulation
  3. 3. 1.WHY WAS THE ENERGY REFORM INTRODUCED? • TO INCREASE THE ENERGY PRODUCTION LEVELS • TO OPEN OPPORTUNITIES FOR PRIVATE INVESTMENT, TECHNOLOGY TRANSFER, INDUSTRIAL KNOW-HOW AND COMPETITION, ALLOWING THE COUNTRY TO TAKE ADVANTAGE OF ITS VASTNATURALRESOURCES • TO MAXIMIZE THE ENERGY INCOMES • TO FOSTER ECONOMIC GROWTH, WHICH IN THE PAST THREE DECADES HAS AVERAGED 2.4% ANNUALY • TO PRODUCE MORE ENERGYAT LOWER COSTS • TO PROMOTE THE USE OF RENEWABLE ENERGY
  4. 4. 2. OIL PRODUCTION OIL PRODUCTION IN MEXICO HAS DECREASED, DESPITE THE INCREASED INVESTMENT FOR EXPLORATION AND PRODUCCTION
  5. 5. 3.- GAS DEMAND • THE DEMAND HAS INCREASED • THE PRODUCTION HAS REDUCED THIS SITUATION HAS BEEN GENERATED THAT IMPORTS REACH 30% OF THE NATIONAL CONSUMPTION IN 2013
  6. 6. 4. ELECTRICITY RATES
  7. 7. 5. FORECAST IF THIS TREND CONTINUES, IN A FEW YEARS MEXICO WILL BECOME A NET ENERGY IMPORTER PRIMARY ENERGY: NATIONAL CONSUMPTION AND PRODUCTION
  8. 8. 6. RELEVANT ASPECTS OF THE MEXICAN ENERGY REFORM • ALLOWS PRIVATE AND FOREIGN INVESTMENT, COVERED BY DIFFERENT KINDS OFCONTRACTS • PEMEX WILL HAVE THE PRIORITY OF CHOICE ON AREAS THAT CAN EXPLOITWITHTHEIR OWNRESOURCES • PEMEX TAX BURDEN WILLBE LESS • RENEWAL ENERGY WILL REDUCE GAS EMISSIONS AND THEREFOR REDUCE ENVIRONMENTAL RISKS • GRADUALLY ALLOW SALE AND DISTRIBUTION OF GASOLINE BY PRIVATE COMPANIES • CREATION OFTHE MEXICAN OILFUND
  9. 9. 7. MAIN BENEFITS • INCREASE IN ELECTRICITY, GAS AND OIL PRODUCTION • INCREASE IN GASAND OILRESERVES • GENERATE ONE PERCENTAGE POINT OF ECONOMIC GROWTH IN 2018 AND TWO MORE POINTS FOR 2025 • CREATE NEARLY A HALF MILLION ADDITIONAL JOBS IN THE CURRENT ADMINISTRATION AND TWO AND A HALF MILLION MORE FOR 2025. • REDUCE ENVIROMENTALRISKS • INCREASE PRODUCTIVITY IN THE INDUSTRY AND COMPANIES
  10. 10. 8. AUTHORITIES AND STATE- OWNED COMPANIES THE MINISTRY OF ENERGY (“SENER”): WILL BE RESPONSIBLE FOR THE SELECTION OF AREAS TECHNICAL DESIGN OF CONTRACTS AND THE TECHNICAL GUIDELINES ASSOCIATED WITH THE BIDDING PROCESSES. THE MINISTRY OF FINANCE (“SHCP”): SHALL ESTABLISH THE TAXATION RELATED TO BIDDING PROCESSES AND CONTRACTS. THE NATIONAL HYDROCARBONS COMMISSION (“CNH”): SHALL BE ENTITLED TO PERFORM BIDDINGS, AWARD CONTRACTS, THE SIGNING AND TECHNICAL MANAGEMENT OF THE CONTRACTS, AS WELL AS THE SUPERVISION OFTHE DEVELOPMENT PROGRAMS. MEXICAN STATE-OWNED OIL COMPANY MEXICAN STATE-OWNED ELECTRICITY COMPANY DERIVED FROM THE OBJECTIVE OF MODERNIZATION OF STATE-OWNED COMPANIES, IT IS INTENDED THAT PEMEX AND CFE ARE TRANSFORMED INTO PRODUCTIVE COMPANIES OF THE STATE, PROVIDING THE STATE-OWNED COMPANIES INVOLVED IN THE ENERGY INDUSTRY, WITH TECHNICAL AND MANAGEMENT AUTONOMY, IN ACCORDANCE WITH BEST PRACTICES OF THE INDUSTRY.
  11. 11. 9. PRIVATE PARTICIPATION AND REGULATION THE ENERGY REFORM ALLOWS THE MERGER OF PUBLIC AND PRIVATE INVESTMENTS IN THE ENERGY PRODUCTION AND COMMERCIALIZATION AND THIS IS ATTRACTING INCREASING INTEREST FROM MANY COMPANIES TO MAKE BUSINESS. THROUGH THE ENERGY REFORM, NEW SPECIALIZED INSTITUTIONS WILL DEVELOP, WHICH WILL WORK WITH A SPECIAL LEGAL FRAMEWORK TO REGULATE AND PROTECT MEXICO'S INTERESTS AS WELL AS THE INTERESTS OF THIRD PARTIES. THE MEXICAN GOVERNMENT WILL CREATE THE FOLLOWING ENTITIES: • MEXICAN OILFUND • NATIONALGAS CONTROLCENTER (CENAGAS) • NATIONALENERGY CONTROLCENTER (CENACE) • NATIONAL AGENCY OF INDUSTRIAL SAFETY AND ENVIRONMENT FURTHERMORE IT WILL PROMOTE THE STRENGTHENING OF THE NATIONAL HYDROCARBONS COMMISSION AND THE ENERGY REGULATORYCOMMISSION
  12. 12. • ON APRIL 30, 2014, PRESIDENT ENRIQUE PEÑA NIETO INTRODUCED TO THE MEXICAN CONGRESS THE PROPOSED SECONDARY LAWS THAT WOULD IMPLEMENT THE REFORMS INITIATED THROUGH THE CONSTITUTIONAL MEASURES PASSED BY THE CONGRESS • IT IS EXPECTED THAT THE MEXICAN CONGRESS WILL CONSIDER THE ENABLING LEGISLATION IN A SPECIAL SESSION DURING THE LAST HALF OF JUNE 2014

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