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

1. EMBASSY OF MEXICO IN DENMARK
THE MEXICAN ENERGY
REFORM
Ambassador José Ignacio Madrazo

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. 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. 2. OIL PRODUCTION
OIL PRODUCTION IN MEXICO HAS DECREASED, DESPITE THE INCREASED
INVESTMENT FOR EXPLORATION AND PRODUCCTION

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. 4. ELECTRICITY RATES

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. 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. 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. 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. 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. • 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