Mexico's Energy Reform: Is the Country Now Open for Business A Shell Sponsored TEC Webinar

1. Mexico’s Energy Reforms: Is
the Country Now Open for
Business?
TEC #EnergyChat Webinar

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3. Special Thanks to our Sponsor
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4. #EnergyChat Webinar: Moderator
Moderator:
Robert Rapier
Twitter: @Rrapier
Director of alternative-fuels technology,
Advanced Green Innovations LLC
#EnergyChat

5. #EnergyChat Webinar: Panelists
Adriaan Kamp,
Founder,
Energy for One World
Twitter: @kamp_efow
Tom Tunstall,
Research Director, Institute for Economic Development,
University of Texas at San Antonio
Twitter: @thomasntunstall
Justin Miller,
Clean Energy Consultant for Latin America & Africa,
Nexant

6. Confidential
Agenda
1. Introduction
2. Legal and Regulatory Framework
a. Power Industry Law
i. Generation
ii. Control / dispatch / market
iii. Transmission & Dsitribution
iv. Trading
b. Power Market Guidelines
3. Recent Signs of Openness
4. What to Watch

7. Confidential
Introduction
• Question: Is the Country Now Open for
Business, specifically in the electric power
sector)?
• Answer:Reform implementation marching
along, but still too early for final verdict
– Evidence of investment in generation and
transmission assets, but…
• …wholesale market not set to commence trial operations
until September 1, 2015

8. Confidential
Legal and Regulatory Framework
• Power Industry Law (and Implementing
Rules)
– Defined institutional roles for CFE, SENER, CRE and
CENACE:
• Generation
• Control/dispatch/market
• Transmission/distribution
• Trading
– Established new power industry structure
• Greater private actor participation in these areas

9. Confidential
Legal and Regulatory Framework
• Power Industry Law (and Implementing
Rules)
– In regard to generation, the Reform:
• allows non-CFE generators to sell (i) on spot
market, (ii) to CFE through auctions, (iii) to power
traders, or (iv) qualified users
• provides for non-discriminatory use of T&D
infrastructure by non-CFE generators
– Result:
• Greater opportunities for IPPs on commercial terms

10. Confidential
Legal and Regulatory Framework
• Power Industry Law (and Implementing
Rules)
– Aspects relating to control/dispatch/market:
• CENACE charged with interconnection studies,
not CFE
• CENACE dispatches in observance of least-cost
methodology
– Result:
• Greater opportunities for IPPs on commercial
terms

11. Confidential
Legal and Regulatory Framework
• Power Industry Law (and Implementing
Rules)
– Aspects relating to transmission and
distribution:
• T&D still reserved to state under Reform but…
– …state can enter into associations and contracts to
finance, install, maintain, manage, operate, expand,
modernize, monitor and conserve T&D infrastructure
– Result
• Greater commercial opportunities for private
power T&D infrastructure and services actors

12. Confidential
Legal and Regulatory Framework
• Power Industry Law (and Implementing
Rules)
– Aspects relating to power trading and distributed
generation:
• Reform created role for private power suppliers to:
– purchase power on spot market or under long-term contracts
– sell power to qualified users
– Result
• Unregulated private suppliers can purchase power
at market prices
• Market prices for power from distributed
generation

13. Confidential
Legal and Regulatory Framework
• Publication of Definitive Electricity
Market Guidelines in August 2015
– Establish design and operation principles for the
wholesale power market
– For short-, medium- and long-term,
• Guidelines define rules and procedures for
market participants to trade energy, ancillary
services, CELs, capacity and FTRs
– Market Trial phase commences September 1

14. Confidential
Recent Signs of Openness
• Non-CFE Generation
– USD 320 million - 155MW IEnova wind farm in
Baja California
• CFE Generation
– Iberdola, Gas Natural, Enel, FEMSA, AES, etc.
• Transmission
– USD 17.3 million – engineering, design,
construction and commissions of 21.1km
transmission line in Chihuahua

15. Confidential
What to Watch
• Wholesale Power Market set to enter
trial phase on September 1
– Fully operational in 2016
• CENACE to issue tender for medium- to
long-term power tenders in October
2015
• Contract award scheduled for March 2016
– Will tender attract sufficient interest from IPPs
or will it disappoint?

16. 16
2014
2030-2050
7 Billion
People
9 Billion
People
90 trillion
USD
economy
180-210
trillion
USD
225 million
oil eq/day
500- 750
million
oil eq/day
400 ppm CO2 and Carbon Budget
consumed for 2 degrees/ 21st century
??? ppm CO2 and
Climate Change Effects

17. Prof. Jeffrey Sachs- Earth Institute:
The Age of Sustainable Development
8/28/2015
Clickable Video Presentation

18. “Every Energy Company and Every Energy
Architecture in this world can be improved
upon in order to raise the availability,
affordability and sustainability of energy to
all”.- Adriaan Kamp, 2015
18

19. Is Mexico Ready and Open for Business
with the international (energy)
community?
Is the international (energy) community
ready for business with Mexico?
19
Mexico Energy Reform:
Is the Country now Open for Business?

20. 20
Mexico Energy Reform (1)
The short answer: Yes!

21. PEMEX / Mexico are tuning the right business
incentives and step-wise licensing program for Shale,
Deep-Water, Shallow, and Mature Conventionals-
allowing foreign direct investments and partnerships

22. 22
Mexico Energy Reform (2)
But there is more to the energy reform..

23. 23
Mexico Energy Reform (3)

24. P E S T O

25. Is Mexico Ready and Open for
Business with the international
(energy) community?
In the words of US congress research:
It can go well/ it can go sour
25
Mexico Energy Reform:
Is the Country now Open for Business?

27. Principal Investigator: Thomas Tunstall, Ph.D.
Lead Investigator: Javier Oyakawa, M.A., M.Sc.
Thomas Tunstall, Ph.D.
Research Director
Institute for Economic Development
The University of Texas at San Antonio
thomas.tunstall@utsa.edu

30. Eagle Ford Economic Reports

38. ECONOMIC IMPACT
STUDY
LEGAL ANALYSIS
BUSINESS ROADMAP
ON HOW TO DO
BUSINESS IN THE
ENERGY SECTOR
ONLINE PLATFORM
CONNECT B2B WITHIN
ENERGY SECTOR IN
MEXICO AND TEXAS

39.  328 Standards in the oil and gas industry just for valves.
 Shale E&P companies use standardized, interchangeable parts.
Source: IHS

40. Thank you!
Eagle Ford and Mexico:
Latest Development
August 2015
Thomas Tunstall, Ph.D.
Research Director
UTSA Institute for Economic Development
thomas.tunstall@utsa.edu

41. Special Thanks to our Sponsor