Mexican energy sector overhaul could reduce U.S. export demand

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Chron / Katherine Blunt / August 6

 

An ambitious plan to boost Mexico’s oil and gas production could potentially slow the country’s energy sector reforms and hinder trade opportunities for U.S. refiners and pipeline companies that have ramped up exports to meet growing demand there, according to research firm Morningstar.

Mexican president-elect Andrés Manuel López Obrador announced late last month a plan to invest billions of dollars in Pemex, the country’s state-owned energy company, in an effort to  reverse years of declining production. He also reaffirmed his intent to review more than 100 exploration and production contracts awarded to private oil and gas companies since the 2013 reforms, which opened the country’s energy sector to foreign investment for the first time in decades.

Mexico’s energy reforms are enshrined in its constitution, and López Obrador has said that he will he will honor existing contracts so long as they don’t reveal corruption. But Morningstar noted that any effort to scale back the reforms or increase Mexican energy production could jeopardize some $200 billion in outside investments planned for the country’s oil and gas, power, refining and distribution sectors.

Part of López Obrador’s plan involves investing $2.6 billion to upgrade the nation’s six existing refineries as well as building a new, $8.6 billion refinery at the oil port of Dos Bocas in Tabasco. The country’s existing refineries have been operating at less than 70 percent capacity since 2012, according to Mexico’s energy department, requiring the country to import more gasoline, diesel, jet fuel and other refined products.

 

Chron / Katherine Blunt / August 6

 

California-based energy company building $150 million Mexico fuels terminal

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Chron / Rye Druzin, Staff Writer / July 12

 

 

A California energy company is moving ahead with a $150 million fuels terminal in the Mexican state of Sinaloa.

Sempra Energy of San Diego is building the fuels terminal in Topolobampo, Mexico through its Mexican subsidiary Infraestructura Energética Nova, S.A.B. de C.V. or IEnova after the company secured a 20 year contract with the Topolobampo Port Administration.

The first phase of the project will have a storage capacity of 1 million barrels for fuels including gasoline and diesel. Sempra Energy expects operations to start in the fourth quarter of 2020.

In April Sempra Energy announced that IEnova would build a $130 million, 1 million barrel fuels terminal at Ensenada, a city in the Mexican state of Baja California.

San Antonio refiner Valero Energy Corp., the largest independent refiner in the U.S., signed a deal in August with IEnova to export refined product into Mexico. The gasoline, diesel and jet fuel would ship to new $155 million storage terminals IEnova will build in the Gulf of Mexico port city of Veracruz. Other storage terminals will be constructed in Puebla, southeast of Mexico City, and in Mexico city itself, to the tune of $120 million.

 

Chron / Rye Druzin, Staff Writer / July 12

 

Amlo and the realities of Mexico’s oil reform

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Petroleum Economist / Craig Guthrie / July 9

 

The Mexican president-elect needs a strong oil and gas sector to fund a promised social transformation

The investor-friendly tone Mexican president-elect Andres Manuel Lopez Obrador, widely known as Amlo, struck in the run-up to his landslide victory on 1 July is fueling confidence he will tweak rather than dismantle the energy reforms that are enticing international oil companies to the country.

Prospects of an Amlo presidency had stirred concerns among investors for months ahead of the vote—he’s the first leftist Mexican president since the 1930s, and has forged an anti-elitist platform calling for a reordering of the political landscape. And yet the peso gained more than 2% against the US dollar in the hours after the result.

«This can be a presidency ruled by reason and legality,» Ixchel Castro, manager of Latin American oils and refining markets research with Wood Mackenzie, tells Petroleum Economist, while pointing to the currency market’s reaction and the links he’s built with Mexican business elites. «There may be change in the emphasis of the energy reforms, but we see a reversal as highly unlikely».

Launched by outgoing President Enrique Peña Nieto in 2013, the reforms ended Pemex’s 75-year monopoly over the energy sector. So far, auctions in January and March jointly lured at least $100bn in oil exploration investment commitments from more than 70 different firms—useful revenue for a president who has promised sweeping social changes to tackle crime, corruption and poverty.

Amlo made opposition to the reforms a bedrock of his failed 2013 presidential bid, and told a rally just four months ago that he would never allow Mexican crude to return to the hands of foreigners. But a reversal in tack since has seen his top business adviser and nominee for chief of staff, Alfonso Romo, lead a pro-business public relations drive towards international investors.

Romo told Reuters on 25 June that there could be more auctions of oil drilling rights, as long as a review of contracts that have already been awarded to private companies showed no problems. «We will revise them and everything good will remain,» he said, noting that Amlo had said this directly to investors in New York.

But it’s not expected to be all smooth sailing for foreign oil investment under Amlo’s watch. Uncertainty over the long-term goals of his populist agenda will likely continue to unnerve companies looking to establish a steady pipeline of projects.

«Amlo will likely enjoy the benefits from the existing contracts that have been awarded, especially in terms of oil barrels produced, fiscal revenue received and jobs created. By the third year of his administration he can claim that Mexico is producing more oil under his presidency,» Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Centre wrote in an e-mail.

«But he will be reluctant to continue the bidding rounds. The one possible exception that I see would be in deep waters and in farm-outs from Pemex.»

Mexico plans to auction 37 onshore areas and nine in the shale gas-rich Burgos Basin on 27 September, as well as the farm-out of seven onshore areas with Pemex on 31 October.

Amlo’s approach to a planned re-shaping of Pemex is seen as the next critical indicator of his eventual intentions on the country’s energy direction.

While the president has pledged to resurrect Pemex into a strong national oil company through cost-cutting, this comes amid a significant decline in domestic energy production—from 3.4m barrels of oil a day in 2004 to 1.9m b/d in 2018.

«Pemex must be forced to compete in order to become stronger,» said Wood. «If the reform process is stopped, Pemex would gain from a strengthening of its position in the short-term. But in the long term its competitiveness and productivity could be severely damaged.»

 

Petroleum Economist / Craig Guthrie / July 9

 

 

Rangeland Energy Begins Operations at its South Texas Energy Products System (STEPS) Terminal Facility in Corpus Christi, Texas

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Oil and Gas 360 / june 5

 

SUGAR LAND, Texas

Rangeland Energy III, LLC (“Rangeland”) today announced that operations commenced at its STEPS terminal in Corpus Christi, Texas, on Monday, June 4. Rangeland also announced that in June the company will begin loading diesel onto railcars for a leading refined products customer. The diesel will be delivered to third-party inland terminals in Mexico via the Kansas City Southern Railway(NYSE: KSU).

“Rangeland is looking forward to facilitating the transportation of diesel to destinations in Mexico for a major industry player,” said Rangeland President and CEO Christopher W. Keene. “This is the first customer to contract with us for services at the STEPS facility. As we continue to build out the STEPS project, we are working with other key marketers, refiners and producers to provide services into and out of STEPS.”

About STEPS

STEPS is an integrated hydrocarbon logistics system that receives and stores refined products, liquefied petroleum gas (“LPG”) and other hydrocarbons at a new terminal hub located in Corpus Christi, Texas, and transports them to terminals primarily located in Mexico. During the initial phase of the project, refined products and LPGs will be received in the Corpus Christi terminal then shipped to third-party inland terminals located in Mexico. In subsequent phases, marine facilities in Corpus Christi and Mexico will be added to the system, along with the infrastructure to accommodate additional commodities including crude oil, condensate and fuel oil. The STEPS project expands upon and leverages Rangeland’s successful track record of developing similar infrastructure in the Bakken Shale and Permian Basin.

The terminal site in Corpus Christi is strategically situated along the Kansas City Southern Railroad mainline within five miles of the Port of Corpus Christi and the Valero, CITGO and Flint Hills refineries. Inbound products initially will be delivered by truck or rail, followed later by pipeline and barge. Refined products and LPGs will move out of the STEPS Corpus Terminal primarily by rail, but the terminal could eventually connect to pipelines and vessels.

About Rangeland Energy

Headquartered in Sugar Land, Texas, Rangeland Energy was formed in 2009 to focus on developing, acquiring, owning and operating midstream infrastructure for crude oil, natural gas, natural gas liquids and other petroleum products. The company is focused on emerging hydrocarbon production areas across North America, with a current emphasis on the Gulf Coast and Canada. The Rangeland team represents more than 200 years of combined midstream experience and is backed by an equity commitment from EnCap Flatrock Midstream. Visit www.rangelandenergy.com for more information.

 

Oil and Gas 360 / june 5

 

Netherland Sewell Adds Mexico City to the 2018 Oil & Gas Property Evaluation Seminar Lineup

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Oil & Gas 360º / May 29

 

NSAI Oil & Gas Property Evaluation seminars coming to London, Singapore and Mexico City this summer

Netherland Sewell & Associates (NSAI) has again expanded the reach of its popular Oil & Gas Property Evaluation Seminars for financial professionals, with the new addition of a seminar in Mexico City on September 5-6, 2018.

“We are very excited to introduce the NSAI Oil & Gas Property Evaluation seminars to Mexico,” said NSAI SVP & CFO Scott Frost. “With the country opening its hydrocarbon sector to foreign investors and international partners, the time is right for NSAI to host a seminar in Mexico.”

Seminars deliver a basic understanding of the upstream oil and gas industry

The two-day seminars are designed to help energy finance professionals gain a deeper understanding of the various aspects of the evaluation of hydrocarbon reserves and learn how to use reserves reports and studies.  Participants can expect to gain a basic understanding of the upstream oil and gas industry, including basic geology of different plays, reservoir evaluation basics, reserves and resources definitions, understanding hydrocarbons-in-place, recovery factors and rates, operating expenses and capital costs, and more.

The seminar speakers are NSAI professionals that have significant career expertise in reserves determination methods, the economics of hydrocarbon extraction, and petroleum geology. The seminars are popular with financial institutions that invest in energy development as well as banks that are involved in making lending decisions for oil and gas exploration and production projects.

Below is the 2018 NSAI Oil & Gas Property Evaluation seminar calendar:

  • May 7 & 8 and 9 & 10, 2018 – Dallas (Both sessions had record attendance with a waiting list)
  • June 26 & 27, 2018 – London: Grange City Hotel
  • July 10 & 11, 2018 – Singapore: Singapore Exchange – SGX Auditorium
  • September 5 – 6, 2018 – Mexico City: Asturiano Polanco Banquet Room

NSAI encourages energy industry and oil and gas financial professionals to pass this information on to colleagues who may benefit from attending. “We are excited about the opportunity to meet again with petroleum industry financial professionals and would like to thank you for recommending our seminars to your colleagues,” said NSAI SVP Joseph Spellman.

Scott Rees, NSAI Chairman and CEO, told Oil & Gas 360® that the firm has graduated about 6,500 people during 38 cumulative years of seminars in Dallas, London and Singapore. “We are glad to be adding Mexico City to that list,” Rees said.

Interested parties may learn more and register at NSAI’s website.

 

Oil & Gas 360º / May 29

 

Mexico’s Billion Dollar Oil Industry Ripe for the Picking

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Baystreet Staff / May 22

 

It may have taken the better part of a century, but Mexico figured out that their state-owned energy monopoly, PEMEX, was a business model that just wasn’t working out. After hammering out legislation in 2013 to denationalize the nation’s oil and gas industry, the worst thing that could happen, did; oil prices collapsed, and companies globally hit the brakes on spending. What was expected to be the opening of floodgates to invest in arguably the biggest energy opportunity today didn’t happen quite as expected. With oil prices climbing to fresh three-and-a-half year highs, all that is changing and the Mexico’s oil space is starting to heat up with investment of $150 billion now secured.

As it happens, investors’ conservative approach worked perfectly in favor of Steve Hanson and his team at International Frontier Resources Corp. (TSX-V: IFR) . «We knew that we were heading to Mexico for the first onshore licensing round to build the cornerstones of our operations,» Hanson said in a phone call with Baystreet.ca. «We were in a strong financial position with a clear mission to become the next energy leader in Mexico. Others staying on the sidelines as oil bottomed in 2016 really worked to our benefit as a first-mover in Mexico’s energy reform.»

The savvy leadership at IFR, formed an equal partnership with a Mexican petrochemical giant, as a result, this Canadian company became the first foreign-owned joint venture (JV) and independent oil company to actively explore onshore opportunities in Mexico in over 80 years. Through its strategic JV, IFR is also the first foreign company to complete the regulatory review and drill onshore conventional oil in Mexico under license contract. You’d think it would have been a major like Halliburton (NYSE: HAL) or Baker Hughes (NYSE: BHGE) or Schlumberger (NYSE: SLB), companies that were already working in the area as service providers to PEMEX, but it wasn’t. It was a little $30 million market cap. company that was nimble enough to beat everyone to the punch.

«We weren’t afraid of the price of oil. Not even at the $40 per barrel that oil was fetching at the time; we knew we could still make money based on our expertise and interpretation of the geology,» said Hanson. «At $70 oil, we’re obviously excited with our position, » he added.

Confident for Good Reason

Hanson’s confidence isn’t unfounded. He has over two decades of well-grounded experience in finance and corporate development, serving as chairman and managing director at the award-winning equity money management firm Van Arbor Asset Management before selling it with a sizable payout to the ZLC Private Investment Management in 2008. Next he was the CEO and president of PanAsian Petroleum that was sold profitably to Ivanhoe Energy, shortly after Hanson took charge. Likewise, that was followed by serving as a director at Lion Petroleum, a company focused on oil and gas in East Africa which was then acquired by Taipan Resources.

IFR’s management team is the embodiment of success and has experience across the finance and energy spectrum throughout the globe, including COO and director Andy Fisher, who has a history of taking companies with negligible assets to robust oil and gas production. For instance, he founded Arcan Resources and grew it from no production to 4,000 barrels of oil equivalent per day (boe/d), before the company was sold to Aspenleaf Energy Ltd., in June 2015 for CDN. $300 million. He was also VP, international contracts and negotiation, at Pacalta Resources Ltd. («Pacalta») in Ecuador, where he helped in growing the company from 100 boe/d in production to roughly 45,000 boe/d. In 1999, Alberta Energy Co., the predecessor to EnCana’s (TSX: ECA) (NYSE: ECA), bought Pacalta in a deal worth approximately CDN. $1.0 billion!

For the sake of brevity, the profiles of everyone contributing to IFR’s future can’t be covered; however, it certainly is worth mentioning that Colin Mills, an independent director at IFR, has more than three decades of diverse international experience in power generation, including building two power plants in Mexico, which adds to the local advantage of IFR in terms of navigating the regulatory environment in Mexico.

The commitment and confidence of these individuals to IFR is best recognized based on the fact that insiders hold more than one-third of the company’s outstanding shares.

It’s this experience and dedication at IFR that led to the formation of Tonalli Energia, a 50-50 JV between IFR’s Mexican subsidiary, Petro Frontera S.A.P.I de CV, and Mexican petrochemical giant Grupo IDESA. As a first mover, the partnership and its in-country experience gives Tonalli a serious competitive edge to catapult it forward into becoming the next energy leader in Mexico.

The Tecolutla Project – Now a Producer!

Imagine every bit of oil in Texas was controlled by one company for the last 80 years. That’s a rough analogy for what has been going on in Mexico. It’s explored enough (both on- and offshore) to know that there are tremendous reserves, possibly comparable to the all-resilient Permian Basin, but woefully little with respect to extracting oil and gas. Right now, Mexico ranks as the Western hemisphere’s third largest oil producer and host of the fourth largest known oil reserves.

Those could be conservative positions in the future considering Premier Oil last summer made a major offshore discovery in a block next to Talos Energy and Sierra Oil and Gas that is estimated to hold in excess of one billion barrels of oil that possibly extend into the adjacent block. This was discovered through the first shallow water offshore exploration well drilled since denationalization. Shares of Premier rocketed higher with the find. «Few think of Mexico in the same terms as Saudi Arabia, despite the fact that Mexico has similar quantities of hydrocarbon resources,» argued a recent report published by Manhattan Institute for Policy Research. However, this is about to change with higher oil prices and growing investor interest.

Lending further credence to Mexican oil potential, IHS Markit thinks the country’s untapped Tampico-Misantla Basin on the east coast of Mexico could be one of the world’s next «super basins.» Part of the basin includes the massive Poza Rica oil field, estimated to contain 3.8 billion boe, and IFR’s Tecolutla project which has now commenced completion operations for its recently drilled TEC-10 well.

The Tampico basin is known to have geology similar to the prolific North American basins, with stacked conventional and unconventional pay zones. In fact, IFR recently drilled 138 meters of reef thickness at its directional evaluation, TEC-10 well. It is also known that such basins tend to have «halo» zones of tight oil (light oil that is easily produced) surrounding them, this may be supported by the limited amount of exploration that has so far occurred at Tecolutla.

Seven wells were drilled between 1956-1972, with a well with last recorded production rates in January 2016. IFR announced the completion of a successful workover of a legacy TEC-2 well which was tested for production for a total of seven days and far exceeded management expectations. The well reported an average flow of 125 barrels of oil per day which was more than 13 times higher compared to last recorded production on the well! Newly drilled TEC-10 is next to test for production rates which is the most exciting moment for IFR JV since its inception!

IFR was awarded the block in May 2016 with no cash payment, merely a royalty agreement which offered one of the most favourable terms in comparison to the royalties on other blocks offered during the bid round. Furthermore, Export Development Canada (EDC) backstopped IFR by putting up the company’s portion of the performance bond required by Tonalli, allowing the company to conserve its cash, while lending a great deal of validation to the project. IFR ended the first quarter of 2018 with $2.81 million in cash and cash equivalents and no debt.

The first drill rig penetrated the ground in April, reached depth of 2,453 meters total vertical depth and was cased for production testing this month which was a historic moment for the Mexican oil and gas sector. Several points stand out when looking at the disclosed results, namely the fact that visible oil was noticeable from the core and the fact that oil was hit at deeper levels than oil was ever produced in the zone historically, indicating the El Abra reservoir at Tecolutla could have greater volume than ever believed.

Moreover, IFR, via Tonalli, is using modern exploration technology at Tecolutla for the first time. IFR is using the first-ever 3D seismic data shot for the whopping 81-billion-barrel Chicontepec formation with the aim of helping better understand Tecolutla field.

The beauty of the rock, according to Hanson, is not just that it is apparently flush with oil, but naturally fractured as well, making horizontal drilling easy, without the need for fracturing that draw the ire of environmentalists. These characteristics mean that the drilling is low cost, to the extent that Hanson believes the company can produce profitably at a cost of less than $20-$25 per barrel.

The Upcoming Catalysts

IFR is presently working on production testing, continuing analysis of the wireline, image logs and core analysis, refining the 3D seismic model and identifying the next drill target. The JV is looking ahead to the second tender of Round Three of bidding for projects (scheduled for September 27, 2018). Given the surge in value that Premier Oil experienced with its find, any positive data regarding the initial drill hole underpinned by historic production, should energize IFR shares and likely drive the attention of the investment community.

«We started IFR and moved aggressively in Mexico with the purpose of building a billion-dollar company,» Hanson added during the call. He continued, «We are very proud of being a first-mover in what we believe is going to quickly emerge as one of the most vibrant energy markets in the world and we’re not going to relent in our efforts to build value just as we have with previous companies.»

It’s difficult to disagree with anything Hanson says. They have nailed all of their milestones so far and certainly have plenty of running room to add to their portfolio. They have an outstanding partner in Grupo IDESA, the backing of EDC, are fully-funded for the existing work program, all the necessary infrastructure is in place, and they have outstanding experience across the entire supply chain that should allow IFR to sell oil at a price that couldn’t be realized anywhere else in the Western hemisphere.

Now, if they just start to prove the oil and the economic viability of the resource as they believe, IFR should be off to the races as the company looks to notch the next major success in their already impressive accomplishments.

Disclaimer: Nothing in this article should be considered as personalized financial advice. We are not licensed under securities laws to address your particular financial situation. No communication by our employees to you should be deemed as personalized financial advice. Please consult a licensed financial advisor before making any investment decision. This is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this article is not provided to any individual with a view toward their individual circumstances. Baystreet.ca has been paid a fee of four thousand dollars for International Frontier Resources Corp. advertising. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled company. Because of this conflict, individuals are strongly encouraged to not use this article as the basis for any investment decision. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in this article is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.

 

Baystreet Staff / May 22

 

Expert questions BP’s drilling plans for offshore Nova Scotia

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The Canadian Press / The Chronicle Herald / May 15

 

An engineering expert and former oil industry consultant has raised the alarm on BP Canada Energy Group’s plans to drill off Nova Scotia.

“Given BP’s current proposals for exploratory drilling offshore Nova Scotia, the likelihood of an uncontrolled blowout exceeds the upper limits for tolerability of exploratory well drilling risks,” said Robert Bea in his risk analysis of BP’s plans.

Bea, who is professor emeritus at the Center for Catastrophic Risk Management at the University of California at Berkeley, has investigated catastrophes including the Columbia space shuttle explosion in 1987 and the blowout of a Deepwater Horizon rig owned by BP eight years ago.

“Based on the information provided by BP, the blowout risk is clearly not acceptable,” Bea said in an interview Monday.

Bea uses a complex risk assessment system that looks into factors such as the commitment of everyone involved in an operation to safety, from contractors to the company’s top managers. The company’s awareness of major risks and its technical and management ability to assess risk is also taken into account.

After applying these criteria to BP’s plans for offshore Nova Scotia, Bea said the risk of an uncontrolled blowout like Deepwater Horizon was high. Eleven rig workers were killed in the Deepwater explosion on April 20, 2010, in the Gulf of Mexico and it triggered the biggest oil spill in U.S. history at an estimated 4.9 million barrels.

In a decision in early April, the Canada-Nova Scotia Offshore Petroleum Board authorized BP Canada to do preparatory work in advance of its plan to drill an exploration well about 50 kilometres off Sable Island. The decision drew protests from groups, including the Council of Canadians, about the environmental risks associated with the project and the strength of the regulations that govern the offshore.

BP contends that if there was a blowout off Nova Scotia, there would be sufficient time to drill a relief well and to get access to equipment such as a capping stack to contain the situation. But Bea said he questions that optimism, based on the documentation he’s seen and his personal experience in assessing gas and oil projects.

The provincial and federal governments have denied that the project, which could see up to seven exploration wells drilled off the southeast coast of Nova Scotia over a three-year period, poses unacceptable environmental risks.

Premier Stephen McNeil has said he’s confident that BP would take the appropriate measures to ensure safety and environmental responsibility throughout the project. He said BP has taken strides to strengthen regulations since Deepwater.

Federal Environment Minister Catherine McKenna has said the project “is not likely to cause significant adverse environmental effects.”

Bea agrees there would be economic benefits for Nova Scotia but only if the project is done successfully.

“I don’t think it’s a case of we should do this at all,” he said. “I think it’s a case of if we choose to do this, we need to do it with the best available technology. Because the consequences of being wrong are too high.”

 

The Canadian Press / The Chronicle Herald / May 15

 

Energy Reform Could Generate $1T in Foreign Investment for Mexico by 2040

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FROM:  Natural Gas Intelligence / Ronald Buchanan / 19 de marzo de 2018

 

Mexico’s energy reform could generate $1 trillion of direct foreign investment by 2040, said leaders of the industry lobby, Mexican Association of Hydrocarbon Companies, earlier this month.

The association, known by its Spanish acronym Amexhi, was presenting its Agenda 2040, a huge volume that reviews the industry’s past, from its origins at the beginning of last century; the present, including current uncertainties; and a future through 2040 that would «transform Mexico.»

Amexhi President Alberto de la Fuente admitted that the investment goal is ambitious.

The Agenda presupposes that power and hydrocarbons would account for  4% of gross domestic product by the target date. And, de la Fuente emphasized, it would require accurate instrumentation of the reform’s precepts, «as well as the resolution of challenges that are a legacy of the previous model.»

The defense of the Agenda would require four watchwords, he added: «Steadfastness, competence, transparency and knowledge.»

Amexhi has taken pains to remain neutral during the current campaigns for Mexico’s July 1 presidential election.

«All the candidates have shown interesting elements in their policy statements,» said Enrique Hidalgo, president of ExxonMobil Exploracion y Produccion Mexico, and the coordinator of Agenda 2040.

Some of the industry group’s sympathizers, however, have claimed that the pronouncements of the current leader in the race, Andres Manuel Lopez Obrador, who helms the left wing nationalist Morena party, has been less than steadfast in support of the reform. They also claim that his proposal for new refineries show a lack of understanding of the industry.

At the moment, the No. 2 in the race is Ricardo Anaya, leader of the National Action Party, the traditionally pro-business PAN. But Anaya has yet to issue any policy statements on energy.

Anaya also has embraced policies of left-wingers with whom he has formed an alliance. With them, he signed a statement of «No to the gasolinazo» — the liberation of gasoline prices.

Running third in the opinion polls is senior technocrat Jose Antonio Meade of the incumbent Institutional Revolutionary Party, the PRI. Meade was hand-picked by President Enrique Pena Nieto.

Meade’s loyalty to the energy reform has not been questioned. However, his loyalty to Peña Nieto has so far placed a political millstone around his neck. Pena Nieto is said to be the most unpopular Mexican president since political opinion polls were first published in the nation late in the 20th century as its democratic era began to dawn.

The democratic dawn has begun late for the former state monopolies of oil and natural gas, Petroleos Mexicanos (Pemex) and power, Comision Federal de Electricidad, the CFE.

Neither is free to set a budget, as Congress and the Finance ministry keep a tight grip on their spending. The Pemex and CFE unions, particularly that of Pemex, have corporate powers that go well beyond the defense of the interests of the workers in terms of pay and conditions.

The challenge are considerable, said senior analyst Arturo Carranza of Mexico’s National Institute of Public Administration. But, he added, the rewards are realistic.

Agenda 2040 proposes 15 bid rounds to lease oil and gas acreage. Since the 2013-14 reform was enacted, there have been two rounds featuring eight separate completed lease auctions. Three auctions are currently underway for the third round.

«But the pace has been stepped up and it can be pushed further,» Carranza said. «The country’s potential is beyond question for the industry. And the government has to do its part by identifying opportunities that the companies can grasp. In return, it can reap the benefits, such as royalties, on behalf of the nation.

«At the same time, the government has to cast off the restrictions on the budgets of Pemex and the CFE,» he added.

De la Fuente said at the presentation that about 80% of the nation’s oilfields are currently in decline, «but the best tool that’s available to revert the trend is the energy reform.»

 

 

FROM:  Natural Gas Intelligence / Ronald Buchanan / 19 de marzo de 2018

Mexico Energy Reform Slowdown Would Be ‘A Shame,’ Pemex CEO Says

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FROM: Bloomberg / Adam Williams / 7 de marzo de 2018

Mexico’s 2013 decision to end the government monopoly on energy has resulted in billions in investment and the arrival of dozens of international oil companies.

Carlos Trevino, Petroleos Mexicanos’s new chief executive officer, thinks it would be unfortunate for that to be interrupted by the next administration.

The top concern of Trevino, who took over at Pemex in November, is that Mexico will elect a president in July that will “slow down the energy reform pace,” he said in an interview with Bloomberg Television at the CERAWeek by IHS Markit event in Houston.

“Someone who doesn’t believe in the energy reform may reduce the speed very much and I think that would be a shame in Mexico,” Trevino said. “The energy reform has a lot of benefits to the country, to the people, so the the worst case scenario in my point of view is that the speed that we are implementing the energy reform will be reduced.”

Trevino’s concern matches that of many energy industry leaders in Mexico, which has signed more than 90 oil and gas production contracts with international majors such as Royal Dutch Shell Plc, Chevron Corp. and Exxon Mobil Corp. since a landmark 2015 crude auction. Presidential front-runner Andres Manuel Lopez Obrador, who leads polls ahead of the July 1 election, has vowed that his administration will slow the pace of the current oil auctions and review contracts signed by the current government.

A reversal or significant modification to the overhaul would be “almost impossible because to change the energy reform you will need to change the constitution,” Trevino said. It would require a majority in Mexico’s upper and lower houses and it “is really difficult for any president to have that amount” of support.

“It is possible but improbable,” Trevino said. “We have a lot of certainty on what is going to happen in the future no matter who wins the election.”

Refining partner
Pemex, which has reiterated that partners will improve crude production and refining margins, will formalize a joint-venture agreement with Mitsui & Co. at its flagship refinery this month, Trevino said. The partnership with Mitsui is an estimated $2.6 billion deal that will increase production to help reduce the nation’s reliance on imported fuels.

Pemex also expects to sign at least one additional refinery partnership as soon as this summer, Trevino said, without providing additional details. The company continues to seek partners for refinery auxiliary services in areas such as power generation, water treatment and steam generation, he said.

he partnership with Mitsui is an estimated $2.6 billion deal that will increase production to help reduce the nation’s reliance on imported fuels.

Pemex also expects to sign at least one additional refinery partnership as soon as this summer, Trevino said, without providing additional details. The company continues to seek partners for refinery auxiliary services in areas such as power generation, water treatment and steam generation, he said.

The company’s Salina Cruz refinery, which was offline for several months last year following a series of natural disasters, is operating at half of its capacity, processing around 150,000 daily barrels, according to Trevino. Pemex’s Madero refinery, which is in the process of a restart, is currently processing between 60,000 and 80,000 barrels, he said. The Madero refinery, which has the capacity to process 190,000 barrels per day, should ramp up to normal rates at the end of the month.

Oil Auctions
Pemex, which won rights to develop four deep water areas in Mexico’s Jan. 31 auction, is going to bid for a few block in the March 27 tender of 35 shallow water zones, he said. Pemex would prefer to bid in partnerships but is willing to go it alone if need be, Trevino said.

The company, which launched its own oil hedge last year to safeguard against a potential price drop, will continue the program next year, Trevino said.

 

 

FROM: Bloomberg / Adam Williams / 7 de marzo de 2018

Vista Oil & Gas signs agreement to acquire oil and gas assets in Argentina

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FROM: Hydrocarbons technology / 20 de febrero de 2018

Mexican-listed Vista Oil & Gas has agreed to buy an oil and gas platform from Pampa Energía and Pluspetrol Resources Corporation, along with interests in some exploitation concessions, assessment blocks and exploration permits in Argentina.

A significant part of the acquired assets are located in the Neuquina basin.

Once the deal is completed, Vista expects to become the fifth largest oil producer and operator in Argentina, as per the latest information published by the Argentine Ministry of Energy and Mining. Vista chairman and CEO Miguel Galuccio said: “With this transaction, we found the right balance of current profitable production and reserves – coupled with high-growth potential in Vaca Muerta, the most exciting emerging shale play globally – perfectly aligned with our vision.

“The platform and timing could not be better suited to start delivering on our plan of becoming the leading Latin American independent oil and gas company.”

“The platform and timing could not be better suited to start delivering on our plan of becoming the leading Latin American independent oil and gas company.”

Following the closure of the deal, Vista’s enterprise value would stand at $10 per share, equivalent to around $860m, and have an equity value of $960 million.

As part of the consummation of the deal, Riverstone Vista Capital Partners, an affiliate of Riverstone, has agreed to acquire an additional five million Series A Shares for $50m pursuant to a forward purchase agreement signed at the time of Vista’s initial public offering. Other investors have also agreed to buy ten million Series A Shares of Vista for $100m.

Along with an $650m initial public offering, these proceeds will take the total equity available to fund the deal to $800m.

Vista has also signed a commitment letter, following which a credit facility of up to $300m may be used as backstop to boost the certainty of transaction completion.

If the backstop credit facility is not drawn, Vista expects to be debt-free and have $100m of cash on hand to fund future drilling and acquisitions.

The deal is expected to close in April.

 

FROM: Hydrocarbons technology / 20 de febrero de 2018