MEXICO'S OIL AND GAS DEVELOPMENT PROSPECTS
July 7, 2014
Subject to changes
MEXICO’S OIL AND GAS DEVELOPMENT PROSPECTS Prepared by Jesús Reyes Heroles G.G. for
I. MEXICO’S ENERGY SECTOR UNLEASHED
-2-
•
Until December 2013, the potential for furthering energy interdependence in North America was limited, due to Mexico’s restrictions.
•
Discussion was full of diplomatic, politically correct and rhetorical statements.
•
Mexico’s recent Constitutional amendments are a game changer.
•
Now private investment in Mexico’s energy sector is possible and is actively pursued by President Peña Nieto’s government.
•
This opening comes about when: " The U.S. is undergoing its own “energy revolution” " Canada is ripping years of consistent energy policy.
•
This constitutes a North American energy revival.
II. NATURE, SCOPE AND TIMETABLE OF MEXICO’S ENERGY REFORM
-3-
Energy Reform is central for Mexico’s economic strategy: •
To accelerate economic growth and employment, based on increased investment, public and private. " Maintain, to the extent possible, the investment of Pemex and CFE " Substantially increase investment from private parties.
•
Another objective of reform is to enhance economic efficiency, especially based in electricity as an input for production.
NATURE, SCOPE AND TIMETABLE OF MEXICO’S ENERGY REFORM… •
-4-
Eliminates Pemex exclusivity on the entire hydrocarbon production chain. " Concurrence of public and private investment, both domestic and foreign. " Maximize resources allocated to the hydrocarbon sector. " Allows private parties to book oil reserves or the expected revenue-streams from them, for financial-reporting purposes.
•
Allows Pemex to associate, according to its financial and operative capacities. " Enable Pemex to compete with other companies in exploration, production and in the entire chain of industrial processing. o Previous situation: Worldwide anomaly. " Caveat: reform keeps Pemex as part of the budget (PEF) à Many restrictions.
•
Allows private parties to: " Participate in electricity generation for third parties (not only CFE). " Finance, install, maintain, manage, operate and expand transmission and distribution infrastructure, by means of contracts with CFE.
NATURE, SCOPE AND TIMETABLE OF MEXICO’S ENERGY REFORM…
-5-
STATUTORY THRESHOLDS OF REFORM December 20
March 21
Constitutional reform enacted Pemex requests fields to keep (“Round Zero”) Initiatives for 21 legislative changes* Exected approval of all legislative changes Granting areas of "Round Zero" to Pemex Mexico's Energy Fund Legal and regulatory framework for environmental aspects Renewable Energy Program Midstream regulation Centers for the control and dispatch of power and gas Domestic content (25%) Pemex as productive firm of the public sector Domestic content (35%)
* 12 reforms and 9 new laws Source: EnergeA based on Energy reform.
April 30
July 15
September 17
December 21
January 1, 2015
July 15, 2015
December 2015
December 2025
III. SHORT TERM: ADDRESS GAS SHORTAGES
Address gas shortages •
Mexico’s gas deficit increased since 2008.
•
Fuels deficit increasing since 2003.
•
U.S.-Mexico gas pipeline bottlenecks are being eliminated
•
Reform in course will rapidly expand Mexico’s pipeline network.
•
Reform opens opportunities for private parties to produce, commercialize and trade fuels and natural gas.
•
According to official estimates, gas deficit will continue in the near term. Before impact of the reform.
-6-
SHORT TERM: ADDRESS GAS SHORTAGES…
-7-
Ehrenberg, Az.
San Luis Río Colorado
Ehrenberg-San Luis Río Colorado
Ehrenberg-San Luis Río Colorado Ext.: 170 km Cap.: 130 MMcfd Cost: 250 MMDD
Sásabe-Mazatán Cd. Juárez
Sásabe
Samalayuca
Guaymas Guaymas-El Oro Ext.: 364 km Cap.: 500 MMcfd Cost: 429 MMDD El Oro Topolobampo El Oro-Mazatlán Ext.: 462 km Cap.: 200 MMcfd Cost: 405 MMDD
El Encino
Samalayuca-Laguna
Waha, Tx.
Cd. Juárez-El Encino Ext.: 383 km Cap.: 850 MMcfd Cost: 395 MMDD In operation
Sásabe-Guaymas Ext.: 544 km Cap.: 760 MMcfd Cost: 569 MMDD
Cd. Juárez Topolopambo
Waha-Samalayuca Ext.: 300 km Cap.: 1,450 MMcfd Cost: 500 MMDD
Ojinaga
Los Ramones
Waha-Ojinaga Ext.: 230 km Cap.: 1,350 MMcfd Cost: 400 MMDD
Ojinaga-El Encino Ext.: 254 km Cap.: 1,350 MMcfd Cost: 400 MMDD
El Encino-El Oro Ext.: 574 km Cap.: 450 MMcfd Cost: 1,088 MMDD Laguna
Mazatlán
Agua Dulce, Tx.
El Encino-La Laguna Ext.: 423 km Cap.: 1,500 MMcfd Cost: 650 MMDD
Los Ramones Los Ramones Ext.: 850 km Cap.: 2,100 MMcfd Cost: 2,500 MMDD
Apaseo El Alto
Source: EnergeA based on CFE, PGPB.
IV. INVESTMENT OPPORTUNITIES IN MEXICO’S ENERGY SECTOR
-8-
17 E&P in deep waters
Gas pipelines
1
10
Amount of investment ($)
4 9
15
11 12 Coal seam gas
21 3
13
14
5 6
7
23
20
16
22
18
8 2 Complexity (time)
Heavy oil E&P in shallow waters
19
INVESTMENT OPPORTUNITIES IN MEXICO’S ENERGY SECTOR… MAIN INVESTMENT OPPORTUNITIES ① Gas pipelines Now ② Fuel stations (restricted) 2017: january ③ Gas distribution systems Now ④ Oil pipelines 2015: january ⑤ Storage and distribution terminals for 2015: january fuels (TAR’s) ⑥ Facilities for logistics 2015: january ⑦ Imports / exports of oil products 2017: january (except gasoline and diesel) ⑧ Gas processing 2014: july ⑨ Heat and power cogeneration Now ⑩ Refining 2014: july ⑪ Shale gas production 2017 ⑫ Shale oil production 2017 ⑬ Dry gas production 2015 ⑭ Production in mature fields (new 2015 regime) ⑮ Chicontepec E&P 2017 ⑯ Heavy oil E&P in shallow waters 2017 ⑰ E&P in deep waters 2018 ⑱ Imports / Exports of gasoline and 2019: january diesel ⑲ Trade of oil products (except gasoline 2017: january and diesel) ⑳ Imports / exports of crude oil 2014: july 21 Coal seam gas 2014: july 22 Domestic marketing of hydrocarbons 2018: january 2015: january 23 Maritime terminals 5
-9-
I I I I P
I
P
I I
P P P P
I I I I I
P P P
I
I I
P
I I I I
P: Partnering with Pemex I: Independently
INVESTMENT OPPORTUNITIES IN MEXICO’S ENERGY SECTOR…
Now
2014: July
• Gas pipelines
• Gas processing
• Gas distribution systems
• Refining
• Heat and power cogeneration
• Imports/exports of crude oil • Coal seam gas
2015: January • Storage and distribution terminals (TAR’S) • Oil pipelines • Facilities for logistics
2015
• Shale gas production • Shale oil production • Chicontepec E&P • Heavy oil E&P in shallow waters
2018: January • Domestic marketing of hydrocarbons
2018 • E&P in deep waters
2017: January
• Dry gas production
• Fuel stations (under debate)
• Production of mature fields (new regime)
• Imports/exports of oil products (not gasoline/diesel) • Oil products sale (not gasoline/ diesel)
• Maritime terminals
2017
- 10 -
2019: January • Imports/exports of gasoline and diesel
ROUND ZERO: PEMEX’S REQUESTS FOR “ASIGNACIONES”…
FROM ACTUAL RESERVES 1P RESERVES
2P RESERVES
3P RESERVES
Pemex 97%
Pemex 83%
Pemex 71%
State 3%
State 17%
State 29%
13.9 BBOE1/
26.2 BBOE1/
44.5 BBOE1/
FROM PROSPECTIVE RESOURCES Pemex 31%
State 69% 112.8 BBOE2/ Source: EnergeA based on Pemex.
BBOE2/
% OF PROSPECTIVE RESOURCES
Shale
8.9
15
Deep water
8.1
29
Shallow water
9.5
63
Onshore
8.0
82
34.5
31
Total
1/ as of January 2013 2/ as of March 2014
- 11 -
Subject to changes
MEXICO’S OIL AND GAS DEVELOPMENT PROSPECTS Prepared by Jesús Reyes Heroles G.G. for
I. MEXICO’S ENERGY SECTOR UNLEASHED
-2-
•
Until December 2013, the potential for furthering energy interdependence in North America was limited, due to Mexico’s restrictions.
•
Discussion was full of diplomatic, politically correct and rhetorical statements.
•
Mexico’s recent Constitutional amendments are a game changer.
•
Now private investment in Mexico’s energy sector is possible and is actively pursued by President Peña Nieto’s government.
•
This opening comes about when: " The U.S. is undergoing its own “energy revolution” " Canada is ripping years of consistent energy policy.
•
This constitutes a North American energy revival.
II. NATURE, SCOPE AND TIMETABLE OF MEXICO’S ENERGY REFORM
-3-
Energy Reform is central for Mexico’s economic strategy: •
To accelerate economic growth and employment, based on increased investment, public and private. " Maintain, to the extent possible, the investment of Pemex and CFE " Substantially increase investment from private parties.
•
Another objective of reform is to enhance economic efficiency, especially based in electricity as an input for production.
NATURE, SCOPE AND TIMETABLE OF MEXICO’S ENERGY REFORM… •
-4-
Eliminates Pemex exclusivity on the entire hydrocarbon production chain. " Concurrence of public and private investment, both domestic and foreign. " Maximize resources allocated to the hydrocarbon sector. " Allows private parties to book oil reserves or the expected revenue-streams from them, for financial-reporting purposes.
•
Allows Pemex to associate, according to its financial and operative capacities. " Enable Pemex to compete with other companies in exploration, production and in the entire chain of industrial processing. o Previous situation: Worldwide anomaly. " Caveat: reform keeps Pemex as part of the budget (PEF) à Many restrictions.
•
Allows private parties to: " Participate in electricity generation for third parties (not only CFE). " Finance, install, maintain, manage, operate and expand transmission and distribution infrastructure, by means of contracts with CFE.
NATURE, SCOPE AND TIMETABLE OF MEXICO’S ENERGY REFORM…
-5-
STATUTORY THRESHOLDS OF REFORM December 20
March 21
Constitutional reform enacted Pemex requests fields to keep (“Round Zero”) Initiatives for 21 legislative changes* Exected approval of all legislative changes Granting areas of "Round Zero" to Pemex Mexico's Energy Fund Legal and regulatory framework for environmental aspects Renewable Energy Program Midstream regulation Centers for the control and dispatch of power and gas Domestic content (25%) Pemex as productive firm of the public sector Domestic content (35%)
* 12 reforms and 9 new laws Source: EnergeA based on Energy reform.
April 30
July 15
September 17
December 21
January 1, 2015
July 15, 2015
December 2015
December 2025
III. SHORT TERM: ADDRESS GAS SHORTAGES
Address gas shortages •
Mexico’s gas deficit increased since 2008.
•
Fuels deficit increasing since 2003.
•
U.S.-Mexico gas pipeline bottlenecks are being eliminated
•
Reform in course will rapidly expand Mexico’s pipeline network.
•
Reform opens opportunities for private parties to produce, commercialize and trade fuels and natural gas.
•
According to official estimates, gas deficit will continue in the near term. Before impact of the reform.
-6-
SHORT TERM: ADDRESS GAS SHORTAGES…
-7-
Ehrenberg, Az.
San Luis Río Colorado
Ehrenberg-San Luis Río Colorado
Ehrenberg-San Luis Río Colorado Ext.: 170 km Cap.: 130 MMcfd Cost: 250 MMDD
Sásabe-Mazatán Cd. Juárez
Sásabe
Samalayuca
Guaymas Guaymas-El Oro Ext.: 364 km Cap.: 500 MMcfd Cost: 429 MMDD El Oro Topolobampo El Oro-Mazatlán Ext.: 462 km Cap.: 200 MMcfd Cost: 405 MMDD
El Encino
Samalayuca-Laguna
Waha, Tx.
Cd. Juárez-El Encino Ext.: 383 km Cap.: 850 MMcfd Cost: 395 MMDD In operation
Sásabe-Guaymas Ext.: 544 km Cap.: 760 MMcfd Cost: 569 MMDD
Cd. Juárez Topolopambo
Waha-Samalayuca Ext.: 300 km Cap.: 1,450 MMcfd Cost: 500 MMDD
Ojinaga
Los Ramones
Waha-Ojinaga Ext.: 230 km Cap.: 1,350 MMcfd Cost: 400 MMDD
Ojinaga-El Encino Ext.: 254 km Cap.: 1,350 MMcfd Cost: 400 MMDD
El Encino-El Oro Ext.: 574 km Cap.: 450 MMcfd Cost: 1,088 MMDD Laguna
Mazatlán
Agua Dulce, Tx.
El Encino-La Laguna Ext.: 423 km Cap.: 1,500 MMcfd Cost: 650 MMDD
Los Ramones Los Ramones Ext.: 850 km Cap.: 2,100 MMcfd Cost: 2,500 MMDD
Apaseo El Alto
Source: EnergeA based on CFE, PGPB.
IV. INVESTMENT OPPORTUNITIES IN MEXICO’S ENERGY SECTOR
-8-
17 E&P in deep waters
Gas pipelines
1
10
Amount of investment ($)
4 9
15
11 12 Coal seam gas
21 3
13
14
5 6
7
23
20
16
22
18
8 2 Complexity (time)
Heavy oil E&P in shallow waters
19
INVESTMENT OPPORTUNITIES IN MEXICO’S ENERGY SECTOR… MAIN INVESTMENT OPPORTUNITIES ① Gas pipelines Now ② Fuel stations (restricted) 2017: january ③ Gas distribution systems Now ④ Oil pipelines 2015: january ⑤ Storage and distribution terminals for 2015: january fuels (TAR’s) ⑥ Facilities for logistics 2015: january ⑦ Imports / exports of oil products 2017: january (except gasoline and diesel) ⑧ Gas processing 2014: july ⑨ Heat and power cogeneration Now ⑩ Refining 2014: july ⑪ Shale gas production 2017 ⑫ Shale oil production 2017 ⑬ Dry gas production 2015 ⑭ Production in mature fields (new 2015 regime) ⑮ Chicontepec E&P 2017 ⑯ Heavy oil E&P in shallow waters 2017 ⑰ E&P in deep waters 2018 ⑱ Imports / Exports of gasoline and 2019: january diesel ⑲ Trade of oil products (except gasoline 2017: january and diesel) ⑳ Imports / exports of crude oil 2014: july 21 Coal seam gas 2014: july 22 Domestic marketing of hydrocarbons 2018: january 2015: january 23 Maritime terminals 5
-9-
I I I I P
I
P
I I
P P P P
I I I I I
P P P
I
I I
P
I I I I
P: Partnering with Pemex I: Independently
INVESTMENT OPPORTUNITIES IN MEXICO’S ENERGY SECTOR…
Now
2014: July
• Gas pipelines
• Gas processing
• Gas distribution systems
• Refining
• Heat and power cogeneration
• Imports/exports of crude oil • Coal seam gas
2015: January • Storage and distribution terminals (TAR’S) • Oil pipelines • Facilities for logistics
2015
• Shale gas production • Shale oil production • Chicontepec E&P • Heavy oil E&P in shallow waters
2018: January • Domestic marketing of hydrocarbons
2018 • E&P in deep waters
2017: January
• Dry gas production
• Fuel stations (under debate)
• Production of mature fields (new regime)
• Imports/exports of oil products (not gasoline/diesel) • Oil products sale (not gasoline/ diesel)
• Maritime terminals
2017
- 10 -
2019: January • Imports/exports of gasoline and diesel
ROUND ZERO: PEMEX’S REQUESTS FOR “ASIGNACIONES”…
FROM ACTUAL RESERVES 1P RESERVES
2P RESERVES
3P RESERVES
Pemex 97%
Pemex 83%
Pemex 71%
State 3%
State 17%
State 29%
13.9 BBOE1/
26.2 BBOE1/
44.5 BBOE1/
FROM PROSPECTIVE RESOURCES Pemex 31%
State 69% 112.8 BBOE2/ Source: EnergeA based on Pemex.
BBOE2/
% OF PROSPECTIVE RESOURCES
Shale
8.9
15
Deep water
8.1
29
Shallow water
9.5
63
Onshore
8.0
82
34.5
31
Total
1/ as of January 2013 2/ as of March 2014
- 11 -
