The View From Inside Mexico’s Energy Reform

As Mexico’s government agencies implement historic energy reforms, the Comisión Nacional de Hidrocarburos (CNH) bears the burden of coordinating the contract and bidding process with private partners who will work with government-owned petroleum company Pemex, and making sure the process goes smoothly. So far it has.

In August, Mexico’s President Enrique Peña Nieto enacted secondary laws allowing foreign and domestic companies into an energy industry monopolized by Pemex since the 1930s. Dr. Guillermo C. Dominguez Vargas, a commissioner at CNH in charge of exploration and production technology and metering technology, spoke with Privcap about what has happened since this legislation was introduced, and what the next steps are.

“We’re now moving as fast as possible implementing all that is written in [the] secondary legislation,” says Dominguez, a former Pemex Exploration and Production Vice President of Planning, and later, VP of Technology and Professional Development.

“The energy reform goes according to the timeline we set,” he says, “saving some time here and there. It’s very exciting for all of us—the first time in 75 years we have the opportunity to receive domestic companies and those outside of Mexico. We have a lot of hydrocarbon resources.”

Dominguez and the six other commissioners at CNH will be taking care of all of the regulation, with Pemex and other agencies doing all of the tendering of projects and licenses for Round 1. The commissioners also provided technical support as well as advice to Mexico’s Energy Secretariat (SENER) as it was decided what areas of the country should be given to Pemex in Round Zero. Pemex got first choice on licenses for this inaugural round, and can operate them with participation of private companies. The SENER and the CNH will select the partners and manage and control the contracts.

Early in September, it was announced that the areas to be contracted out by Pemex in Round 1 would be selected by CNH and SENER. Dominguez says there will be 169 blocks offered in the bidding process for this round, to be done in the first quarter of 2015. Included will be some shale gas areas onshore near the border with the U.S., some conventional areas in shallow waters, and deep offshore locations. “The closest to the states is Perdido, deep offshore on the Mexican side [in the Gulf of Mexico].”

A National Hydrocarbons Data Center will also be created, under the government’s energy reforms. CNH will manage this geologic and operational database, information that currently resides with Pemex. There will be enough data on hand to offer to all of the companies awarded contracts in Round 1, Dominguez says, but as of now the new center is not ready to receive the information.

In addition to managing this database, CNH will authorize surveys above and below the ground, carry out bids and establish awardees, sign the contracts, manage technical issues of the licenses and contracts, supervise operational plans, and regulate exploration and production.

“The way we do things in Mexico is the Secretary of Energy will tell us what kind of contracts they want to offer the companies in Round 1—it could be production-sharing, licenses and profit-sharing contracts,” Dominguez says.

While it’s unclear yet how much involvement private companies—and private capital—will have in the Mexican opportunity, Dominguez wants to stress that the momentous changes to the country’s energy sector are a “good opportunity to do business with Mexico.”

“The energy reform is going according to the timeline we set,” he says. “We’re making sure it’s worth it to come to Mexico and help us out. We need to spread the word…we are a very responsible country. We’re trying to do the energy reform the best way we have learned abroad. We’re very tough in terms of corruption, and know there might be some problems there. We’ve been very open on these tenders, and have provided a lot of public information.”