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The Mexican Energy Reform
Opportunities in the Midstream Sector
January 14, 2015 Bosque de Duraznos 127 4th floor
Bosques de las Lomas 11700
Mexico City
Tel +52 (55) 52458423
www.spectronei.com.mx
Index
1. Context
2. Where do we stand? Natural Gas
Oil Products
3. What was done?
4. Outlook Natural Gas
Oil Products
5. Conclusions
Context
Why was an energy reform needed?
PEMEX´s low operating capacity and lack of technology to conduct
exploration and production of hydrocarbons in non-conventional fields.
The need to increase capacity to refine, transport, store and distribute
hydrocarbons, and improve operational efficiency.
The commitment of the Federal Government to reduce domestic energy
prices and production costs.
Articles 25, 27 and 28 of the Mexican Constitution were amended and
six decrees were issued containing the corresponding secondary
legislation.
Where do We Stand?
Existing Infrastructure
Gas processing complex
Pipeline
Existing Pipeline Infrastructure
Source: PEMEX
Natural Gas
4679 4511 4423 4498 4573 4818
5356
6058
6919 7030 7020 6594 6385 6370 6518
4326 4358 4851
5287 5722 5890
6531 6984 7204 7377
7777 7923
8699
9581 9762
3500
4500
5500
6500
7500
8500
9500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
MM
cfp
d
Production, demand and imports of natural gas 2000-2014
Production Consumption Imports
Source: SENER
33%
Source: PEMEX
Refinery
Pipeline
Oil Pipeline
Storage and distribution terminals
Existing Pipelines for Oil Products
Gasoline
601 637
672 719
761 793 793 802 800 804 788 776
445 466 440 442 444 437 455
405 389 416 425 443
200
300
400
500
600
700
800
900
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
MM
cfp
d
Production, demand and imports of gasoline 2003-2013
Demand Production
Note: Imports include Methyl tert-butyl ether component
Source: SENER
Imports
43%
What was done?
Energy Reform
Energy Reform
In order to develop the much needed infrastructure, the Energy Reform approved by Congress modified the industrial organization framework of the natural gas and oil product transportation industry.
In the case of natural gas, the industry was opened to the private sector in 1995, but the recent reform clarified different aspects and created new institutions to make sure that open access prevails in the system.
Before the Reform, in the case of oil products, PEMEX maintained the monopoly in pipeline transportation, but allowed the private sector to participate in the transportation by tanker cars.
Natural Gas
The separation between gas transportation and marketing is established.
The Centro Nacional de Gas (CENAGAS) is created as an independent operator of the transportation system.
Open access to the network is provided to anyone.
SENER approves the planning of the transportation system.
New attributions are granted to SENER and CRE. Also, direct participation from the Antitrust Commission (COFECE) is considered.
CENAGAS
Performs the following functions:
Administers the infrastructure and contracts that Pemex transfers.
Makes sure that open access is granted by private and public carriers in daily, mid and long-term operations.
Elaborates a five-year expansion plan of the Natural Gas Transport and Storage Integrated System, identifying strategic projects.
Conducts the tender processes of strategic transport infrastructure projects.
New Model of the Natural Gas Industry
Private
Sector
SPC
SPC
CRE
Private
Sector
Private
Sector
Private
Sector CENAGAS
SPC
Natural Gas
Production Consumption
(Final users)
Economic Regulation
Transportation
Marketing
and imports
Source: SENER, Secondary Laws
New Model of the Oil Product Industry
SPC
SPC
CENAGAS
Private
Sector
Private
Sector
Oil product
Production Consumption
(Final users) Pipeline
Transportation
Marketing
and imports
Source: Secondary Laws
CRE
Economic Regulation
SPC
SPC
Private
Sector
Private
Sector
Gradual Opening of Gasoline and Diesel
2014
Controlled
increase in
prices will reflect market
conditions
2015 2016 2017 2018
Set maximum prices in gasoline and diesel, and
their updating Free Price
Imports done only
by PEMEX Free Imports
Pemex Gas stations
will compete with other brands
Source: SENER
What can we expect?
Outlook
9,834 10,134
10,655 11,003 11,109 11,082
11,411 11,697
12,139 12,460
12,748 13,207
6,785 7,006 7,583
8,443 8,582 8,546 8,589 8,786 8,874 8,899 8,967 9,391
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
MM
cfp
d
Production, demand and imports of natural gas 2015-2026
Demand Production
Natural Gas Outlook
Source: SENER
Imports
29%
31%
Source: SENER
New Pipeline Capacity Required
Imports Point
Exports Point
Imports & Exports Point
Non-associated Gas Deposit
Oil and Associated Gas Deposit
Pemex
Private
Pemex Stations
Private Stations
Future CC plants
Gasoline Outlook
425 443 437 509 517 513 509 521 515 515 549
604 603 651 650 651
788 776 773 781 809 841 880 910 960
1,018 1,080 1,120
1,170 1,215 1,254 1,279
200
400
600
800
1,000
1,200
1,400
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
MM
cfp
d
Production, demand and imports of gasoline 2013-2028
Production Demand Imports
Source: SENER
43%
49%
165.6 MBD
229.1 MBD
295.1 MBD
346.5 MBD
243.4 MBD
TOTAL: 1,279.7 MBD
Expected Gasoline Demand by region in 2030
Source: SENER
Conclusions
The existing infrastructure is inadequate to meet national requirements in terms of transportation and storage of oil products and natural gas.
In the next 15 years, the demand for oil products and natural gas will increase. This situation will aggravate if required investments in these sectors do not take place.
The Energy Reform will broaden investment opportunities to help reduce the current gap in infrastructure and anticipate for future needs.