Energy Reform in Mexico takes another step forward

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Despite the heightened tensions between Mexico and the U.S. on account of President Trump's threats to shut down the movement of goods, people, and investment between the two countries and the effect that the resulting uncertainty has already had on Mexico's economy, there is good news to report from the energy front. The projects awarded in the two renewable energy auctions carried out in 2016 are moving forward, with one generator signing a PPA with a private consumer, the first under the new rules set forth by the energy reform. It is an indication that the electric energy market is ...

New era for energy SOEs

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Energy markets worldwide are undergoing constant regulatory revision driven by changes in technology: the growing presence of renewables and IT advances in network management. The old world of vertically integrated utilities with geographically fixed markets is rapidly vanishing. Deregulation in developing countries is also morphing into something new, and the old private-public dichotomy is being replaced by a marketplace where scaled-down state-owned enterprises (SOEs) compete side-by-side with private entrepreneurs. The presence of SOEs is important to the shape energy markets can take in developing countries and the long-term success of new investment and technologies. Insider's advantage The first thing that comes to ...

Mexico’s the energy reform: new roles for oil producing states

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Despite being a federal country, energy policy is highly centralized in Mexico, as is the collection and disbursement of oil revenues. Before the energy reform of 2013, Pemex was responsible for all hydrocarbon related investment and production decisions, while the federal treasury, which in Mexico is the Secretaría de Hacienda y Crédito Público (SHCP), managed the collection and distribution of revenues. While fiscal centralization continues under the new regulation, and federal entities like Pemex,  SHCP, and the energy regulatory agencies, SENER and CNH, continue to control energy policy, state and local governments will play increasingly important roles in the oil & gas business ...

Mexico’s energy reform: market forces not so powerful after all

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One of the main goals of Mexico's energy reform is to make energy cheaper, thus improving the economy's productivity and the quality of life of Mexican citizens. The reform seeks to achieve this by introducing competition and market forces in a sector until recently monopolized by the government. The reforms passed in 2014 made drastic changes to the structure of hydrocarbon and electricity markets, introducing competitive bidding and a wholesale market for electricity that would force the retirement of older plants and their replacement by more efficient ones. The benefits of these reforms, both in the price and quality of energy, cannot be ...

Why can’t Pemex compete?

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Last week Pemex received a financial bailout of $4.2 billion from the Mexican treasury. These revenues provide only a temporary reprieve and fall far short of solving the company's financial problems, which are vast. Yet Pemex has one of the lowest production costs: 7 USD/barrel in 80% of its fields, 16.54 in the Chicontepec blocks, and under 10 in shallow waters. Mexico's costs are well below those of Brazil (49), Canada (41), and the U.S. (36) and comparable to those of Saudi Arabia and Iraq (10). So why are we constantly hearing that Pemex needs to become more competitive? And why does ...

Clean Energy Certificates for sale in Mexico

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The certificates, known by the acronym CEL (Certificado de Energía Limpia), are central to Mexico's strategy to encourage renewable energy generation. Similar instruments have been created in other energy markets to help generators and large consumer meet renewable energy targets in a cost-effective way through third party development of renewable sources. The sale of the first CELs took place with the long-term energy auction that ended on March 30, though the market to commercialize CELs will not begin to operate until 2018 when generators and large users are due to start meeting renewable energy targets. Targets have been set at 5% for 2018 and ...