Mexico s Energy Reforms: Opportunities Amidst Challenges

Transcription

1 Mexico s Energy Reforms: Opportunities Amidst Challenges August 20, 2015 Presented by: Ricardo Garcia-Moreno Partner Houston

2 AGENDA The Need for Energy Reform General Framework Round Zero and Round One Results of First Call of Round One Where are the Opportunities? Challenges Ahead 2

3 THE NEED FOR ENERGY REFORM 3

4 HISTORICAL BACKDROP Mexico nationalized its oil sector in 1938, and since then Pemex has been the sole oil operator in the country Mexico is one of the 10 largest oil producers in the world and the third largest in the Americas However, Mexico s oil production has steadily decreased since 2005 as a result of natural production declines from Cantarell and other large oil fields In respect of electricity, the Comision Federal de Electricidad (CFE) is the Mexican government entity that is the dominant player in the generation sector, holding more than 75% of the country s installed generating capacity Currently, and as compared to the U.S. and other industrialized nations, electric generation capacity in Mexico is expensive and not environmentally friendly 4

5 TOTAL ENERGY CONSUMPTION IN MEXICO BY TYPE,

6 MEXICO TOTAL OIL PRODUCTION AND CONSUMPTION, Mexico Total Oil Production and Consumption,

7 MEXICO S CRUDE OIL PRODUCTION BY FIELD,

8 MEXICO S DRY NATURAL GAS PRODUCTION AND CONSUMPTION,

9 AVERAGE ELECTRICITY RATES AT FIRST QUARTER OF 2013 *Source: SENER 9

10 GENERAL FRAMEWORK ROUND ZERO AND ROUND ONE 10

11 OIL & GAS Before the Reform State Monopoly - PEMEX PEMEX does E&P, transportation, storage and sales Hydrocarbons owned by State Private companies could only participate through service agreements Private investment was allowed in transportation, storage and distribution of natural gas After the Reform More open market driven Pemex is now a State-Owned Productive Company Pemex entitled to Round Zero Hydrocarbons in situ owned by State Private investment is allowed. E&P contracts will be awarded by CNH Agreements may include (i) service agreements; (ii) profit sharing agreements; (iii) production sharing agreements; (iv) licenses, or (v) a combination of any of the above PEMEX may enter into joint venture agreements and joint operating agreements with private sector 11

12 CONTRACTUAL FRAMEWORK IN E&P Source: CNH 12

13 ROUND ZERO AND ROUND ONE ROUND ZERO PEMEX was assigned 83% of Mexico s total proved and probable hydrocarbon reserves (1P / 2P) and 21% of Mexico s total prospective resources The reserves granted to PEMEX positions it in 5th place worldwide in proven reserves Round Zero secures enough reserves for PEMEX to mantain its current production level of 2.5mmbpce for the next 20 years ROUND ONE Round One comprises 109 blocks for exploration and 60 blocks for production, and includes new areas of different sizes and types of resources, including: (i) deep-water; (ii) shallow-water; and (iii) on-shore fields, including unconventional. Together, these blocks cover approximately 28,500km2, and represent an annual investment of approximately US $8.5 billion 13

14 ROUND ONE TENTATIVE CALENDAR Call 1 Call 2 Call 3 Call 4 Call 5 FIRST INVITATION TO BID DECEMBER 2014 FEBRUARY 2015 MAY 2015 OPENING OF DATA ROOMS JANUARY 2015 FEBRUARY 2015 JUNE 2015 NEW AREAS AND FIELDS SHALLOW WATERS EXPLORATION SHALLOW WATERS PRODUCTION ONSHORE DEEP WATERS & EXTRA- HEAVY FIELDS CHICONTEPEC AND UNCONVENTIONAL AREAS 14 EXPLORATION AREAS 5 EXTRACTION AREAS 25 EXTRACTION AREAS Source: CNH 14

15 CALENDAR (DEADLINES) Bid CNH-R01-L01/2015 Bid CNH-R01-L02/2015 Bid CNH-R01-L03/2015 Publication of Bid December 11, 2014 February 27 May 12 Publication of Updated Bid & Final Contract Request Access to Dataroom May 29 August 14 November 2 March 17 June 1 August 14 Dataroom Access July 14 September 29 December 14 Bid Payment March 1 June 23 August 28 Clarification Periods (3) Pre-Qualification (Reception of Documents) May 27 August 12 October 30 March 31 July 10 October 2 Bid Submission & Opening July 15 September 30 December 15 Bid Award July 17 October 2 December 17 Execution of Contract August 21 November 6 Februrary 8, 2016 Source: CNH 15

16 ROUND ONE Source: CNH 16

17 ROUND ONE: FIRST CALL - SHALLOW WATERS Source: CNH 17

18 ROUND ONE: FIRST CALL Source: CNH 18

19 ROUND ONE: FIRST CALL Source: CNH 19

20 ROUND ONE: SECOND CALL SHALLOW WATERS Source: CNH 20

21 ROUND ONE: SECOND CALL Source: CNH 21

22 ROUND ONE: THIRD CALL - ONSHORE Source: CNH 22

23 ROUND ONE: THIRD CALL Source: CNH 23

24 RESULTS OF FIRST CALL OF ROUND ONE 24

25 SUCCESS OR FAILURE? DISSAPOINTING Only 2 blocks awarded why? Price of oil Quality of seismic data Trepidation of being first Majors waiting for the deepwater and ultra deepwater Bid Procedures POSITIVE TAKEAWAYS Transparent and New Process CNH and SENER are Listening and Reacting 25

26 WHERE ARE THE OPPORTUNITIES? 26

27 NATURAL GAS IMPORTS NATURAL GAS CONSUMPTION OUTPACING DEMAND AND THE U.S. HAS ABUNDANT SUPPLY Annual International Energy Outlook (2015) projects that pipeline exports of natural gas to Mexico will grow from 0.7 Tcf in 2013 to 3.0 Tcf in 2040 in the Reference case CROSS-BORDER GAS INFRASTRUCTURE GROWING June 2015, CFE announced a tender for 24 projects, including 5 natural gas pipelines, for approximately $10 billion to increase electricity generation. The largest gas pipeline consists of a $3.1 billion underwater line from Brownsville, TX to the gulf port of Tuxpan, MX. These new pipelines, together with 11 others under construction or being tendered, will expand the natural gas pipeline network by 75% by

28 NORTH AMERICAN PIPELINES Source: 28

29 MEXICO PIPELINE SYSTEM 29

30 MEXICAN SHALE BASINS The U.S. EIA estimates that Mexico could hold up to 13 billion barrels of shale oil resources Mexico is believed to have the 4th largest shale gas reserves in the world Source: PEMEX Investors Relations December 2013; U.S. EIA 30

31 DEVELOPMENT OF SHALE GAS WELLS Eagle Ford Formation in Texas USA Austin San Antonio Mexico Monterrey In 2012, 9100 shale oil/ gas wells were drilled in the United States and three were drilled in Mexico Source: Comisión Nacional de Hidrocarburos with information from: North Dakota Department of Mineral Resources, Oklahoma Geological Survey, Texas Railroad Commission, Bureau of Ocean Energy Management, Oil &Gas Journal Well Forecast for

32 UNEXPLORED POTENTIAL USA Deepwater and ultra deepwater wells in the Gulf of Mexico Austin USA San Antonio Gulf of Mexico Mexico Mexico Cuba Monterrey In 2012, there were 137 wells drilled in deepwater and ultra deepwater in the United States and there were six drilled in Mexico Source: Comisión Nacional de Hidrocarburos with information from: North Dakota Department of Mineral Resources, Oklahoma Geological Survey, Texas Railroad Commission, Bureau of Ocean Energy Management, Oil &Gas Journal Well Forecast for

33 PEMEX Pemex is looking for partnership opportunities, not only for its Round Zero assets, USA but also Round One and future rounds Pemex has signed MOUs and other agreements with Lukoil, Chevron, Austin ExxonMobil, BHP Billiton, Pacific Rubiales, just to name a few San Antonio Pemex needs capital as a result of low oil prices and budget cuts Mexico Monterrey BlackRock and First Reserve Ramones II Pipeline Sale of Pemex s 50% stake in the pipeline company Gasoductos de Chihuahua for $1.325 billon to a unit of Sempra Energy 33

34 CHALLENGES AHEAD 34

35 CHALLENGES AHEAD Mexican Energy Market Competiveness Price of Oil Transparency & Rule of Law Competitive Contracts; National Original Rules Lack of Infrastructure Water Land Security Corruption Taxes 35

36 RICARDO GARCIA-MORENO Ricardo Garcia-Moreno, Partner in the Houston office of Haynes and Boone, practices corporate law with an emphasis in mergers and acquisitions, energy, securities law compliance and corporate governance. He has more than 21 years of experience representing U.S., European and Latin American clients in the United States and internationally in transactions involving mergers, acquisitions and divestitures involving public and private companies; investments; joint ventures; capital markets transactions, including public, Rule 144A and private placements of equity and debt securities; and acting as "outside general counsel" to public and private companies. He has been recognized by Best Lawyers in America, Texas Super Lawyers and he has a Martindale Hubbell client review rated 5.0 out of 5 Preeminent. He received his B.B.A from the University of Texas at Austin and his J.D. from the University of Texas at Austin School of Law. He can be reached at ricardo.garcia-moreno@haynesboone.com or

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