Pemex CEO: ‘Perfect storm’ paved way for landmark energy reform

HOUSTON — Rising oil production costs intersected with an unprecedented spirit of harmony between political parties last December, creating the conditions necessary to pass Mexico’s landmark energy policy, the head of the national oil company said Monday.

“It created the ‘perfect storm’ for energy reform,” said Emilio Lozoya, chief executive officer of Petroleos Mexicanos, or Pemex, at the inaugural dinner for the IHS CERAWeek energy summit in Houston.

Lozoya said politicians of all stripes recognized the toll that high energy costs have taken across Mexico’s economy, resulting in years of sluggish growth. They agreed on reform measures that officials hope will lower fuel and power prices.

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“Mexico has abundant reserves but very high energy cost,” Lozoya said. “This was the main aim of the reform, to have a new policy that allows Mexico to have competitive prices.”

Government officials hope that the constitutional reforms, which are opening its oil and gas fields to international investment for the first time since the 1930s, will bring much-needed foreign capital to invest in energy production.

Pemex has estimated that it needs about $1 trillion dollars to develop its oil and gas resources in the coming years, providing opportunities for a broad range of investors.

Lozoya said Pemex intends to have potential joint ventures lined up as soon as the end of the year, to leverage both the financing and technology the partners could provide. The new blood is expected to help turn around the company’s declining production, which fell from 3.3 million barrels per day in 2005 to about 2.5 million barrels a day in 2013.

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Pemex initially will focus on its mature plays, which Lozoya called “the low hanging fruit”, in an initial pre-bidding phase, known as Round Zero.

But the company also plans to keep a presence in deepwater and in unconventional plays, Lozoya said. The company will put together potential deals with partners after the necessary implementing regulations, which are scheduled to be made public in late April, have been released.

“One reason Pemex has not developed its shale plays is because we have plenty of more attractive opportunities, such as our mature fields,” Lozoya said. “We will focus on this area after the secondary legislation has passed.”