Open for Business: First Major Deal Since Energy Reforms Will Bring Fracked Gas to Mexico

picture-7019-1570723309.jpg
on

For the first time in 76 years, a piece of Mexicoโ€™s oil and gas infrastructure has been sold to a foreign investor, and the deal will help bring fracked gas from Texasโ€™s Eagle Ford shale region into Mexico. In this first major deal since the countryโ€™s landmark energy reforms, Pemexโ€”the state-owned oil company that had kept domain over the countryโ€™s vast petroleum and natural gas reserves since they were nationalized back in 1938โ€”sold a 45-percent stake of a prospective natural gas pipeline project to the United States-based investment funds BlackRock and Firstย Reserve.

The $900 million sale provides Pemex the capital to build out 462 miles of natural gas pipeline that make up the second phase of this major, midstream infrastructure project. Across its entirety, Las Ramones project will funnel natural gas from Texasโ€™s Eagle Ford shale down to the demand-hungry industrial parks of Centralย Mexico.

Credit:ย Pemex

This deal โ€œis the first large step in monetizing assets and bringing partners to midstream,โ€ said Pemex CEO Emilio Lozoya. โ€œIt symbolizes what Pemex will be seen doing in the coming months: bringing partners into the valueย chain.โ€

At CERAWeek in Houston in late April, Enrique Ochoa Reza, director of Mexicoโ€™s Federal Electricity Commision (CFE), noted the significance of the deal. Ochoa Reza cited the irony of Mexicoโ€™s historic inability to tap into either Mexicoโ€™s vast natural gas reserves or U.S. exports, and the sudden access to both. โ€œWe didnโ€™t have enough natural gas pipelines to receive that natural gas, and we didn’t have the reforms that would allow us to extract that natural gas from our soil,โ€ said Ochoa Reza. โ€œNow we have both elements, and CFE is promoting the construction of more natural gas pipelines.โ€

Ochoa Reza announced plans to expand natural gas pipelines in Mexico by 75 percent by the end ofย 2018.

Just theย beginning

Just a couple of weeks after the Las Ramones deal was formalized, Pemex and First Reserveย announced another, bigger ventureโ€”a $1 billion investment to fund energy infrastructure throughout the country.

Meanwhile, a Mexican company called IEnova, is working on three other natural gas pipelines, including the first phase of Las Ramones.Though IEnova is based in Mexico and listed on the Mexican stock exchange, it is a subsidiary of Sempra Energy, the San Diego-based natural gas company. And now that the reforms have passed and foreign investment is welcome, Sempra is showing interest in directly dealing in Mexicanย projects.

Besides the new constructions, Pemex will spin off tens of thousands of kilometers of pipelines and other midstream infrastructure to other private companies. Meanwhile, the upstream holdingsโ€”the actual oil and gas reserves and resourcesโ€”are opening up for private investment for the first time since resources wereย nationalized.

No contracts for exploration or extraction have been awarded yet, but this summer will welcome a new chapter in this crude oil and gasย bonanza.

The very first upstream contracts will be awarded on July 15th, for 14 shallow-water offshore exploration areas. In all, 34 companies have qualified to bid, though they arenโ€™tย public.

The second set of contracts, these ones for actual oil production in nine shallow-water offshore fields, will be awarded on Septemberย 30th.

In the meantime, Pemex is opening up the bidding process for dozens of onshore fields, deepwater contracts, the drooled-over Chicontepec oil field, and then โ€œunconventionals,โ€ likely to mean shale fields that would have to be fracked.ย ย 

picture-7019-1570723309.jpg
Ben Jervey is a Senior Fellow for DeSmog and directs the KochvsClean.com project. He is a freelance writer, editor, and researcher, specializing in climate change and energy systems and policy. Ben is also a Research Fellow at the Institute for Energy and the Environment at Vermont Law School. He was the original Environment Editor for GOOD Magazine, and wrote a longstanding weekly column titled โ€œThe New Ideal: Building the clean energy economy of the 21st Century and avoiding the worst fates of climate change.โ€ He has also contributed regularly to National Geographic News, Grist, and OnEarth Magazine. He has published three booksโ€”on eco-friendly living in New York City, an Energy 101 primer, and, most recently, โ€œThe Electric Battery: Charging Forward to a Low Carbon Future.โ€ He graduated with a BA in Environmental Studies from Middlebury College, and earned a Masterโ€™s in Energy Regulation and Law at Vermont Law School. A bicycle enthusiast, Ben has ridden across the United States and through much ofย Europe.

Related Posts

on

The decision to allow Novatek to attend the flagship conference was described as โ€œdisappointingโ€ and โ€œdisturbingโ€ by campaigners.

The decision to allow Novatek to attend the flagship conference was described as โ€œdisappointingโ€ and โ€œdisturbingโ€ by campaigners.
on

Badenochโ€™s leadership campaign was part-funded by a board member at one of the worldโ€™s largest fossil fuel companies.

Badenochโ€™s leadership campaign was part-funded by a board member at one of the worldโ€™s largest fossil fuel companies.
Analysis
on

The Conservative leader, who attacked โ€œradical green absolutismโ€ in a Washington DC speech, recently met with a host of influential anti-climate figures.

The Conservative leader, who attacked โ€œradical green absolutismโ€ in a Washington DC speech, recently met with a host of influential anti-climate figures.
on

Campaigners raise concerns over โ€˜alarmingโ€™ potential conflicts in the powerful political grouping.

Campaigners raise concerns over โ€˜alarmingโ€™ potential conflicts in the powerful political grouping.