Natural gas is the preferred fuel for electrical generation.
It’s been a year since energy reform was introduced in Mexico, setting in motion a legislative process that came to a conclusion last night in the Senate, when it approved the last of the secondary legislation.
It is anticipated that President Peña Nieto will promulgate the laws within days. The president heralded the final vote in the Senate with comments on Twitter last night
“A Mexico more competitive and prosperous. The stage has been set for a new phase of development and well being for Mexican families.”
“Mexico will produce clean energy at low cost, with well-paid employees and we will guarantee the protection of the environment,” he wrote in a second tweat.
But it will probably be two years before Mexicans see any benefits, says the head of the Federal Electrical Commission (CFE).
Enrique Ochoa Reza said it will take that long to develop the necessary infrastructure that will permit switching from oil to natural gas for the generation of electricity, and thus reduce costs.
“The CFE has great challenges ahead, the first of which is to change from oil cumbustion, which is four times more expensive that natural gas and 68% worse as a pollutant . . . .” That will require pipeline infrastructure and new generation systems.
The process for developing that infrastructure began three weeks ago when tenders were announced by the Energy Secretary.
Meanwhile, another part of the reform process will be accelerated as the Energy Secretariat will announce a month ahead of schedule which oil and gas fields will remain in the hands of Pemex in what’s being called a Round Zero allocation.
That will allow the government to proceed with signing joint ventures with private energy companies to boost oil production. “Round Zero will be announced next week,” said a senior government official.
While the legislation lays out the contractual framework for private firms, the commercial terms will be unknown until they are set by finance offiicials.
A new hydrocarbons commission will regulate the energy sector by supervising contracts and managing bids. One possible sticking point for private firms might be the prohibition of going to international arbitration for companies that might wish to appeal the termination of a contract.
“That’s a pretty deadly provision for any company,” said Miriam Grunstein, an energy specialist with CIDE, a research institute.
But at least one oil services firm is bullish. “We are very encouraged,” said Halliburton president Jeff Miller.
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