Energy reform could increase Mexico’s long-term oil production by 75%

eia.gov

Source: U.S. Energy Information Administration, International Energy Outlook 2014 preliminary projections

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On August 11, Mexico's president signed into law legislation that will open its oil and natural gas markets to foreign direct investment, effectively ending the 75-year-old monopoly of state-owned Petróleos Mexicanos (Pemex). These laws, which follow previously adopted changes in Mexico's constitution to eliminate provisions that prohibited direct foreign investment in that nation's oil and natural gas sector, are likely to have major implications for the future of Mexico's oil production profile. As a result of the developments in Mexico over the past year, EIA has revised its expectations for long-term growth in Mexico's oil production.

Although there are many complexities to the new reform and many details that still must be settled before the reforms can take effect, reform is expected to improve the long-term outlook for growth in Mexico's petroleum and other liquids production. Analysis in EIA's upcoming International Energy Outlook 2014 (IEO2014) will include the potential effects on upstream oil exploration and production and the potential for foreign participation.

The changes in EIA's assessment of Mexico's liquids production profile are profound. Last year's International Energy Outlook projected that Mexico's production would continue to decline from 3.0 million barrels per day (MMbbl/d) in 2010 to 1.8 MMbbl/d in 2025 and then struggle to remain in the range of 2.0 to 2.1 MMbbl/d through 2040. The forthcoming Outlook, which assumes some success in implementing the new reforms, projects that Mexico's production could stabilize at 2.9 MMbbl/d through 2020 and then rise to 3.7 MMbbl/d by 2040—about 75% higher than in last year's outlook. Actual performance could still differ significantly from these projections because of the future success of reforms, resource and technology developments, and world oil market prices.

Since 2008, the contract structure for any private company partnering with Pemex was a performance-based service contract, which offered financial incentives to private contractors working in Mexico's upstream sector. Incentives were provided in some cases, such as when a project is completed ahead of schedule, when Pemex benefits from the use of new technology provided by the contractor, or when the contractor is more successful than originally expected. These contracts also include penalties for environmental negligence or failure to meet contractual obligations.

Mexico's legislation introduced three new contract types that will provide more opportunity for foreign investment in its energy sector:

• Profit-sharing contracts allow companies to receive a percentage of the profits resulting from oil and natural gas development. While companies entering into these contracts would not own the resources being developed, they would be allowed to include the revenue from their part of the estimated future profits.
• Production-sharing contracts allow companies to own title to a percentage of resource volumes as they are produced.
• Licenses allow participating companies to be paid in the form of oil and natural gas extracted from each project.

The production-sharing contracts and licenses will effectively allow foreign companies to account for reserves, which is a particularly attractive incentive for investment in Mexico's energy sector. Different contract types will likely be applied according to the degree of risk associated with specific projects. For instance, licenses will likely be used for projects that are very capital intensive and high-risk, requiring advanced technology, like oil shale or ultra-deepwater projects. Less risky onshore and shallow offshore projects would more likely use profit-sharing arrangements.

Mexico awards 83% of oil reserves to state firm Pemex

bbc.com
13 August 2014

Pemex had asked for a larger share of possible oil reserves, which include off-shore oil exploration

Continue reading the main story

The Mexican government has granted national oil firm Petroleos Mexicanos (Pemex) the rights to 83% of the country's proven and probable oil reserves, as part of a broad overhaul.

But Pemex will only get 21% of possible reserves, less than it had asked for.

Those are the areas where oil has not yet been discovered and which will require a greater degree of investment and exploration to fully exploit.

Mexico enacted new rules this week to open up the country's energy sector.

Private oil companies are now allowed to operate in the country for the first time in 76 years.

The next round of bidding will see private oil firms vie for the remaining 79% of possible reserves.

Joint ventures

The BBC's Will Grant in Mexico City says the announcement is good news for the likes of Exxon Mobil from the United States, the Anglo-Dutch multinational Royal Dutch Shell and the Russian firm Lukoil, which are all said to be interested in the auction of Mexican oil contracts due to be completed by June 2015

In the end, it seems that both sides can be reasonably happy with the outcome, our correspondent adds.

The director of Pemex, Emilio Lozoya, said the company intended to set up 10 different joint ventures with the private firms, among them plans for deep-water drilling.

President Enrique Pena Nieto has made energy reform a key goal of his administration.

His government said it hoped to receive about $50bn (£30bn) in investment over the next three years as a result of the new rules opening the sector.

The hope is that the changes in the energy sector will boost production back to 2004 levels by 2025.

Crumbling infrastructure, bureaucracy and corruption have pared Mexican production from 3.6 million barrels a day in 2004 to just 2.5 million.

Mexico's state ownership of its natural resources has been enshrined in the constitution since the late 1930s.

The government had to get a constitutional amendment through parliament last year before a protracted process of secondary laws could begin.

Abe opens LatAm tour with Mexico energy deals

chinapost.com
By Leticia Pineda ,AFP
July 27, 2014

MEXICO CITY -- Japanese Prime Minister Shinzo Abe struck a series of energy deals Friday with Mexican President Enrique Pena Nieto at the start of a five-country Latin American tour.

Abe, whose visit to the region comes on the heels of Chinese President Xi Jinping's, met Pena Nieto at the presidential palace for talks that ended with the signing of a raft of deals.

The new agreements included one between Mexican state oil firm Pemex and Japan's development bank, and another between Pemex and the Japan Oil, Gas and Metals National Corporation.

With Japan on the lookout for new power sources after the Fukushima disaster forced the shutdown of its nuclear reactors, energy is high on the prime minister's agenda for the trip.

Mexico is undergoing sweeping changes in its energy sector, with Congress poised to end struggling Pemex's 75-year monopoly and open up the oil and gas sectors to foreign investment.

The two leaders, both elected in 2012, took turns praising each other for the reforms they have implemented.

Pena Nieto hailed the “bold transformations” of Abe's fiscal stimulus and monetary easing programs, while Abe drew parallels between their leadership styles, saying both saw reform as a growth strategy.

Traveling with a delegation of Japanese executives and his wife Akie, Abe received a red-carpet greeting at Mexico City airport from Foreign Minister Jose Antonio Meade.

Pena Nieto and first lady Angelica Rivera then threw a welcome ceremony for them at the presidential palace.

Kenko Sone, an official traveling with Abe, mentioned the “special interest” of Japanese companies in Mexico's shale gas, though he said there were no firm investment plans yet.

Sone said that it would be cheaper for Japan to import gas from Mexico than from the United states. The American gas Japan currently buys comes from the eastern United States, and must be shipped through the busy Panama Canal.

Japan is Mexico's fourth trade partner, with total trade of US$19.3 billion last year. There are some 800 Japanese companies that have investments in Mexico, especially automobile giants like Nissan, Mazda and Honda.

Abe is the first Japanese leader to visit Mexico since Prime Minister Junichiro Koizumi in 2004.

Natural Resources
Abe's nine-day trip — which will also take him to Trinidad and Tobago, Colombia, Chile and Brazil — comes two days after China's Xi wrapped up his own four-country tour.

The interest of the rival powers underlines Asia's growing interest in the region's fast-growing economies and vast natural resources.

Announcing Abe's trip earlier this month, government spokesman Yoshihide Suga said Latin American countries “are increasingly important for the Japanese economy because of their growing economies and natural resources.”

Japan, long one of the world's top exporting countries, has registered two consecutive years of trade deficits since the March 2011 earthquake and tsunami triggered the Fukushima disaster.

With its emerging economies, Latin America holds promise as a relatively untapped market for Japanese exports, in addition to its coveted raw materials.

But Japan is not the only one showing growing interest in the region often considered the United States' back yard.

The back-to-back Chinese and Japanese visits come at a moment when territorial disputes between the Asian rivals have pushed their relations to a low point.

China's Xi headed home from his own trip to Brazil, Argentina, Venezuela and Cuba with dozens of deals in areas from oil to mining to agriculture.

Russian President Vladimir Putin also recently wrapped up a tour of the region, visiting Cuba, Nicaragua, Argentina and Brazil.

Xi and Putin, who overlapped in Brazil, played to Latin American resentment toward perceived dominance of the region by Japan's longtime ally the United States.

Together with Brazil, India and South Africa — their partners in the BRICS group of emerging nations — they announced a new US$50 billion development bank and US$100 billion reserve fund to rival the Western-dominated World Bank and International Monetary Fund.

World's Largest Silver Producing Countries: Mexico

forbes.com

(Kitco News) - While more gold mines have been popping up in Mexico over the last decade, the country remains the global leader in silver production.

Stretching across the country, Mexico boasts some of the largest primary silver mines in the world.

A recurring theme highlighted throughout this feature is that many of the mines responsible for large quantities of silver are not actually primary silver producing mines; it’s simply a by-product.

Goldcorp Inc.’s (TSX:G)(NYSE:GG) Peñasquito mine is primarily a gold mine that produced over 400,000 ounces of gold in 2013.

Primero Mining Corp.’s (TSX:P)(NYSE:PPP) San Dimas Mine is a fairly large gold producer and yet fits into the country’s top five silver mines.

Mexican silver supply has increased steadily over the last decade and the country is expected to continue to set the pace for global silver production in 2014.

Huge rangeland boost announced

Tuesday, 20 May 2014 01:10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

thenews.com.mx

President aims to rehabilitate drought -stricken land

BY MAURILIO SOTO

The News

President Enrique Peña Nieto introduced Monday a National Rangeland Rehabilitation Program aimed at reclaiming drought-ravaged lands in the north of the country.

The rehabilitation efforts will cover 1.5 billion hectares of arid land, providing enough water for livestock in the states of Durango, San Luis Potosí, Coahuila and Zacatecas.

In the coming months, equipment will be delivered to the states of Aguascalientes, Baja California, Baja California Sur, Chihuahua, Nuevo Leon, Querétaro and Sonora.

The president, speaking at the 78th General Assembly of the National Confederation of Livestock Organizationsin Zacatecas, Zacatecas, said the draught conditions in those states are holding back agribusiness, a major sector of the national economy.

He said the 300,000 structures being built will collect 7.06 million cubic feet of water each.

The government is also allocating 312 million pesos, in the form of insurance, to rangelands, which will insure more than 80,000 producers and protect 4.65 million head of cattle.

Mexico is the world’s seventh largest meat producer, said the president, whose government will invest 120 million pesos to ensure the genetic quality of high value livestock, through the DNA Testing Program.

“Specific action is being taken, through policies and programs, to give fresh impetus to the livestock business in this country,” the president said. “This reaffirms the commitment of the government to support the livestock, fields and fisheries of our country.” This will in turn strengthen the income and productivity of the 6.6 million who work in these industries.

After reaffirming the government’s commitment to “detonating the potential” of the Mexican countryside, the president imparted that this particular sector, which is central to the national economy, grew by 5 percent the first TWO months of 2014.

México: World’s Largest Silver Producer

by Murry Page

16 May 14  

mazmessenger.com

 

For four consecutive years México has led the world in the production of silver. According to the annual survey by the Institute for Silver, 2013 made the fourth consecutive year in which México topped all other countries that produce silver.

According to the Institute in 2013 México produced 169.7 million ounces of silver, besting Peru, which produced 118.1 million ounces and China, which produced 118 million ounces.

Andrew Leyland, one of the co-authors of the report, said, “There were mixed results from Méxicolast year. Decreased production of silver over last year, but the country still maintains its position as the number one producer in the world.”

The report noted that the production by México was 169.7 million ounces in 2013, down from 172.3 million ounces in 2012.

Leyland added that the total worldwide production of silver increased from 792.3 million ounces in 2012 to 819,600,000 ounces in 2013.

(from Azteca Noticias)

Mexican President to Visit Mazatlán Next Week

by Maureen Dietrich

16 Apr 14 

mazmessenger.com

 

Mexican President Enrique Peña Nieto will visit Mazatlán next week to inaugurate the Buque de Investigación Pesquera y Oceanográfica (BIPO I) whose home port will be Mazatlán, confirmed Sinaloa Governor Mario López Valdez.

The ship will explore the ocean floor to 8,000 meters with special equipment to obtain important scientific information to aid in the development of marine resources. Costing 410 million pesos, the ship has seven high tec laboratories for analyzing different species. Its main function is to search for new fish and seafood species at depths down to 2,000 meters that could be used for commercial purposes.

The BIPO I was financed by the Banco Interamericano de Dessarrolo, and constructed in Vigo, Spain for the company Astilleros Armón Vigo. (from Noroeste)

The U.S. and Mexico Partner to Save the Colorado River Delta

by Jennifer Pit

nationalgeographic.com

 March 4, 2014

The Colorado River has been dammed and diverted so many times that it no longer flows regularly into the Gulf of California, leaving its once-fertile Delta dry and barren. (Photograph by Blue Legacy/Oscar Durand)

Since 1960, the Colorado River has not flowed regularly to the sea. While pockets of green remain, the Colorado in its delta is a parched river begging for relief. The dry, sandy channel glares in the bright sun, abandoned by the river that has been overtapped and overworked for too long.

It’s hard not to think of the lost potential of an ecosystem that once thrived. After an adventure there in 1922, American author, scientist and environmentalist Aldo Leopold wrote:

“On the map, the delta was bisected by the river, but in fact the river was nowhere and everywhere, for he could not decide which of a hundred green lagoons offered the most pleasant and least speedy path to the Gulf [of California].”

The Colorado’s delta was once a landscape of plenty, the basis of rural economic activity and local employment. Tourism, recreational hunting, sport and commercial fishing – all have been lost to overuse and over exhaustion of a limited resource.

For decades, it seemed nothing could be done. I spent much of the past 15 years shining a spotlight on the sorry state of the Colorado River Delta for audiences across the country. And while it is true that these conversations would quickly turn to the byzantine complexities of water law and the difficulties of caring for shared cross-border resources, it is also true that most people are truly unsettled by the reality that the Colorado stops short of its natural destination.

Some 380 bird species are expected to benefit from the pulse flow. (Photograph by Blue Legacy/Oscar Durand)

Now we are taking a major step to right the wrong that has been done to the Colorado River Delta. For the first time in history, the U.S. and Mexico will send a modest volume of water into the Colorado River Delta in the form of a temporary “pulse flow,” which will mimic the natural spring floods that once nourished the delta. Never before have we deliberately sent water below Morelos Dam, the last dam on the river just south of the U.S.-Mexico border, to benefit the environment. This month, water from the Colorado River will literally pulse through the border as a sign to the rest of the world of what we can accomplish through cooperation between nations. It feels like a triumph of human optimism over acquiescence.

Some may grumble that this is not the time to send water to the environment, but that objection ignores the broader context of the recent binational agreement and the many benefits it brings to both countries. In addition to breathing life back into the delta, this new framework more broadly allows the U.S. and Mexico to share surpluses in times of plenty and reductions in times of drought, provides incentives for leaving water in storage, and conserves water through joint investments in projects from water users in both countries. These benefits extend to water users throughout the Colorado River Basin – in all seven U.S. and two Mexican states.

By abandoning the old framework of “who gets what” and establishing cooperative management of our shared resource, the U.S. and Mexico are achieving benefits for communities and nature alike. With this kind of cooperation, I have renewed hope that in the not-so-distant future we will see delta ecosystems and economies thrive once again.

Goldcorp announces US$2.39bn Osisko offer, confirms commitment to Mexico

bnamericas.com

By Samuel Williams 

Monday, January 13, 2014

Vancouver-based Goldcorp (TSX: G, NYSE: GG) CEO Chuck Jeannes reaffirmed the company's commitment to mining in Mexico, despite its focus on growth in Canada through a planned Cdn$2.6bn (US$2.39bn) acquisition of compatriot Osisko Mining (TSX: OSK).

While Osisko has about 1mn hectares of land in Mexico's Guerrero gold belt, Goldcorp's main focus in the planned acquisition is Osisko's Malartic gold mine in Quebec, which offers a resource of about 10Moz gold, supporting a long mine life and low all-in sustaining costs.

Production at the mine will also provide "immediate free cash flow" to support the construction and ramp-up of projects including Cerro Negro in Argentina and Éléonore and Cochenour in Canada over the coming 18 months.

Goldcorp "continues to be committed to Mexico," Jeannes said in a conference call to discuss the planned takeover, with the country an "outstanding" mining jurisdiction despite the introduction of new taxes on the sector.

But he added: "It's pretty tough to beat Canada."

The company warned earlier it may be forced to divert investment away from Mexican projects, such as Camino Rojo, as a result of the taxes, which include a 7.5% levy on mining sales, minus certain deductions, and a 0.5% gross revenue tax on gold, silver and platinum mines.

THE OFFER

Under Goldcorp's cash and shares offer, the company would pay Cdn$5.95 per Osisko share. Based on closing share prices on January 10, the offer represents a 28% premium on Osisko's 20-day volume weighted average share price, and a 15% premium over Osisko's TSX closing share price on Friday, the company said in a statement.

The offer is open for acceptance until February 19, and requires acceptance by Osisko shareholders holding at least two-thirds of the company's shares.

Goldcorp also has mines and projects in the US, Chile, the Dominican Republic and Guatemala.

Osisko's shares were trading at Cdn$6.19 shortly before 1pm Toronto time, up 19.7% on the previous trading day.