The events in Norway and Scotland
Mexico Energy Partners co-sponsored the 2018 oil and gas events in Oslo, Norway and Aberdeen, Scotland, organized by NovaOil of Mexico City. The events presented Mexico's post-reform energy sector to European operators, service companies and private investors. We thank the sponsors and participants who took part.
Mexico Energy Partners was formed by energy and finance professionals with a network across energy, project finance and capital markets. The firm is based in New York and has more than a decade of energy advisory experience across the Americas.
Photos from the oil and gas conference in Oslo, Norway and Aberdeen, Scotland
What the opportunity set on that agenda meant for buyers in Mexico
The upstream opening drew the European audience. CNH awarded 16 of the 35 shallow-water contract areas offered in Ronda 3.1 on 27 March 2018, with Pemex taking seven of them (Expansión, 27 March 2018). For a plant director in Monterrey or a CFO with a plant in the Bajío, the consequential part of the same reform sits downstream, in how natural gas is now priced and transported.
CRE Acuerdo A/026/2017, published in the Diario Oficial de la Federación on 16 June 2017, removed the maximum price on first-hand sales of natural gas (ventas de primera mano) and voided the price-cap methodology approved under RES/998/2015. The acuerdo justified the change by pointing to imports, LNG terminals and private producers as competing sources of supply. Gas under that regime no longer arrives at a regulated ceiling. It arrives at a negotiated price.
Eleven days later CRE published the notice giving effect to the capacity reservation regime and the general terms and conditions for the national transport system, SISTRANGAS, operated by CENAGAS (DOF, 27 June 2017). Firm and interruptible transport capacity is contracted by the shipper. It is no longer folded invisibly into a delivered price from Pemex.
Those two instruments moved a cost line most Mexican plants had never had to manage. Commodity risk and transport risk now sit with the buyer, and they can be contracted separately. The volumes involved keep growing. SENER's Prospectiva de Gas Natural 2017-2031 recorded 2016 imports of 4,168.1 million cubic feet per day, 87.2% of it entering by pipeline, and projected national demand rising 26.8% by 2031 to 9,656.9 million cubic feet per day.
Three questions for the gas desk
- Whether your gas price still references a Pemex first-hand sale formula that CRE voided in June 2017, and which published index has replaced it.
- Who holds the transport capacity serving your delivery point, on what term, and what your supply does if that capacity is not renewed.
- Your firm and interruptible split, and the cost of the alternate fuel or the curtailment you would absorb.
On our read, a facility that buys both gas and electricity should price the two together. Gas-fired generation sets the marginal cost of power for much of the year in the Mercado Eléctrico Mayorista, so a gas hedge and a power hedge negotiated in separate rooms can double the same exposure. That is a question for energy procurement and for whoever owns the site's operating budget, not for the engineering team alone.
Reviewing gas and power exposure at your site
Mexico Energy Partners reviews delivered natural gas and electricity cost for industrial facilities in Mexico. An initial review needs 12 months of gas invoices, the current supply and transport contracts, the delivery point, and a recent CFE bill.