Mexico reforms seen as key to North American energy alliance

Efforts to reform Mexico’s oil and gas regime appear likely and could provide the necessary stimulus for a North American energy alliance with Canada and the US, experts suggested at a discussion hosted by Washington, DC, think tank NDN.

Mexico President Enrique Pena Nieto is politically smart, skilled, and delivering on his promises, former US Sec. of Energy Bill Richardson said. The country’s two biggest political parties have similar oil and gas reform proposals and control enough seats in Mexico’s congress to enact some major changes, he indicated.

“It’s not going to involve privatization of [national oil company Petroleos Mexicanos], but it will involve partnerships for drilling in the Gulf of Mexico, natural gas development, and renewable and alternative energy projects,” Richardson said.

Mexico’s reforms won’t happen immediately, but when they do, they could provide a foundation for a geopolitical energy partnership with Canada and the US, he said. “Once Mexico makes its reforms, it will be possible for the three countries to work more closely together,” said Richardson, who also is a former US ambassador to the United Nations.

Duncan Wood, who directs the Mexico Institute at the Woodrow Wilson Center for International Scholars, said energy sector reforms that are being discussed in Mexico—combined with Canadian and US technology—are the biggest driving force in formation of a North American energy alliance.

The conservative National Action Party (PAN) proposed offering oil and gas concessions, which gives Pena and the Institutional Revolutionary Party (PRI) room to maneuver and possibly get legislation allowing some joint ventures, primarily involving tight oil and gas, he said.

Under pressure

But the country clearly is under pressure to make changes in its oil and gas regime, Wood continued. “Unless there is serious energy reform, Mexico’s energy demand and production will cross in 2018-20,” he said. “It will need to face the fact that US refineries, which now refine Mexican oil and send the products back across the border, will soon refine more US and Canadian crude.”

Prospects for reform are good, Wood emphasized, adding, “Between now and Christmas, you’ll see reforms in Mexico that will lay the foundation for a strong North American energy alliance.”

Rick Van Schoick, energy portfolio director at the North American Research Partnership in San Diego, meanwhile, said, “We are at an energy crossroads, but many things stand in our way, starting with 100 jurisdictions in our three countries which are trying to maximize their individual gains from this energy opportunity.

He said the US Department of Energy had a North American working group that was disbanded soon after George W. Bush became president, and which energy secretaries for Bush’s successor, Barack Obama, have not revived.

“We need to talk more intensively about energy with our three neighbors,” Van Schoick said, adding that a summit of Canada, Mexico, and US leaders this fall in Mexico might be a good place to start.

“There are good times ahead,” he said. “Mexico may hold the key to meeting North America’s energy challenges.”
Contact Nick Snow at nicks@pennwell.com.

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