A dramatically improved US oil and gas production outlook clearly is the biggest difference between the current North American Free Trade Agreement negotiations and the ones that established the pact in the early 1990s. But the impacts of Mexico's energy policy reforms are not far behind, speakers suggested at the Woodrow Wilson International Center for Scholars' 2017 North American Energy Forum on Sept. 27.
"In my own view, they were crucial and should be kept," Geronimo Gutierrez, Mexico's ambassador to the US, said in his opening remarks. "We actually did it very late-after 70 years-but it let us borrow from what so many other countries did. This helped us strike the right balance between the needs of the oil and gas industry and of the state."
The original agreement's Investor-State Dispute Settlement provision recognized there were problems with Mexico's legal system, Gutierrez said. "It was meant to make investments more secure," he said, adding, "There could be room for improvements, but it should be kept. If it isn't, Mexico could pass its own law to protect foreign investments and make them more secure."
John Padilla, managing director and partner at IPD Latin America in Fort Lauderdale, Fla., and moderator of a panel on energy integration, said, "We would not be here without Mexico's energy reforms. I also believe the US energy revolution would not have been as extensive without Mexico's energy reforms."
Padilla said North America's gross domestic product is about 28% of the world's total, and energy is a very critical component. Mexico's energy trade has grown nearly fivefold since NAFTA came into effect, Padilla said. The country now imports about 80% of its natural gas, 62% of its gasoline, and 52% of its diesel fuel, he said.
Much in midstream
The US, meanwhile, has gone from a $21-billion annual trade deficit with Mexico to about a $10-billion trade surplus, Padilla said. "Of about $8.5 billion of US and Canadian energy investment in Mexico since 2014, about half has been in the midstream," he said.
Others on the panel saw matters that still need to be addressed. "We consider labor a continuing issue for our industry, particularly since prices fell," said Devon Canada Corp. Pres. Rob Dutton, who also is president of the Canadian Association of Petroleum Producers. "People should be able to move across the borders easily. This also applies to technology and ideas."
Dave Lye, Encana Corp.'s senior vice-president for external affairs, said, "It's all about staying competitive. We support the steps the Canadian government is taking, but recognize the US may take different steps. We try to stay cognizant of each country's goals."
