Aug 292016
 

State-owned Pemex currently has six oil refineries in Mexico, which process around 1.05 million barrels/day (b/d) of crude.

The company has now shelved plans to add a $10-billion refinery at Tula (Hidalgo) owing to doubts about its long-term viability. It does seem that it is unlikely to be needed since Mexico’s energy reforms have led to several private companies submitting proposals to build less expensive, modular “mini-refineries” in Mexico. Each of these mini-refineries is 80-90% smaller than any of the six giant Pemex refineries.

Planned new refineries. Credit: El Economista / Refmex.com.mx

Planned new refineries. Credit: El Economista / Refmex.com.mx

A consortium of U.S. firms, Refinerías Unidas de México (Refmex), plans to invest 11.6 billion dollars to build 9 mini-refineries, starting with a $1.5billion refinery in Campeche with the capacity to refine between 40,000 and 60,000 b/d. Construction would take between 18 and 30 months.

Other proposed locations (map) include Cadereyta (Nuevo León), Dos Bocas (Tabasco), Minatitlán (Veracruz), Lázaro Cárdenas (Michoacán), Manzanillo (Colima), Salina Cruz (Oaxaca), Tula (Hidalgo) and Tuxpan (Veracruz). Several of these locations are in the recently announced federal Special Economic Zones, which offer fiscal incentives to investors.

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Jul 042016
 

A recent Bloomberg analysis highlights Mexico’s “Clean Energy Revolution”. The analysis of Mexico’s electricity sector finds that total energy demand will rise 72% over the next 25 years, from 305,000 GWh in 2015 to 512,000 GWh in 2040, while installed capacity will triple, to around 247 GW.

Fossil fuels are currently the source of 78% of the electricity generated in Mexico, but renewable energy (including hydro-power) will account for 69% by 2040.

According to Bloomberg, the costs of producing wind and solar energy will become fully competitive with electricity from natural gas power stations by 2025.

The report concludes that the renewable energy sector in Mexico represents an enormous investment opportunity, worth up to $186 billion between now and 2040.

The federal government is increasing its investments in research and development of renewable energy sources each year, up to $310 million in 2020, to build more “energy innovation centers” (Cemies). The five existing Cemies focus on geothermal, solar, wind, bioenergy and ocean energy respectively. Two new Cemies will investigate the use of intelligent networks and carbon capture alternatives.

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Jun 302016
 

Pemex has concluded a round of upgrades to its refineries which means that all fuels made in Mexico are now “clean” (ultra-low-sulfur). Pemex refineries produce 420,000 barrels of vehicle fuels a day, but national demand is for 800,000 barrels a day.

pemex

Imported fuels, which come mainly from refineries in Texas, already meet ultra-low-sulfur standards. The state oil giant has invested 1.7 billion dollars in modifying its six refineries to produce only ultra-low-sulfur fuels.

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Feb 112016
 

Mexico’s state-owned Federal Electricity Commission (Comisión Federal de Electricidad, CFE) has remained the dominant electric utility in Mexico for almost eighty years, even though most Latin American countries ended state monopolies in the 1990s. Now, Mexico’s on-going energy reforms are revamping the CFE behemoth by splitting it into four distinct entities focusing, respectively, on electricity generation, transmission, distribution and commercialization.cfe-619x348

  • Generation: CFE’s total installed capacity is 55,118 MW, coming from 628 generating units in 185 power stations.
  • Transmission: Mexico has 115,400 km of high voltage transmission line.
  • Distribution: CFE currently has 820,602 km of mid- and low-voltage lines, 1910 substations and 1.38 million distribution transformers. Distribution to domestic users is organized via 16 regional units: Baja California, Bajío, Centro Occidente, Centro Oriente, Centro Sur, Centro Norte, Golfo Norte, Jalisco, Noroeste, Norte, Oriente, Peninsular, Sureste, Valle de México Sur, Valle de México Centro and Valle de México Norte.
  • Commercialization: Includes the sales and billing to more than 38 million end-users, as well as the operations of two CFE subsidiaries (CFE Internacional and CFE Energía) involved in international trading.

In related news, Mexico’s energy regulatory body, the Centro Nacional de Control de Energía (CENACE) is introducing a market framework. Long-term energy and capacity Power Purchasing Agreements (PPAs) can now extend 15 years, with guaranteed commercialization of all power produced by each generation unit. This should provide a welcome boost to many renewable energy projects.

Mexico is committed to generating 35% of its energy from renewable sources by 2024. Hydro-electric and geothermal power plants have been important for a long time, and significant solar and wind-energy plants have been added in recent decades. A market system involving tradable Clean Energy Certificates (Certificados de Energías Limpias, CELs) is an integral part of the reforms.

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Pemex works at its Clean Fuels Policy

 Mexico's geography in the Press  Comments Off on Pemex works at its Clean Fuels Policy
May 222014
 

As part of its Clean Fuels Policy, Pemex is modernizing its refineries in Ciudad Madero, Minatitlán, Salamanca, Salina Cruz and Tula.The total investment involved is 3.4 billion dollars. The plan, which will take 4 years to complete, includes the construction of new plants in several of the locations

Pemex installations in Mexico. (Adapted from Fig 15.5 of Geo-Mexico). All rights reserved.

Pemex installations in Mexico. (Adapted from Fig 15.5 of Geo-Mexico). All rights reserved.

The objective is to produce Ultra Low Sulfur diesel fuel (UBA) in the five refineries, in compliance with Mexican standards. The new technology will reduce vehicle emissions of carbon dioxide and nitrogen oxides by between 50 and 80%.

Since last September, 42,500 barrels/day of ultra low sulfur gasoline is already being produced at the Pemex refinery in Cadereyta, Nuevo León.

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Pemex defines its priority areas for oil and gas

 Updates to Geo-Mexico  Comments Off on Pemex defines its priority areas for oil and gas
Apr 212014
 

Recent reforms to the energy sector have meant that Pemex has had to define its priority areas, those areas where it wishes to continue exploration and development. At a later date, it is then possible for the government to ask for bids from other oil companies, and award contracts to explore and develop oil and gas fields in other areas of Mexico. The first stage is known as Round Zero.

In March, Pemex published its portfolio of areas for exploration for “Round Zero” (Ronda Cero), with preliminary data for 2P (proven, probable) and 3P (proven, probable, possible) reserves as of the start of this year. 2P reserves totaled 24.174 billion barrels of crude equivalent, while 3P reserves totaled 43.8 billion barrels. The figures, slightly lower than the equivalent figures from January 2013, have not yet been confirmed by independent auditors.

Map from Pemex "Round Zero" document

Map from Pemex “Round Zero” document

46% of probable reserves are located in Chicontepec (Proyecto Terciario del Golfo) in Veracruz, and 43% in offshore regions including the Akal, Balam, Ayatsil, Maloob, Kunah and Tsimín fields.

56% of possible reserves are located in Chicontepec, and an additional 34% in offshore regions.

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Latin America’s biggest solar energy plant helps power La Paz

 Mexico's geography in the Press, Updates to Geo-Mexico  Comments Off on Latin America’s biggest solar energy plant helps power La Paz
Mar 312014
 

Latin America’s largest solar power plant is now supplying power to the city of La Paz in Baja California Sur. The Aura Solar I photovoltaic power plant has an installed capacity of 30 MW. The plant was officially inaugurated on 19 March 2014, and will supply about 82 GWh/year of electricity to around 164,000 residents of La Paz, more than two-thirds the city’s total population of 220,000. It is located a short distance east of the city, and replaces an old, air-polluting thermoelectric plant.

Auro Solar 1 project, La PazThe new power plant, owned by Corporación Aura Solar, is the largest photovoltaic power plant in Latin America, according to company chairman Daniel Servitje Montull. The 100-million-dollar plant occupies 100 hectares (250 acres) and was constructed by engineering firms Gauss Energía and Martifer Solar. The project relies on about 131,800 solar panels and has an estimated operational life of 30 years. About 25% of Mexico’s electricity is currently generated using clean energy sources. Mexico has set a national target of 35% clean energy by 2024, in order to minimize Mexico’s contribution to global climate change.

This 2-minute YouTube video shows various stages in the building of the plant:

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Energy reforms and Mexico-USA Transboundary Hydrocarbons Agreement

 Mexico's geography in the Press, Updates to Geo-Mexico  Comments Off on Energy reforms and Mexico-USA Transboundary Hydrocarbons Agreement
Jan 302014
 

Mexico recently approved the most significant energy reforms since the nationalization of the oil industry in 1938. The reforms end the 75-year monopoly over the energy industry enjoyed by state oil giant Petroleos Mexicanos (Pemex), opening the way for private investment in petroleum exploration and production.

The proposals do not allow foreign ownership of mineral or oil resources, but do allow private sector firms to participate in refineries and distribution networks, as well as sign profit-sharing contracts with state oil giant Pemex and the Federal Electricity Commission. The reforms include a revised tax regime for Pemex, the world’s fifth-leading oil producer, and its reorganization into two subsidiaries.

Mexico’s oil production has risen recently to 2.5 million barrels/day (b/d) and is expected to reach 3 million b/d by 2018.

The Mexico-USA Transboundary Hydrocarbons Agreement (THA) has been approved by senators in Washington. The accord allows both countries to explore and develop crude reserves that straddle their exclusive economic zones in the Gulf of Mexico. It establishes “an environmentally safe and responsible framework to explore, develop, and share revenue from hydrocarbon resources that lie in waters beyond each country’s exclusive, economic zones,” according to White House National Security Council spokesperson Caitlin Hayden.

location of doughnut holes

The two “doughnut holes” where Mexican and US Exclusive Economic Zone claims overlap

The American Petroleum Institute has hailed the possibility of Mexico-USA joint projects in the Gulf of Mexico. The reserves in the maritime boundary region are believed to total more than 170 million barrels of oil and 15 million metric tons of natural gas, according to the U.S. Department of the Interior’s Bureau of Ocean Energy Management.

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Mexico’s Pemex is one of the most competitive oil firms in the world

 Updates to Geo-Mexico  Comments Off on Mexico’s Pemex is one of the most competitive oil firms in the world
Dec 022013
 

Despite the criticisms regularly leveled at it, Mexico’s oil giant Pemex is actually one of the most competitive oil firms in the world.

First, its costs of exploration and production are much lower than those of most other major oil companies. Pemex’s production costs in 2012 averaged 6.84 dollars/barrel (d/b) of oil equivalent, well below the costs incurred by international rivals Exxon (9.91 d/b), Chevron (15.16), Total (8.17), Shell (12.47) and British Petroleum (12.50).

pemexPemex’s exploration and development costs are also among the world’s lowest. They fell from 16.13 d/b in 2011 to 13.77 d/b in 2012, mainly due to the discovery of several new reserves. Among major players, only Shell had lower costs (11.75 d/b), with Pemex well ahead of British Petroleum (17.37 d/b), Exxon (19.31), Total (22.68) and Chevron (28.81).

Thirdly, as new fields are fully explored, Mexico’s proven oil reserves are expected to continue to rise for a number of years, from the current level of 13.87 billion barrels to 14.92 billion barrels by 2018. (During this period, Pemex will extract an estimated 6.64 billion barrels, but they will be more than replaced by anticipated new discoveries)

How important is Pemex to the Mexican economy?

One third of Mexico’s national budget comes from the petro industry, which accounted for 7.6% of GDP in 2012.

In 2012, Pemex invested 23.9 billion dollars in Mexico, appreciably more than the 19.2 billion dollars invested that year by América Móvil, Femsa, Walmart, Frisco, Cemex, Liverpool, Alfa and Mexichem, combined.

In terms of revenues, Pemex had revenues in 2012 of 142.4 billion dollars, greater than the 139.1 billion dollars in revenues of América Móvil, WalMart, Femsa, Alfa and Cemex combined.

According to a Bloomberg analysis, between 1973 and 2012, Pemex generated a cash flow (before tax and depreciation) that was 63% higher than the total cash flow of all the firms listed on the Mexican Stock Market. In 2012, the Ebitda (Earnings before Interest, Tax, Depreciation and Amortization) of Pemex was 88.2 billion dolalrs, compared to the combined 54.2 billion dolalrs of Ebitda for América Móvil, Banorte, Femsa, Walmart de México, Grupo Modelo, Cemex, Kof, Televisa, Peñoles and Alfa.

How important is Pemex in the worldwide picture?

According to Petroleum Intelligence Weekly, U.S. Energy Information Administration and U.S. Crude Oil Imports by Country, Pemex is one of the world’s five most important crude oil producers, after Aramco (Sauid Arabia), NIOC (Iran), CNPC (China) and KPC (Kuwait).

Pemex is the third largest oil exporter to the USA, after Canada and Saudi Arabia, but ahead of Venezuela and Nigeria.

Pemex installations in Mexico. (Adapted from Fig 15.5 of Geo-Mexico). All rights reserved.

Pemex installations in Mexico. (Adapted from Fig 15.5 of Geo-Mexico). All rights reserved.

Mexico has the world’s 13th largest crude oil reserves and Pemex has the world’s 15th highest oil company revenues.

Mexico’s proposed energy reforms, which will allow private sector firms more access to some parts of the oil and gas sector, will only serve to boost the competitiveness of Mexico’s oil industry. The major problems facing Pemex are not directly related to revenues or to competitiveness, but are the persistence of corruption and a lack of transparency.

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Mexico has the world’s highest level of energy security among large economies

 Mexico's geography in the Press, Updates to Geo-Mexico  Comments Off on Mexico has the world’s highest level of energy security among large economies
Apr 042013
 

According to a recently published U.S. Chamber of Commerce study of the largest energy-consuming nations, Mexico is the most energy secure country of the 25 countries in the large energy user group with a score 14% below the OECD average (see graph).

energy security graph (US Congress)

The study compiled an “International Index of Energy Security Risk”, taking into account 28 metrics including fossil-fuel imports, power generation and carbon-dioxide emissions, using data from sources such as the U.S. Energy Information Administration and the Paris-based International Energy Administration.

Other countries with high levels of energy security included the U.K., Norway, New Zealand, Denmark, Australia and the U.S. (Which tanked 7th overall. Energy security was lowest in the Ukraine, followed by Thailand, South Korea, the Netherlands, Brazil, Italy, Turkey and Japan.

Mexico’s energy security has ranked as first or second among the large energy user group of countries every year since 1980. The metrics where Mexico has a significant comparative advantage over other OECD members include:

  • low amount it spends on fuel imports per dollar of GDP generated
  • low energy expenditures per dollar of GDP and per capita are also lower
  • low costs to produce electricity.
  • low amount of energy each person uses, both overall and in the transport sector
  • low amount of carbon dioxide each person emits

As the graph shows, however, Mexico’s energy security is edging closer to that of OECD countries, meaning that Mexico’s comparative advantage in energy security is slowly shrinking.

Mexico is the world’s seventh largest oil producer, and also a major oil exporter. While production levels had been declining, they have begun to rise again in recent months. Mexico also has large reserves of natural gas, but these have not been developed quickly enough to prevent imports of natural gas from rising sharply in recent years as demand for natural gas outstrips domestic supply.

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