March 2018 

Mexico faces several big external and internal challenges in the next 12 months. What’s different is the feeling I got from talking to the active E&Ps, financiers, service providers and their partners. The industry itself feels mature, experienced and focused – as if the energy reform took place 20 years ago. I believe this is the surest sign that every one of these challenges can soon be turned into an opportunity.

Here are our five key takeaways from Mexico Assembly 2018.

NAFTA 2.0?

The poll during the Mexico Assembly showed that 89% of the audience think that NAFTA negotiations will lead to multiple changes. Most believe it will not happen before the July elections, even though the pressure is on to finalize it by April 30. Multiple industries are wary of the effects of the new NAFTA but overall Mexico is forced to explore new trade avenues which can, and will, result in fruitful deals down the line. Canada, Brazil, Argentina, Europe and Central America are already in line. Since then, aluminium and steel tariffs broke the news and added another layer of complexity to U.S.- Mexico relationship. Ultimately, it is the unpredictability of President Trump’s foreign politics combined with the potentially anti-export new Mexican government that is the biggest risk to business in the country.

Will elections change the course of the Energy Reform?

Short answer – unlikely. Constitutionally, the energy reform and the upcoming bid rounds are protected from major government changes, even within the case of the leftist victory. The biggest risk here is the speed of progression and permits that can be slowed down or stalled by the new party. The industry’s top concern right now should be to prove the energy reform’s worth to the communities and local employees who will decide Mexico’s fate in July.

Fuel Market – 55% of all petrol stations to be non-PEMEX in 3 years

Another poll during the event suggested that the industry is extremely optimistic about the state of the fuel retail market in Mexico. With BPs ambition of 1,500 gas stations in Mexico by 2021, Repsol looking at 200-250 in the next 12 months, Total opening its first and at least another 5 players eyeing the opportunities – the optimistic view isn’t surprising. The Energy Council is excited to meet most of the new market players in the next year and to include them in 2019 for an extended discussion on lessons learnt. The amount of new players in the country is a positive trend which is creating healthy competition.

Healthy Competition

As energy sectors liberalize one by one, we see a healthy combination of majors, mid and small-caps all around. For me, it is the best indication of long-term energy success in any country, as it shows that the choice of opportunities attracts several types of companies and different investors with varied criteria. It keeps the market stable but attractive. There are now over 40 active E&Ps, from small private ones to majors. In the fuel sector, a combination of global players with very local private businesses is a signal to invest.

Offshore Successes Worth Billions

92.8 billion dollars could be invested in total in offshore projects in Mexico, and the process has just started. In comparison, in many countries offshore activity, especially exploration, is rapidly decreasing- Mexico fairs well even with mature, developed opportunities globally. The recipe for this success, according to most players, seems to be just how quickly the government bodies, especially CNH, learnt from mistakes and advice given.