[Premium] Mexican Regulator Sets Out Wishlist

Transforming state monopoly Pemex into a joint-stock company and diversifying Mexico's gas sources are the two priorities for the country, said the head of upstream regulator CNH (national hydrocarbons commission) Juan Carlos Zepeda in London March 21.

He told delegates at Mexico Day that only when Pemex has shares will it be able to raise funds on capital markets, although he told NGW in an interview that the state could keep 50% plus one share, to ensure it retained control.

The country goes to the polls in the summer, and a populist candidate, the left-wing Andres Manuel Lopez Obrador (Amlo for short), is doing well so far. However, turning Pemex into a 'proper company' was not to avoid government interference in a key part of the national economy should Amlo win: it is a priority in its own right, CNH's Zepeda told NGW. Delegates however also said that the government was pushing through what reforms that it could, before the elections, to make it harder for Amlo to return to the old days if he became president.

Pemex does not have the capital it needs in order to produce the oil and gas it needs to double national oil production to 3mn b/d and to stop importing gas, said Zepeda. However, selling shares would solve that problem. Before the upstream oil and gas sector was opened up to licensing rounds, Pemex was given 90% of the known reserves.

Chris Sladen, who runs the UK major BP's Mexico business, told the conference that Mexico's goal would require the launch of some ten big fields annually for several years but there was no sign of that. BP has exploration acreage but no production yet in Mexico.

Zepeda also said that diversifying gas supplies meant more domestic production. US gas is the cheapest there is, but the country needs to build more pipelines to gasify more regions in order to satisfy latent demand. The Burgos basin in the north is an extension of the gas-prone US Eagle Ford play, he said, but bids for acreage there will not be awarded until September. "It is very good that we can import US gas  but we need to diversify; we should be able to diversify. It is not easy to compete with the US until the Burgos Basin comes on," he told NGW.

Mexico now imports about 5bn ft³/d of its 6bn ft³/d consumption, mostly through two pipelines from the US, along with a smattering of LNG, but it could consume 8bn ft³ by 2020 given the lifting of capacity constraints, he said.

"We want to keep importing US gas," he said, "but it should be complementary. If we had all the pipelines we wish, we could easily use another 2bn ft³/d in the short term."

Mexican upstream regulator CNH's presiding commissioner Juan Carlos Zepeda (Photo credit: CNH)