 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
Sunday, August 25, 2002 Maximizing energy opportunities By Debra Guerra-Vasquez
Texas Railroad Commissioner Charles Matthews recently led the largest trade mission to Mexico from Texas in 30 years. The goal — opening discussions on energy development and cross-border energy projects. Despite issues of a Mexican Congress divided on energy issues, ownership of exclusive rights to exploration and production in Mexico by the state’s oil company, and a slow process toward energy reform, participants and observers see positive movements that can benefit U.S. companies who get in on the ground floor early. Texas is the largest producer, consumer and exporter of natural gas in the United States. It produces about 5.5 trillion cubic feet annually while exporting 1.7 Tcf per year, mainly to the Northeast and Midwest U.S. There are 10 natural gas pipeline interconnects between Mexico and the United States, seven of which are in Texas, two in California, and one in Arizona. Commissioner Matthews reports that in 2001, a high of 140 billion cubic feet of natural gas was exported to Mexico, an increase of 33 percent over 2000, although 465 million cubic feet of liquid natural gas was exported by truck. Mexico is home to the Western hemisphere’s fourth-largest natural gas reserves (after the U.S., Venezuela, Canada) with proven natural gas reserves of 29.5 trillion cubic feet. Its 1999 production was about 1.29 Tcf with consumption of 1.26 Tcf. Mexico has not emphasized exploration and development of its natural gas, leaving it with insufficient production to meet growing consumption. Estimates vary about the need over the next 10 years for Mexico to spend about $14 billion a year to keep up with energy demand and $4.5 billion a year for exploration and development. Government-owned and managed Pemex (Petroleos Mexicanos) is one of the largest oil companies in the world. Under Mexico’s constitution, it has exclusive rights to exploration and production of oil and natural gas. Sixty percent of its revenues go to taxes, which support one-third of the federal budget. The need for capital has led energy officials to look for ways to increase foreign investment in natural gas exploration and development within constitutional limits. In June, Pemex announced plans to award multiple service contracts of up to $8 billion to foreign firms to help develop the natural gas reserves in the Burgos Basin in northeast Mexico. Pat French, vice president for development with the Texas Alliance of Energy Producers, says foreign investors and regulators are hopeful the contracts will be written along standards similar in style to arrangements made in Iran and Venezuela. Matthews sees Texas as ideally suited by geography, sharing a border of more than 1,240 miles, and technical expertise to help develop Mexico’s hydrocarbon infrastructure. “The multiple service contracts will provide for the hiring of geologists, petroleum engineers, drilling contractors, and other services,” Matthews said. “Texas has more than 100 years experience in finding, producing, and transporting hydrocarbons all over world.” A key part of Matthews’s strategy is to streamline the permitting process for new pipelines to Mexico. When RRC staff began looking at the Texas side of the border, they found 10 agencies involved — four state and six federal agencies. That process has been streamlined through a memorandum of understanding signed by the state agencies in March 2001, providing for the Railroad Commission to be lead agency, assembling documents and interfacing with all state agencies. The RRC also works with federal regulators to speed up the permitting process. Matthews cites as a success the permit approval of Tidelands Oil Corporation, accomplished in 14 months, a significant decrease from the typical three-year process. Construction has begun on the pipeline to ship natural gas from Eagle Pass to Coahuila, Mexico. Matthews plans another trade mission in 2003. In the immediate future he will speak at a Border Energy Forum hosted by the Texas General Land Office with other U.S. and Mexican agencies in Saltillo, Mexico, in October. He will be joined by Commissioner Raul Monteforte, CRE (Comision Reguladora de Energia), Veronica Angulo, U.S. Dept. of Energy, and Mike Ward, Tidelands Oil Corporation Jeff Jones, principal with Quantum Energy in Albany, went on the trade mission. Although he saw potential for opportunity, he also observed a political climate that is slowing down the process. He heard different viewpoints with no consensus on Mexico’s energy situation at a presentation with representatives of Mexico’s three political parties However, David Shields, energy writer/analyst in Mexico City is optimistic. “There is no better time than now, as much can be done under the current legal framework,” Shields said. “Investors who have made headway in power generation and natural gas distribution believe it is better to get in on the ground early before the competition heats up under future openings. Energy reform is proceeding more slowly than many people would like, but there are signs it may move forward soon, especially in electricity. Moreover, it may be better to have a reform that is gradual, prudent and well thought-out, rather than something hasty and impractical.” “Opportunity is there today without any changes in federal law or federal constitution. The regulatory climate is ripe,” Matthews said. He sees advantages for smaller companies that are able to respond quickly within the current environment of dialogue from professional to professional and regulator to regulator. Dan Robertson, editor of the Permian Basin Oil & Gas Report, is solidly in favor of Matthews’ efforts while acknowledging a long history that’s going to be hard to overcome. “This can help Texas service companies to bridge the rise and fall in their businesses and the key will be to build relationships and alliances with Mexico,” he said. French cautions that Mexico is not the place for companies that desire a quick turnaround, but for those willing to build business relationships for the long term that will be profitable. Debra Guerra-Vasquez is a local writer. Useful Web sites: Information
on the upcoming Border Energy Forum hosted by Texas General Land
Office www.glo.state.tx.us/energy.border
|
Take
the fast-growing energy needs of Mexico, add the growing needs
of Texas and the results are opportunity and challenge for U.S.
companies willing to invest in a long-term relationship with Mexico.|
|
E.W. Scripps Publications