Welcome!

News Feed Item

Mexico's Historic Energy Reforms Promise to Spur Investment

For the First Time in Generations, the Country's Long-Sheltered Oil, Gas, and Power Sectors Are Opening Up to Investment and Competition; A New BCG Report Identifies the Potentially Massive Opportunities

MONTERREY, MEXICO -- (Marketwired) -- 04/09/14 -- Mexico, the world's fourteenth-largest economy, is about to get a major shot in the arm. Historic reforms will shake up and open its underperforming energy sector and "go a long way toward modernizing Mexico's economy," according to a new report by The Boston Consulting Group (BCG). The report, titled The Promise of Mexico's Energy Reforms, is being released today.

The pervasive and persistent shortcomings in the country's nationalized oil, natural-gas, and electricity systems spurred the passage of far-reaching constitutional reform in 2013. Local production, distribution, and transmission systems have been unable to keep up with the underlying growth in domestic demand. To reverse years of declining oil production and lagging investment, Mexico is setting up a regulatory infrastructure that will invite and attract new participants. The report systematically analyzes the major sectors in oil, natural gas, and electricity and lays out the potential opportunities.

"These reforms, while still in their opening stages, represent a significant departure from recent history," said Iván Martén, a BCG senior partner and coauthor of the report. "The government recognizes that it needs hundreds of billions of dollars of investment to modernize the energy sector."

A Revolution at Pemex

The most urgent reforms surround Pemex, the national oil company, which has held a monopoly on hydrocarbon production in Mexico since 1938. Mexico's oil production, which helps fund a large chunk of the national budget, has been falling in recent years, as Pemex's most prolific oil wells have matured. In an effort to boost production sharply, Pemex will begin to engage in licensing, profit-sharing, and product-sharing arrangements with private oil companies. "Pemex needs outside partners to help it reach the deepwater oil resources in the Gulf of Mexico," said Eduardo León, a BCG partner and coauthor of the report.

As Mexico's middle class has grown, domestic demand for refined oil products has risen steadily. But Pemex hasn't built a refinery since 1979, and Mexico imports large quantities of gasoline from the U.S. For the first time, Pemex will engage in joint ventures to build new refinery capacity, and permits may be granted for independent refineries. Major changes are also coming to the oil pipeline, transmission, and distribution businesses. Private investors will be able to participate in the pipeline business, and competition could finally arise in the gasoline station sector.

Tapping into Natural Gas

Even though natural-gas distribution has been open to foreign investors in Mexico for nearly 20 years, the sector still presents a huge opportunity. Natural-gas demand has risen at an annual rate of 5.6 percent. But Pemex has not yet begun to exploit the shale gas reserves in the north, which are adjacent and similar to the booming shale formation of Texas. As part of its effort to boost natural-gas production by 82 percent by 2025, "Mexico will need significant new investments in gas exploration and production," said Martén.

In line with the larger regional trend, energy producers in Mexico often prefer clean-burning, cheaper natural gas to coal. That means Mexico needs to significantly expand its gas storage and distribution systems as well. "At present, Mexico has no underground natural-gas storage facilities," notes the report, which was coauthored with EnergeA, a Mexico-based energy consulting firm.

Powering Up the Power Sector

Mexico's power sector is poised to undergo a similar transformation. Modernizing the grid and increasing the nation's generating capacity will require investment of about $93 billion through 2026. In order to boost capacity to cope with growing demand, upgrade reliability, and stimulate renewable-energy production, CFE, the state-owned power agency, is embarking upon a host of reforms. A new regulatory regime aims to create a single free market for power regulation and will permit the sale of energy directly to large commercial users.

The reforms affecting the energy sector are in their early stages. In the coming year, new regulations and enabling legislation will provide a clearer picture as to how companies can proceed. By 2015, Martén said, "we could see the first bidding round for exploration and production in oil and gas."

But it's not too early to start thinking and learning about how these reforms will alter Mexico's landscape. As León noted, the changes won't just bring Mexico's energy industries into the twenty-first century; they will provide a spur to energy-intensive industries -- and to the Mexican economy at large.

A copy of the report can be downloaded at www.bcgperspectives.com.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or [email protected].

About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries. For more information, please visit bcg.com.

About bcgperspectives.com
Bcgperspectives.com features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management's agenda. It also provides unprecedented access to BCG's extensive archive of thought leadership stretching back 50 years to the days of Bruce Henderson, the firm's founder and one of the architects of modern management consulting. All of our content -- including videos, podcasts, commentaries, and reports -- can be accessed by PC, mobile, iPad, Facebook, Twitter and LinkedIn.

The Boston Consulting Group
Eric Gregoire
Global Media Relations Manager

Tel +1 617 850 3783
Fax +1 617 850 3701
[email protected]

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
In his keynote at 19th Cloud Expo, Sheng Liang, co-founder and CEO of Rancher Labs, discussed the technological advances and new business opportunities created by the rapid adoption of containers. With the success of Amazon Web Services (AWS) and various open source technologies used to build private clouds, cloud computing has become an essential component of IT strategy. However, users continue to face challenges in implementing clouds, as older technologies evolve and newer ones like Docker c...
In IT, we sometimes coin terms for things before we know exactly what they are and how they’ll be used. The resulting terms may capture a common set of aspirations and goals – as “cloud” did broadly for on-demand, self-service, and flexible computing. But such a term can also lump together diverse and even competing practices, technologies, and priorities to the point where important distinctions are glossed over and lost.
When shopping for a new data processing platform for IoT solutions, many development teams want to be able to test-drive options before making a choice. Yet when evaluating an IoT solution, it’s simply not feasible to do so at scale with physical devices. Building a sensor simulator is the next best choice; however, generating a realistic simulation at very high TPS with ease of configurability is a formidable challenge. When dealing with multiple application or transport protocols, you would be...
Personalization has long been the holy grail of marketing. Simply stated, communicate the most relevant offer to the right person and you will increase sales. To achieve this, you must understand the individual. Consequently, digital marketers developed many ways to gather and leverage customer information to deliver targeted experiences. In his session at @ThingsExpo, Lou Casal, Founder and Principal Consultant at Practicala, discussed how the Internet of Things (IoT) has accelerated our abilit...
As organizations shift towards IT-as-a-service models, the need for managing and protecting data residing across physical, virtual, and now cloud environments grows with it. Commvault can ensure protection, access and E-Discovery of your data – whether in a private cloud, a Service Provider delivered public cloud, or a hybrid cloud environment – across the heterogeneous enterprise. In his general session at 18th Cloud Expo, Randy De Meno, Chief Technologist - Windows Products and Microsoft Part...
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at Cloud Expo, Ed Featherston, a director and senior enterprise architect at Collaborative Consulting, discussed the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
Two weeks ago (November 3-5), I attended the Cloud Expo Silicon Valley as a speaker, where I presented on the security and privacy due diligence requirements for cloud solutions. Cloud security is a topical issue for every CIO, CISO, and technology buyer. Decision-makers are always looking for insights on how to mitigate the security risks of implementing and using cloud solutions. Based on the presentation topics covered at the conference, as well as the general discussions heard between sessio...
Dion Hinchcliffe is an internationally recognized digital expert, bestselling book author, frequent keynote speaker, analyst, futurist, and transformation expert based in Washington, DC. He is currently Chief Strategy Officer at the industry-leading digital strategy and online community solutions firm, 7Summits.
Detecting internal user threats in the Big Data eco-system is challenging and cumbersome. Many organizations monitor internal usage of the Big Data eco-system using a set of alerts. This is not a scalable process given the increase in the number of alerts with the accelerating growth in data volume and user base. Organizations are increasingly leveraging machine learning to monitor only those data elements that are sensitive and critical, autonomously establish monitoring policies, and to detect...
In his session at 20th Cloud Expo, Scott Davis, CTO of Embotics, discussed how automation can provide the dynamic management required to cost-effectively deliver microservices and container solutions at scale. He also discussed how flexible automation is the key to effectively bridging and seamlessly coordinating both IT and developer needs for component orchestration across disparate clouds – an increasingly important requirement at today’s multi-cloud enterprise.
In his session at @DevOpsSummit at 20th Cloud Expo, Kelly Looney, director of DevOps consulting for Skytap, showed how an incremental approach to introducing containers into complex, distributed applications results in modernization with less risk and more reward. He also shared the story of how Skytap used Docker to get out of the business of managing infrastructure, and into the business of delivering innovation and business value. Attendees learned how up-front planning allows for a clean sep...
In his session at 20th Cloud Expo, Brad Winett, Senior Technologist for DDN Storage, will present several current, end-user environments that are using object storage at scale for cloud deployments including private cloud and cloud providers. Details on the top considerations of features and functions for selecting object storage will be included. Brad will also touch on recent developments in tiering technologies that deliver single solution and an end-user view of data across files and objects...
In his session at @ThingsExpo, Arvind Radhakrishnen discussed how IoT offers new business models in banking and financial services organizations with the capability to revolutionize products, payments, channels, business processes and asset management built on strong architectural foundation. The following topics were covered: How IoT stands to impact various business parameters including customer experience, cost and risk management within BFS organizations.
Given the popularity of the containers, further investment in the telco/cable industry is needed to transition existing VM-based solutions to containerized cloud native deployments. The networking architecture of the solution isolates the network traffic into different network planes (e.g., management, control, and media). This naturally makes support for multiple interfaces in container orchestration engines an indispensable requirement.
"I will be talking about ChatOps and ChatOps as a way to solve some problems in the DevOps space," explained Himanshu Chhetri, CTO of Addteq, in this SYS-CON.tv interview at @DevOpsSummit at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.