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
"Storpool does only block-level storage so we do one thing extremely well. The growth in data is what drives the move to software-defined technologies in general and software-defined storage," explained Boyan Ivanov, CEO and co-founder at StorPool, in this SYS-CON.tv interview at 16th Cloud Expo, held June 9-11, 2015, at the Javits Center in New York City.
Sometimes I write a blog just to formulate and organize a point of view, and I think it’s time that I pull together the bounty of excellent information about Machine Learning. This is a topic with which business leaders must become comfortable, especially tomorrow’s business leaders (tip for my next semester University of San Francisco business students!). Machine learning is a key capability that will help organizations drive optimization and monetization opportunities, and there have been some...
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, whic...
The question before companies today is not whether to become intelligent, it’s a question of how and how fast. The key is to adopt and deploy an intelligent application strategy while simultaneously preparing to scale that intelligence. In her session at 21st Cloud Expo, Sangeeta Chakraborty, Chief Customer Officer at Ayasdi, provided a tactical framework to become a truly intelligent enterprise, including how to identify the right applications for AI, how to build a Center of Excellence to oper...
While some developers care passionately about how data centers and clouds are architected, for most, it is only the end result that matters. To the majority of companies, technology exists to solve a business problem, and only delivers value when it is solving that problem. 2017 brings the mainstream adoption of containers for production workloads. In his session at 21st Cloud Expo, Ben McCormack, VP of Operations at Evernote, discussed how data centers of the future will be managed, how the p...
ChatOps is an emerging topic that has led to the wide availability of integrations between group chat and various other tools/platforms. Currently, HipChat is an extremely powerful collaboration platform due to the various ChatOps integrations that are available. However, DevOps automation can involve orchestration and complex workflows. In his session at @DevOpsSummit at 20th Cloud Expo, Himanshu Chhetri, CTO at Addteq, will cover practical examples and use cases such as self-provisioning infra...
As DevOps methodologies expand their reach across the enterprise, organizations face the daunting challenge of adapting related cloud strategies to ensure optimal alignment, from managing complexity to ensuring proper governance. How can culture, automation, legacy apps and even budget be reexamined to enable this ongoing shift within the modern software factory? In her Day 2 Keynote at @DevOpsSummit at 21st Cloud Expo, Aruna Ravichandran, VP, DevOps Solutions Marketing, CA Technologies, was jo...
As Marc Andreessen says software is eating the world. Everything is rapidly moving toward being software-defined – from our phones and cars through our washing machines to the datacenter. However, there are larger challenges when implementing software defined on a larger scale - when building software defined infrastructure. In his session at 16th Cloud Expo, Boyan Ivanov, CEO of StorPool, provided some practical insights on what, how and why when implementing "software-defined" in the datacent...
Blockchain. A day doesn’t seem to go by without seeing articles and discussions about the technology. According to PwC executive Seamus Cushley, approximately $1.4B has been invested in blockchain just last year. In Gartner’s recent hype cycle for emerging technologies, blockchain is approaching the peak. It is considered by Gartner as one of the ‘Key platform-enabling technologies to track.’ While there is a lot of ‘hype vs reality’ discussions going on, there is no arguing that blockchain is b...
Blockchain is a shared, secure record of exchange that establishes trust, accountability and transparency across business networks. Supported by the Linux Foundation's open source, open-standards based Hyperledger Project, Blockchain has the potential to improve regulatory compliance, reduce cost as well as advance trade. Are you curious about how Blockchain is built for business? In her session at 21st Cloud Expo, René Bostic, Technical VP of the IBM Cloud Unit in North America, discussed the b...
You know you need the cloud, but you’re hesitant to simply dump everything at Amazon since you know that not all workloads are suitable for cloud. You know that you want the kind of ease of use and scalability that you get with public cloud, but your applications are architected in a way that makes the public cloud a non-starter. You’re looking at private cloud solutions based on hyperconverged infrastructure, but you’re concerned with the limits inherent in those technologies.
Is advanced scheduling in Kubernetes achievable?Yes, however, how do you properly accommodate every real-life scenario that a Kubernetes user might encounter? How do you leverage advanced scheduling techniques to shape and describe each scenario in easy-to-use rules and configurations? In his session at @DevOpsSummit at 21st Cloud Expo, Oleg Chunikhin, CTO at Kublr, answered these questions and demonstrated techniques for implementing advanced scheduling. For example, using spot instances and co...
The cloud era has reached the stage where it is no longer a question of whether a company should migrate, but when. Enterprises have embraced the outsourcing of where their various applications are stored and who manages them, saving significant investment along the way. Plus, the cloud has become a defining competitive edge. Companies that fail to successfully adapt risk failure. The media, of course, continues to extol the virtues of the cloud, including how easy it is to get there. Migrating...
The use of containers by developers -- and now increasingly IT operators -- has grown from infatuation to deep and abiding love. But as with any long-term affair, the honeymoon soon leads to needing to live well together ... and maybe even getting some relationship help along the way. And so it goes with container orchestration and automation solutions, which are rapidly emerging as the means to maintain the bliss between rapid container adoption and broad container use among multiple cloud host...
Imagine if you will, a retail floor so densely packed with sensors that they can pick up the movements of insects scurrying across a store aisle. Or a component of a piece of factory equipment so well-instrumented that its digital twin provides resolution down to the micrometer.