Review of the Economist
Nov, 23rd-29th, 2013. pp.16-18 “Energy in Mexico: Make or break for Peña Nieto”
This article mainly stated the future energy sector in Mexico through the energy reform which recently submitted.
Summary of the article
Enrique Peña Nieto is the president of Mexico (Dec. 2012~), promising a series of the reforms, in education, telecoms, banking, fiscal, political and energy, that aimed at raising the country’s unimpressive economic growth.
The energy sector needs the most urgently reform aiming to end state monopolies and encourage private investment in energy.
Since 1938 oil and gas have been a state monopoly, managed by Pemex (Petroleos Mexicanos). In these days in Mexico, the oil production and proven reserves are declining and the amount of energy imports is increasing, due to the lack of the technology and capital to exploit abundant resources, deep-sea oil and shale gas, or to build new refineries and pipeline.
The Federal Electricity Commission (CFE: Comision Federal de Electricidad) is another inefficient state monopoly, which is one of the reason that Mexican industrial users pay around twice as much for power as their competitors north of the border.
In this article, the draft of energy reform is stated as disappointing one, because even suggested energy reform let private firms work with Pemex, it would offer only a share of the profit and not any oil.
The statistics of energy in Mexico
Figure 1 (left): Shares in primary energy supply Figure 2 (right): Shares in electricity supply
Figure 3: Domestic sales and import of gasoline Figure 4: Production of crude oil
The issues in Mexico
Oil and Gas：
As the article denoted, Pemex faces the lack of capital to exploit more resources. More seriously it lacks the capital to invest refinery, in the result Mexico became net importer of gasoline, although Mexico is the net exporter of crude oil.
Electricity:
CFE generates 64% of electricity supply in Mexico and 36% is generated by IPP (Independent power producer) and households, even though they are allowed to cover only peak load. The price of electricity is slightly higher than that of U.S.: for each dollar people in U.S. pay, Mexican pay 1.25 on average.
The expected benefits of reforming energy sector
Oil and Gas:
The production of oil and gas will increase, which will expand the country’s budget and grow the Mexican economy. Mexicans will have sufficient oil and gas, under competitive conditions that would allow the prices of them decreasing.
Electricity:
Households and industries will receive great benefits from the reform that thy will pay less on their electricity usage because of a greater diversity of generation sources.
Reviewer: Teppei KATATANI, M1