An assortment of high-ranking Mexican national energy regulatory officials voiced support earlier this month for balancing traditional regulatory approaches with the need to let the market dictate energy infrastructure development under the nation's ongoing reforms that allow for more foreign investment.
Representatives from the Energy Ministry (Sener), Comision Reguladora de Energia (CRE), Comision Federal de Electricidad (CFE), Centro Nacional de Gas Natural (Cenagas), and Petroleos Mexicanos (Pemex) offered their insights at the 3rd Mexico Infrastructure Projects Forum in Monterrey, Mexico. Executives in general endorsed global regulatory and market-based approaches.
CRE Commissioner Guillermo Zuniga said the national energy regulatory body has had a "rebirth" with Mexico's energy sector economic reform movement, calling the revamped agency "truly independent," with autonomy in management and "maximum transparency" in its operations.
For example, Zuniga described the new natural gas regulations as "very standard," replicating what he thinks has worked elsewhere throughout the developed world. They are aimed at six specific categories: transmission/storage, open seasons, tariffs, permitting, transaction reporting, and Pemex sales/system regulations.
"Pemex is dominant, but it must be managed so it doesn't push out new participants," said Zuniga. He noted that 30% of the assigned transportation capacity is held by parties other than Pemex. "The price is now set by free markets, creating good prospects for competition, and gas field sales also have worked well." Pemex has not built any pipelines in two decades, he said.
"There are no more regulated Mexican gas prices, they are all market-driven, but they haven't been as low as we would like," he said, noting that transportation infrastructure is needed to eliminate bottlenecks and help drive down prices.
CRE Commissioner Marcelino Madrigal Martinez, said the Mexican equivalent of the U.S. Federal Energy Regulatory Commission is focused on "eliminating barriers to competition," and on the electric side encouraging the development of more distributed generation. CRE is helping to host the Seventh World Forum on Energy Regulation conference on March 20-23 in Cancun, which is to include a session on dissecting "regulation in a time of reform and innovation."
Regulators said a key to bringing the Mexican gas and electric grids into harmony is creating "more open transportation systems" for both forms of energy.
BP Energy Co.’s Darrel Thorson, vice president of business development, said it is essential that Cenagas and CRE "ensure there is transparency and equity in the market," and global market players to force more transparency in the markets.
"There is no scenario for CRE writing every rule that needs to be written right now,” he said, but over time, CRE and the market are “learning the best ways to move this market forward."
Cenagas Director General David Madero emphasized the need for certainty in the market, and said regulators need to help facilitate developing more infrastructure projects, including natural gas system interconnections and greenfield pipeline projects.
In regard to the recent roadblocks for pipeline construction though indigenous regions and rights-of-way disputes, Sener's David Rosales, director general for gas and petroleum, said the link with local communities has not worked effectively. Moving forward, projects need to be handled on a case-by-case basis, he said. He called TransCanada Corp.'s $297 million Tuxpan-Tula gas pipeline project a good example of local outreach.
Cesar Contreras Guzman, assistant secretary for energy planning and transition for the Secretaria de Energia, discussed Mexico's broader energy transition to more reliance on efficiency and renewable energy resources. "Energy development overall is allowing the development of other markets throughout the country," he said.
By 2050, Mexico’s population is expected to exceed 140 million, he said. The goal is to have half of Mexico's power from renewable resources by then, which may carry considerable risks for traditional fossil fuels.