Editor's Note: Please enjoy this bonus coverage from NGI's Mexico Gas Price Index, which includes daily prices, analysis and coverage of the emerging natural gas market in Mexico.
Editor’s Note: NGI’s Mexico Gas Price Index, a leader tracking Mexico natural gas market reform, is offering the following question-and-answer (Q&A) column as part of a regular interview series with experts in the Mexican natural gas market.
This ninth Q&A in the series is with Oscar Roldán, head of the National Data Repository at the National Hydrocarbons Commission (CNH), where he has worked since the regulatory body was founded in 2009. His career in the energy industry began in 2001 in Mexico’s Finance Ministry, where he worked on a new fiscal regime for Petroleos Mexicanos (Pemex). He also worked at the Mexican Energy Ministry from 2007-2009.
Roldán holds a bachelor’s degree in economics from the Instituto Tecnológico Autónomo de México (ITAM) and a master’s degree in Statistics and Econometrics from the University of Essex in England.
This is Roldán’s final interview while at the CNH, as he will soon be leaving his role.
NGI: How important is natural gas to the Mexican economy?
Roldán: Natural gas is without question the fuel of economies. It is the motor, the pillar. Even more so for an economy like Mexico where more than 50% of the electricity generation uses this fuel. Therefore, it is even more strategic and necessary for the development of the industrial sector. The industrial sector in Mexico practically hasn’t increased its consumption of natural gas, and not because it hasn’t wanted to, it is because there have been storage problems for natural gas since 2000. The consumption of natural gas for the industrial sector has been stagnant since 2000. That is because of the lack of natural gas.
Even when more natural gas was produced, it was dedicated to the generation of electricity. The transformation of electricity generation began in 2000 when Mexico reduced use of fuel oil to produce electricity to begin to use combined-cycle plants, and that increased the demand for natural gas dramatically.
Natural gas is necessary for the growth of the Mexican economy and the generation of cheaper electricity. We are right next to a market where the price of natural gas is very low. We are also a country where the gas resources are abundant.
It is a paradox that we have so many problems with the consumption of natural gas. It is the pillar of the economy and is far more important than oil.
NGI: We have seen significant changes in recent months in the Mexican energy regulatory bodies, particularly the Energy Regulatory Commission (CRE) and the National Hydrocarbons Commission (CNH). What do you think of these changes and what do they mean for the country and the energy sector?
Roldán: Without question I think these changes weaken the energy sector. The regulators exist to act as a counterbalance and that counterbalance is very important. The regulators are referees and they are there to assure that the rules of the game are followed as established by the law. The Energy Secretary can’t be the referee, a policy adviser, and sit at the head of the board of Pemex. There is a natural conflict of interest.
The industry requires referees that are neutral that don’t depend on the governments in power and that act as independent institutions. It has been historically proven that these institutions are necessary for economies to function correctly. What is happening now in Mexico is that the institutions are being weakened, and that, without question, isn’t good for anybody.
It isn’t good for Pemex either because the regulators review their exploration and development plans in an autonomous way. If there had been an independent regulatory commission in Pemex back in 2000 or the late 1990s, for example, Pemex probably wouldn’t have been approved to inject nitrogen into the Cantarell field, which was a terrible decision now looking back at it from a long-term point of view. Or, in 2004, for example, the over-production of Cantarell probably wouldn’t have been approved to produce 2.2 million b/d of oil.
So, that is the value of the regulators and independent institutions. If we would have had autonomous regulators at that time, without question the giant error of injecting nitrogen into Cantarell wouldn’t have been committed, nor would it have been over-produced.
NGI: Do you think natural gas imports from the United States to Mexico will continue to increase in the next few years?
To read the full article and gain access to more in-depth coverage including natural gas price and flow data surrounding the rapidly evolving Mexico energy markets, check out NGI’s Mexico Gas Price Index.