Neue Entwicklungen auf den Energiemärkten. The Mexican Energy Reform. Wintersemester Team

Transcription

1 Neue Entwicklungen auf den Energiemärkten The Mexican Energy Reform Wintersemester Team Rebeca Banuelos Guadarrama (PEESE) Dan Christian Lopez (PEESE) Berlin, 29 Jan. 09

2 Index 1. Introduction 1.1. Motivation 1.2. Time Line 1.3. International Comparison 1.4. Actual Situation 2. Oil Industry in Mexico 2.1. Pemex Organization 2.2. Mexican Oil Market 2.3. Refining and Oil Products Demand 3. Reform Initiative 3.1. Strengthening Initiatives 4. Motivation Factors for a Reform 4.1. Cantarell Oil Field 4.2. Deepwater oil reserves in the Golf of Mexico 5. Analysis 6. Alternatives 7. Conclusions 7.1. In relation with the Initiative 7.2. Comments on the approved reform 8. Literature 1. Introduction 1.1. Motivation The theme of the Energy Reform in Mexico is definitely not new, since the early the 90 s we started hearing this proposal from analyst speaking in the news, all this comments where just taken as simple predictions of some future we could avoid easily by allowing the entrance of the private capital in the energy sector. Of course, being both the oil and electricity production state owned companies, this proposals ended always against a big wall, in this case our Constitution, being the article 27 ( article that establish the state ownership of all the natural resources) the hardest to beat. In our personal experience, we both come from similar family backgrounds. As many other thousand families in Mexico, we had relatives working for this state owned companies. Therefore, we listened everyday valuable opinions about this problematic, some of them where indeed strong expressions of nationalism but others where hard critics of the way the government was managing the finances of both companies. The fear of Privatization was always theme of conversation, where the only question left was: Am I going to be able to keep my Job? After more than 15 years, and three different government administrations, this debate is still happening in the Congress. Today, it is become clear that some of the previous predictions are now real facts. The state monopoly controlling the energy sector 2

3 is now suffering the effects the lack of investments in the previous years, the reserves are going down due to the poor incidence of exploration activities and the technology used is not anymore the state of the art available in the market. With this project, we don t want to suggest a possible solution to the political debate of the reform, but to understand the real motivation attained to this reform, from a Technological and costs financial point of view. The analysis of possible alternatives to the main tendency or strategy is also included at the end of this work Time line Oil has being produced in Mexico since 1864, where the first concession for the production of oil was given. As in many other regions of the world, Mexico rapidly attracted the interests of international companies. By 1921 there were more than 200 oil companies developing activities inside the country, most of them American. In 1933, the first Union of workers for the petroleum Industry was created. It didn t take so long before strong differences between the Union and the different Oil companies started to emerge. By 1938, after long negotiations between both parts in which the actual President, Lazaro Cardenas del Rio was present, the oil industry in Mexico was declared expropriated. Short time after the national oil company Pemex was created. That was a hard time for the nation. The oil companies left the facilities without any information. There was deep lack of knowledge and capable human resources to sustain the production activities. Moreover, there were also economical repercussions of the expropriation for the nation, due to the strong fees that Mexico had to pay to all these companies until the end of The few clients willing to buy Mexican crude oil made this business even more difficult. It is difficult to accept now that we owned the survival and after success of Pemex to the international conflict of the Second World War. Table 1: Development of the oil production rate during the history of Pemex [3] Table 1 shows the development of the oil production in Mexico during the last century. It is easy to identify the increase of production after 1980, due to the start of production from the Cantarell Field. This discovering was not the result of expensive explorative studies of the region but the luck of a Mexican fish man, named Cantarell, who in 1971 observed a huge black substance coming from the bottom of the sea. This field ended to be considered one of the three biggest oil fields in the world, and in those years boosted the status of Mexico as an oil producer country [3]. 3

4 1.3. International Comparison Following the example of Mexico, many other countries like Iran, Saudi Arabia among others, started to create their own national companies in order to obtain an economic advantage & control over their oil reserves. The old concept of the big sisters (previously private owned companies that controlled 85% of the worlds oil production) changed rapidly within a matter of decades. Today the whole industry is mainly controlled by NOCs (national oil companies) or state owned companies [1]. The previous 7 sisters had been forced to merge in order to stay in the business. Figure 1: The largest oil and gas companies with respect to the worldwide production [3] 1.4. Actual Situation Mexico is still considered today one of the most important oil producers in the world, considered among the most important suppliers of the United States, who consumes 40% of the world s oil production [1]. But this scenario won t be able to last long, due to the slow rate of restitution from reserves, the poor investments designed for exploration activities and the strong lack of technology developed and acquisition during the last 20 years. Together, these facts had erased the name of Pemex from the list of the 10 most influent oil companies in the world, according to the Energy Intelligence s Ranking of the World s Oil Companies, ranking in which Pemex appears now to be at the 11 position. More over, the strong taxation model imposed to the different activities of the company and the huge contribution of the annual income from the oil industry in the federal budget of the nation, had contribute in the process of making from Pemex the best example of what can happen if a government uses its oil enterprise as a bottomless piggybank. 4

5 2. Oil Industry in Mexico Hydrocarbons in Mexico are mainly to be found in the region of the Golf of Mexico. Being the north regions characterized for their huge reserves of gas, founded in the regions of Burgos and Sabinas; at the southeast, the regions are characterized for the huge oil reserves founded mainly in the fields of Cantarell and Ku-Maloob-Zaap. Therefore, the company divided the country by regions according to these areas. The North region, previously considered just for refining activities and distribution, now plays a great importance due to these gas sources and the new oil reserves founded in Chicontepec, Veracruz. The southeast region, where the Cantarell oil field is located, produced today about 50% of the Mexican crude oil [3]. Oil & Gas Gas Image 2: Location of hydrocarbon sources in Mexico. Source: Pemex, Foro sobre la Seguridad Energetica [3]. Recently the previously abandoned fields of Chicontepec in Veracruz have also being taken into account as one of the most important projects due to a better study of the fields. The region of Aguas Profundas (Deepwaters) represents the most technologie demanding region, due to the difficult access to the large oil reserves expected to be found in this area [3]. 5

6 2.1. The Mexican Oil Market Due to geographical situation of Mexico, it becomes easy to understand the reason why the total exports of Mexican oil industry depend strongly on the Northamerican oil market, where Mexico is considered an important provider of huge amounts of cheap crude oil and an addictive importer of refined fuels Mexico produces today three different types of crude oil, Istmo, Maya and Olmeca. From these, Istmo and Olmeca, both considered light crude oil, are the most profitable sorts. Nevertheless, most of the actual production in Mexico is based on the heavy oil Maya [2], reducing considerably the profit potential obtained. The following graphic shows the development of the oil prices from these three types of crude oil during the year Usd/barrel Total Olmeca (Ultralight Oil) Istmo (Light Oil) Maya (Heavy Oil) Graph 1: Mexico s oil exports during Source: Pemex, SIE (Sistema de Informacion Energetica) [2] 2.2. Refining and Oil Product Demand Mexico has always been considered as an oil producer and an importer of oil products.this concept has not changed even with the construction of the actual six refineries located through all the country, with a net capacity of 1500 kbd [3], the dependence on imported gasoline and many other oil products affect strongly the nation. This capacity has not changed in the last 15 year, although the demand of gasoline has increased from 27 to 37% from 1998 to 2008 [7]. The tendency of gasoline imports has been increased strongly in the last two years, by the first trimester of 2008 there where 335 thousand gasoline barrels imported, quantity that overwhelmed the total import of gasoline during 2007 [3]. 6

7 This importation of refined fuels is today one of the bigger problems in the Mexican nation. According to the International Energy Agency, the demand for gasolines in Mexico has increased considerable during the last 10 years, from 27 % in 1998, of the whole demand of fuels consumed, to 37% in 2008 [7]. In the other hand, almost no effort has being made in order to increase the refining capacity of Pemex, which has not increase in the same period of time [19]. The cost of this scenario is reflected in the huge amounts of money expended in imported gasolines (graphic 2) [3], leaving Pemex sometimes with just a small gap of profil between imports and exports (graphic 1) [2]. Graph 2: Mexican oil industry Imports and Exports during 2008 [2] MUSD Graph 3: Costs of imported gasolines during the last years [3] 3. Reform Initiative 7

8 The political debate of a new Energy Reform has being in many different Congress sessions during the last three Administrations. At the beginning the Executive proposal was to privatize some sectors of this sector, suggestion that immediately caused the negative of the majority of the votes. The next administration tried strongly to convince the Congress of the urgent necessity of allowing private capital to be considered as a possible solution for the strengthening of the energy sector, due to the strong demand of energy expected for the following years. The actual Presidential Initiative differs strongly among the previous in the sense of the lack of an integral view of the reform. The actual proposal includes mainly a series of Initiatives that are expected to help Pemex, the rest of the energy sectors are simply lightly mentioned without any remarkable initiative. In order to limit this project, we focused our efforts in analyzing the important strengthening reforms for the Mexican Oil Industry. The initiatives are briefly presented in the following [3]: 1. Extend action capability a. Contracts with Oil Service Companies will protect the mexican ownership of the resources b. Increase Refining capacity by means of external Manufacturing Companies c. Allow third party companies to develop the transportation storage and distribution activities of oil products and Gas. 2. Autonomy a. Pemex will be able to decide the number and type of companies required for their own objectives. b. In case of strategic projects this will be done by means of organisms proposed directly to the President 3. Projects & acquisitions a. Pemex will be allowed to design their own method for contracting Companies for Services and the development of Projects. b. These Contracts will be opened for public competition. But In case of Innovative Technologies, the acquisition will be made directly. 4. Budget a. The Administration of the company will have the ability to determine and approve its own Budget. b. Pemex will be allowed to use percentages from excess incomes as investment or to cover operation costs. 5. Adquiring debt a. The SHCP will include the credit requests from Pemex within the National Finance Program. b. The negotiation to acquire external credit in foreign currencies will be allowed, even without any approval from the SHCP. 6. Taxation a. Due to the gradual decline of Oil reserves, the production of oil from sources of difficult access has become common, increasing the costs associated. Therefore, the adjustment of the actual tax rates imposed to Pemex should also consider these strong differences. 7. Corporate administration 8

9 a. Creation of a new Administration Committee i. The actual SENER Committee will be maintained ( 6 executive members & 5 members from the Union) ii. Integration of 4 new Consultants, chosen by the President. b. New supporting committees will develop the functions of: i. Auditing the company ii. Analysing investments and strategic projects iii. Develop recruiting activities & evaluate the personal. 4. Motivation Factors 4.1. Cantarell Field Being the mexican oil production based strongly on the rate of production obtained from the Canterell Field, as this enourmous Oil reservoir started it s expected decline phase, the entire oil production rate of Pemex was inmediatelly affected. Many efforts were proposed in order to reduce the rapidly pressure drop of the field. The winning solution in year 2000 was to inyect Nitrogen gas in the field (as shown in the following graphic) [3]. Oil Pressure Pressure without N2 MBPD Pressure kg/cm² Years Graph 4: Development of the production rate from Cantarell field. Source: Pemex, Foro sobre Seguridad Energetica [3] 9

10 This solution managed to maintain the pressure of 90 kg/cm² in 2008, and helped the field reach its peak production on Nevertheless, the normal cycle of the field will continue, reducing the production constantly. Therefore, the location of new reserves turned to be of great importance after 2004 [3] Deepwater oil reserves in the Golf of Mexico Taking into account this scenario the previous government administration decided to increase the investments in exploration. Especially after hearing rumors of the huge possible reserves founded under the deepwaters of the Golf of Mexico, specifically in the region of Perdido, where some of these enourmous reserves passed through the limit of the sea border between Mexico and the United States, as shown in the following picture (image 3). Image 3: Geological formations that are expected to contain oil in the region of Perdido at the Golf of Mexico[3] An agreement signed on 2000, apparently favored Mexico with a 62% of the amount of reserves, calculated in 29 thousand million barrels of oil. Unfourtunately, the Mexican side of these reserves is located at a depth of more than 3 thousand meters, in comparison with the American side where the depth. The whole amount of oil expected to be found in the region of the deepwaters of the GOM is equivalent to 45,4 Thousand million barrels. Amount that would increase the 3P reserves of Mexico up to 99,2 thousand million barrels boosting again the position of Mexico among the international oil producers. [3] 5. Analysis 10

11 The decision of drilling outside the continental shelf, represents a very cost demanding enterprise, not only because of the high level of technology required but also because they usually require more time during their developing. Moreover, the rate of success of developing a succesfull well in the OCS (Offshore Continental Shelf) region is typically around 10%, and cannot be compared with the 90% of success in onshore drilling activities [4]. Therefore, companies normally make use of their easy access reserves of oil before they decide to go drilling on deeper waters. Countries with a high demand of energy, like the United States, usually are forced to go offshore in search of new oil sources. Other countries, like Brazil, had no other choice than going to the deepwaters in order to find hydrocarbons. Nevertheless these cases are characterized by huge production costs and short lifetime of wells, fact that makes this business even more unprofitable. Almost all Brazil's oil production comes from the deepwater fields of the Santos, Campos and Espirto Santo basins off its southeast coast. Unlike large onshore fields, which may produce at peak capacity for a long time, deepwater fields usually follow the production profile shown in the graph (5). Peak production is achieved for a relatively short time some of number of months before exponential declines set in. These declines are steep in the deepwater, running 10-15% per year [8]. Graph 5: Hubbert curve (Offshore Field Profile) [8] Although the drill technology for drilling under feet is today available, the great demand and the limited number of equipments in the world, makes the decision even more difficult. Acquiring this technology it is today not only a matter of spending thousand of dollars per day just to cover the leasing payments, but requires also an enormous planning effort due to the existence of waiting lists of companies that want to have this state of the art technology [9]. 11

12 Offshore drilling operations require precise positioning of the ships and equipment. They also require ocean conditions that make it possible to stay on location for a period of time. The NASA has identified the behaviour of the strong currents that characterize the Gulf of Mexico by using satellites than analize continuously the region. This studies had identify the existence of strong marine current regions that where called Eddies. These eddies, spawned about once a year, are hazardous because the associated currents can present high velocities. Shear at the eddy boundaries can be considerable and keeping a ship on a precise location in an eddy can be very difficualt or impossible. Eddies can be detected easily in sea surface height data, as they produce 'hills' of water over 30 cm above average sea level. Currents can be infered from the data and, when combined with other data including sea surface temperatures, the resultant maps are a very useful tool (image 4) [13]. Image 4: Map showing Eddies found in the GOM [13] Marine currents are not the only natural risks expected in the region of the GOM. Due to climate changes, in the last 10 years, the incidence of hurricanes had increased radically in the region, affecting constantly the production of oil and the refining activites in the zone [14]. Just in the year 2005, these phenomena caused the destruction of 123 oil rigs [24] and an enourmous drop of the production rate as it is shown in the following image (graph 6). 12

13 Graph 6: Effect of hurricanes on the Oil Production from the GOM [14] 6. Alternatives The strong pressure of going for oil to the deepwaters of GOM is mainly based on the fear of loosing this opportunity. Most of the discovered fields go across the border with the USA, and the production of oil from these fields is expected to start by the end on January Due to the geological nature of these fields, it is said that some Mexican oil could be lost through the developing of production activities at the other side of the border. At least this is how the media in Mexico tried to convince people in order to get public support to the Reform Initiative. But, even if the approval of this reform, the actual technology for drilling under ft is still being studied. Moreover, even with the proper equipment there is no guarantee of succeeding. Instead of making huges expenses now in order to try to win this already lost race against the United States, Mexico should call for a new negotiation of the Western Gap Treaty, in order to reconsider the limits of these huge oil reserves. Or at least, negotiate the extension of the ban agreed previously from both sides in order to give some more time to Pemex. There are still many opportunities onshore waiting to be found. Today there are around 200 opportunities on the continental shelf with big chances of being productive [20]. Across the nation there are many abandoned oil wells, where Pemex barely made use of the productive potential, due to the lack of studies, know-how and the 13

14 technologie needed. Just in the state of Veracruz, located in the coast of the GOM 10, 000 abandoned wells are reported. The example of the Chicontepec oil field (field discovered in 1920 and after abandoned), is today probe of the enourmous oil potential that is kept inside the territory (image 6) [3]. kbd Mft³ Image 5: Share of oil production expected to be include from the previously abbandoned oil field of Chicontepec.[3] Mexico needs to recognize the strong potencial of the natural gas and stop the flaring activities. The lack of infrastructure for the transportation of this natural resource casued looses of millions of dollars every year. Although the tendency has decreased during the last years, recently it started to grow again, costing the country around 700 million dollars just during 2006 [3], as it is shown in the following graph (6) Million cubic feet MUSD 0 Graph 6 : Costs of Gas Flaring in Mexico.[3] 14

15 In addition to the traditional oil and gas plays in the deepwater GOM, there may be huge resources in gas hydrate-bearing sands. The in-place hydrate resource may be 30 to 300 times greater than conventional oil and gas reserves. A gas hydrate is a cage-like lattice of ice that traps molecules of natural gas, primarily methane. Hydrates are formed at and just below the seafloor under conditions of low temperature, high pressure, and in the presence of natural gas. In the GOM, hydrates occur in water depths greater than 1,450 ft (442 m). Each ft³ of hydrate yields 165 ft³ (4.7 m³) of gas at standard temperature and pressure [21]. Unfourtunately the technology hasn t yet found the way of making a profitable way of using hydrates, due to the instability of these crystals at normal conditions of pressure and temperature, the option of pelletizin this hydrates is still being under study. 7. Conclusions: 7.1. In relation with the Initiative The overproduction strategy followed by Mexico has almost depleated the oil reserves of the nation, causing the actual reduction of the production rate.this will affect strongly the federal budget of the nation if the prices of the oil decrease more. The initiative of reform proposed by the government does not take into account the whole sectors of energy in Mexico, but it is a good attempt for attracting the investments of privat capital in order to strength the oil industry in the nation. Nevertheless, some initiatives of taxation and autonomy could be considered as a way of improving the capability of Pemex. It is possible to recover the oil production in Mexico, by making use of the large oil reserves that exists through all the territory. The Offshore drilling option is today still not profitable for Mexico. Pemex should first make use of the easy access reserves on the continental shelf, before starting to drill for expensive oil in the deepwaters of the GOM. It is possible to upgrade the actual refining capacity of the nation, by simply improving the investments of the capital and reducing the actual operation costs of the company.due to the strong demand of fuels in Mexico, the refining sector is indeed profitable for Mexico. Therefore the privatization of this industry should be avoided. Mexico needs to resists the pressure of the international companys, and develop it s own cost effective strategy. It is necessary to increase the investments on research and for the developing of new technologies as a strategy for surviving in the new international oil market. 15

16 7.2. Comments on the approved reform After many political debates within the Congress, finally a new Reform was approved for all the different parties. This new initiative was introduced in November Mainly because of the enourmous pressure that represented the global crisis through which the energy sector of Mexico was also being affected. This Reform, took into consideration each of the main Executive Initiatives proposed by the Executive, and transform them in order to keep their intention of strengthening of the Oil Sector, but at the same time, protecting the state ownership of the reserves included in the vigent Constitution. By this means, the inclusion of Risks Contracts, previously suggested by the President Initiative, became now completely impossible. The direct assignation of contracts with privat companies will only be allowed in case of emergency. The initiative related with the improvement of Pemex autonomy, did managed to go throught the congress. Today, Pemex is now independent of the SHCP (government institution in charge of national financies), which means that it doesn t need the approval of its annual budget and gives the organism the freedom to administrate its own investments. The creation of an administration committee with the inclusion of four professional consultants was also accepted, but with the condition that these will be chosen by the Senate. The request of having different taxation model that considers the difference in the costs of developing and production from deepwater fields was also accepted, but this new model will only apply for Pemex activities. In the matter of the improvement of the national refining capacity, finally the approval for the construction of a new refinery was given. Although no precise definition of capacity has being given, it is known the new development will also be placed in the middle region of the country, where the most demand of fuels is found. In relation to the oil fields regions shared with the USA, unfourtunately there was no attempt of reopening the negociations with respect to the previously signed treaties. These oil sources will be used according to the previous agreements. Although the possibility of demand the extension of the actual oil production ban is still being considered in the Mexican Congress. [3] [4] 8. Literature (Presentation and Report) 16

17 1. API, a. Americas Oil & Natural Gas Industry b. Montly Summary Reports c. API, Report Sistema de Informacion Energetica 3. Petroleos Mexicanos. a. Foro sobre Seguridad Energetica b. Situacion Pemex 2008 c. Diagnostico del Sector Energetico 2007 d. Wood Mackenzie Report for Pemex (2007) e. SENER, Diagnostico Situacion Pemex 4. Senado de la Republica, a. La Reforma energética factible b. Tecnologia para la industria Petrolera c. Centro de Estudios de las Finanzas Públicas de la H. Cámara de Diputados 5. DIARIO OFICIAL, Viernes 28 de noviembre de Energy Intelligence, Ranking of the World s Oil Companies IEA Oil Market Report, ASPO-USA, Energy Bulletin, Aug & Dec MMS-OCS (Mineral Management Service Outer Continental Shelf) Report, Deep Water Gulf of Mexico Transocean. a. Frontiers_May 2002, Transocean Co. b. Transocean Ltd. (NYSE: RIG) Fleet Status Report Deepwater Options IMP, Instituto Mexicano del Petroleo NASA, Ocean Surface Topography from the space. sealevel.jpl.nasa.gov/index.html 14. National Oceanic and Atmospheric Administration (NOAA) Coastal Services Center. Hurricane.csc.noaa.gov/hurricanes 15. Energy Information Administration and National Oceanic and Atmospheric 16. Isla Bermeja UNAM, Nuevo Activo en las aguas profundas Shell, The elusive goalto stop flares BP Statistical Review of World Energy June FTE Mexico. Frente de trabajadores de la Energia NETL News Spring08, MMS ReleaSeS PReliMinaRy ReSultS of Gulf of Mexico in- Place natural GaS HydRate Assessment TRANSPARENCY INTERNATIONAL ANNUAL REPORT 2007 Measuring coruption PEMEX