Click here to close now.

SYS-CON MEDIA Authors: Carmen Gonzalez, Liz McMillan, Kevin Jackson, Peter Silva, Greg Wind

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.

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
SYS-CON Events announced today that Vitria Technology, Inc. will exhibit at SYS-CON’s @ThingsExpo, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Vitria will showcase the company’s new IoT Analytics Platform through live demonstrations at booth #330. Vitria’s IoT Analytics Platform, fully integrated and powered by an operational intelligence engine, enables customers to rapidly build and operationalize advanced analytics to deliver timely business outcomes ...
Are your applications getting in the way of your business strategy? It’s time to rethink your IT approach. In his session at 16th Cloud Expo, Madhukar Kumar, Vice President, Product Management at Liaison Technologies, will discuss a new data-centric approach to IT that allows your data, not applications, to inform business strategy. By moving away from an application-centric IT model where data integration and analysis are subservient to the constraints of applications, your organization will b...
WSM International has launched a DevOps services division that offers assessment, consulting and implementation to large enterprises and organizations with complex infrastructures. The concept of DevOps is to blend information technology (IT) software development with operations to optimize the computing infrastructure according to the specific needs of the organization. According to a recent press release from Gartner, "By 2016, DevOps will evolve from a niche strategy employed by large cloud ...
SYS-CON Events announced today that Solgenia will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY, and the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. Solgenia is the global market leader in Cloud Collaboration and Cloud Infrastructure software solutions. Designed to “Bridge the Gap” between Personal and Professional S...
SYS-CON Events announced today that QTS Realty Trust, one of the nation’s largest and fastest-growing providers of data center facilities and cloud services and a leader in security and compliance, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. QTS Realty Trust, Inc. (NYSE: QTS) is a leading national provider of data center solutions and fully managed services, and a leader in security and compliance...
SYS-CON Events announced today that WSM International (WSM), the world’s leading cloud and server migration services provider, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. WSM is a solutions integrator with a core focus on cloud and server migration, transformation and DevOps services.
SYS-CON Events announced today that Liaison Technologies, a leading provider of data management and integration cloud services and solutions, has been named "Silver Sponsor" of SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York, NY. Liaison Technologies is a recognized market leader in providing cloud-enabled data integration and data management solutions to break down complex information barriers, enabling enterprises to make sm...
SYS-CON Events announced today that MangoApps will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY., and the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. MangoApps provides private all-in-one social intranets allowing workers to securely collaborate from anywhere in the world and from any device. Social, mobile, and eas...
Sematext is a globally distributed organization that builds innovative Cloud and On Premises solutions for performance monitoring, alerting and anomaly detection (SPM), log management and analytics (Logsene), and search analytics (SSA). We also provide Search and Big Data consulting services and offer 24/7 production support for Solr and Elasticsearch.
The WebRTC Summit 2014 New York, to be held June 9-11, 2015, at the Javits Center in New York, NY, announces that its Call for Papers is open. Topics include all aspects of improving IT delivery by eliminating waste through automated business models leveraging cloud technologies. WebRTC Summit is co-located with 16th International Cloud Expo, @ThingsExpo, Big Data Expo, and DevOps Summit.
The speed of software changes in growing and large scale rapid-paced DevOps environments presents a challenge for continuous testing. Many organizations struggle to get this right. Practices that work for small scale continuous testing may not be sufficient as the requirements grow. In his session at DevOps Summit, Marc Hornbeek, Sr. Solutions Architect of DevOps continuous test solutions at Spirent Communications, will explain the best practices of continuous testing at high scale, which is r...
@ThingsExpo has been named the Top 5 Most Influential M2M Brand by Onalytica in the ‘Machine to Machine: Top 100 Influencers and Brands.' Onalytica analyzed the online debate on M2M by looking at over 85,000 tweets to provide the most influential individuals and brands that drive the discussion. According to Onalytica the "analysis showed a very engaged community with a lot of interactive tweets. The M2M discussion seems to be more fragmented and driven by some of the major brands present in the...
Countless business models have spawned from the IaaS industry. Resell Web hosting, blogs, public cloud, and on and on. With the overwhelming amount of tools available to us, it's sometimes easy to overlook that many of them are just new skins of resources we've had for a long time. In his General Session at 16th Cloud Expo, Phil Jackson, Lead Developer Advocate at SoftLayer, will break down what we've got to work with and discuss the benefits and pitfalls to discover how we can best use them t...
DevOps is all the rage these days and with good reason as it promises to reduce the time-to-market for new applications. It also promises to improve change management, allowing teams to deploy changes to their applications quickly and efficiently. However, DevOps isn’t something you buy, install, or implement; rather it is the symptom of an appropriate organizational system. In his session at DevOps Summit, Mark Thiele, EVP, Data Center Technologies at SUPERNAP International, will discuss how ...
SYS-CON Events announced today Arista Networks will exhibit at SYS-CON's DevOps Summit 2015 New York, which will take place June 9-11, 2015, at the Javits Center in New York City, NY. Arista Networks was founded to deliver software-driven cloud networking solutions for large data center and computing environments. Arista’s award-winning 10/40/100GbE switches redefine scalability, robustness, and price-performance, with over 3,000 customers and more than three million cloud networking ports depl...