Pemex Chief Touts Mexico's Energy Reform in Washington
Thursday, April 24, 2014
Emilio Lozoya (courtesy Pemex)

While energy reforms have opened the door for Mexico's state-run energy company to expand overseas, its focus for now will be on developing its "low-hanging fruit," the head of Pemex said on Thursday.

Pemex Chief Executive Emilio Lozoya spoke in Washington, D.C., at the annual conference of the Export-Import Bank, the official U.S. export credit agency, on a panel discussing the next frontier of investment opportunities.

Lozoya, a 39-year-old Harvard-educated executive and son of a former finance minister, touted the potential benefits of Mexico's massive energy reform to Mexico's economy, the central American region and the United States.

While it has longer-term ambitions overseas, for now Pemex remains focused on attracting U.S. companies interested in Mexico's untapped potential.

"In Mexico there are many reserves that are accessible compared to other parts of the world. That does not mean that Pemex will not go international at some point, but right now the easier opportunity is in Mexico," he said.

He said Mexico's massive but aging energy sector "needs the hundreds of companies that are trading in the United States to come to Mexico."

Not only would that give Mexico a much-needed boost, but it would be a job creator for the United States, Lozoya said.

Signed into law late last year by President Enrique Pena Nieto, Mexico's energy reform allows for new contractual options for Pemex, as well as foreign or private oil companies, including production-sharing contracts and licenses.

So-called secondary legislation that will set commercial terms for the contracts and other regulations is expected to be approved by Mexico's Congress in May.

Lozoya added that the shale gas boom in the United States also opens up a window of opportunity not only for Mexico, but for Central America as well.

Various infrastructure projects in the works will allow Mexico to tap into the bounty of natural gas in the United States, which will transform Mexico's economy, he said.

"This will mean that we will go from consuming 6 percent of the total electricity in Mexico to producing 15 percent of it," he said, adding that it will move the country away from a reliance on expensive fuel oil.

"The impact on the economy will be great," Lozoya said, noting that the energy reform is expected to increase investment in Mexico to $50 billion to $60 billion per year.

The economic impact could also be felt further south in Central America, where natural gas is priced around $20 per thousand British thermal units, compared with roughly $4.50 in the United States.

"If Pemex together with its partners builds the energy infrastructure to bring this cheap feedstock to Central America, we will create economic opportunities in Central America," he said, noting this could also reduce the major drivers of emigration.

(By Valerie Volcovici; Reporting by Valerie Volcovici; Editing by Dan Grebler)

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