[team title=”” subtitle=”” url=”” image=””]By Steve Taylor[/team]
LAREDO Texas- U.S. Rep. Henry Cuellar says there is great excitement among Mexican elected officials and oil and gas executives about the opening up of their country’s energy industry to private competition.
Cuellar, D-Laredo, based his assessment of the mood of the country on how well an energy summit he hosted in Laredo went last Friday. He said officials from Pemex, Mexico’s state-owned petroleum company, want him to be their guest at a similar gathering in Monterrey next month. Cuellar’s talking points from the Laredo conference are posted at the end of this story.
“There is a sense of optimism and hope among the Mexican officials. They are really excited,” Cuellar told the Guardian. “It is still controversial (opening up the energy sector) but they feel that the people understand there will be more economic wealth. From a landowner to a business to a worker, there will be more money due to this increased economic activity.”
Cuellar likened the lengthy deliberations Mexico is taking as it works on legislation to deregulate oil and gas exploration to the angst the U.S. went through when it passed the Affordable Care Act. “Just like us with healthcare, it is a controversial topic and there are a lot of discussions. But, just like our healthcare reforms, this will be good for the country. It is historic. The congressmen that attended our conference said they are glad to be working on this important legislation.”
Cuellar said one of the federal legislators present at the conference, Héctor García García of Nuevo León, is a member of the Mexican Congress’ energy committee. Diputado García said he believes the legislation will be complete by the end of July.
“The energy committee is doing its due diligence. They want to do this right. They have been traveling over here to learn. They have university professors and businesses involved. The oil belongs to the country but they are trying to work something out where the landowners will benefit,” Cuellar said.
The PEMEX officials at the Laredo summit included Jorge Morales Cerón, Javier Eduardo Medina Malagon, Ricardo Martínez Sierra, Julián de la Garza Castro, Jorge Vivero Flores, Víctor Manuel Barragán Hernández, Héctor Benítez Flores and Manuel Flores. In addition to García, other legislators at the energy summit were C. Blanca Villaseñor Gudiño, C. Camel Athie Flores, and Perfecto Reyes.
One of the points Cuellar said he would like to get across, when he attends the energy conference in Monterrey, is the need for Mexico to train its own workers. “I am telling them to start developing classes in college so they can have the next generation of petroleum engineers. They cannot depend on other countries. I want to encourage them to develop more engineering programs.”
In his speech, Cuellar ran through the numbers, showing Mexico to be, potentially, one of the leading oil producers in the world. “There are a lot of reserves. If Mexico does this right they will be one of the biggest producing companies in the world. It is very, very, very, interesting what they are going through. They are excited, the Pemex guys. The congressmen also. You could sense the excitement,” Cuellar told the Guardian.
Cuellar said he was expecting three leaders from Pemex at the Laredo conference. Instead, there were about ten.
“We listened to the Pemex folks. It is amazing what they are going through right now. The top people understand that there has to be competition. They were saying they had to work with the unions but they were saying there will actually be more work, more business. It will be better for everyone. There were obviously some who were saying, ‘more competition – it might take my job away.’ But, Pemex has said, ‘no, you might find a job elsewhere that pays more, maybe with an American company’.”
Asked if the Mexican officials were concerned about the environmental impact of fracking, Cuellar said: “They have heard the concerns. I told them there is no documented case of an accident involving fracking. I am not saying it could never happen but there is no documented case. I told them you have to be careful. You have got to look at lessons learned. Talk to the Railroad Commission here in Texas. They are a good agency. Talk to other folks in the U.S. Learn from us. Any mistakes we made, you need to make it better for yourself. They said we are looking at everything. They are looking at preventative work.”
A few weeks back, Cuellar told the Guardian that the Rio Grande Valley could see the benefit of increased trade as a result of oil exploration and production in the Burgos Basin of northern Mexico within two years. Asked if – following the Laredo conference – he stood by that prediction, Cuellar said: “From what I heard today, yes. It might be a little quicker. They have got to pass the legislation. Then they have to develop partnerships, put sectors out there for people to come in and develop. It is going to take a little bit of time but I would say in not more than a couple of years you will see the activity.
“The border, Laredo down to the Valley, is a prime place because if you have activities with the Eagle Ford on this side and the Burgos Basin over there you will see a lot of activity in between, equipment, personal, money. I think it is going to a boom. From Laredo down to the Valley we will be at the epicenter of two large economic activities. We are right in the middle.”
Cuellar added that he had heard of two main concerns from American oil companies considering doing business in Mexico. He said one is whether the Mexican government will provide enough of an incentive to invest and two, whether security will be tight.
“I spoke with executives with Conoco Phillips in Houston. I told them yes, I think the incentives will be there and yes, security is going to improve. I think the possibility of petroleum will be a catalyst for improved security. That in turn will be good for the population that lives there. It is in Tamaulipas’ own interest to improve security. That, in turn, will lead to greater prosperity.”
<B>Here are Rep. Cuellar’s talking points from his speech to the Texas Energy Summit:</B>
<I>At this very moment, the United States, Mexico, and Canada stand poised to become the next ‘Middle East’ of the world. And, because of this, it is imperative that stakeholders from a myriad of backgrounds come together to discuss the future of energy production in our region.
Ladies and gentlemen, I am here to state a truth that is often overlooked: Eagle Ford Shale does not stop at the Rio Grande. Mexico is currently the ninth largest producer of oil in the world, holding an approximately 11.4 billion barrels of oil reserves. However this figure does not tell the whole story, since it does not factor in Mexico’s untapped energy potential. It is currently estimated that, in total, Mexico may have the 5th largest collection of shale oil resources on the planet, totaling 13 billion barrels.
And The Burgos, Sabinas, Tampico, Veracruz Basins, as well as the Tuxpan Platform, are estimated to house 545 trillion cubic feet of natural gas, potentially larger than Mexico’s proven conventional reserves. In total the U.S. Energy Information Administration has assessed Mexico’s tight oil and shale gas resources to be the 4th highest globally.
And when combined with the energy reform proposals introduced by the Peña Nieto Administration, and currently being debated within Mexico’s Congress, we are on the cusp of increased production, a rise in infrastructure investment, and the creation of thousands of new jobs just across the border.
According to The University of Texas at San Antonio’s Institute for Economic Development, the 14-county Texas Eagle Ford Shale region supported 86,000 full-time jobs and produced $46.6 billion in total economic output in 2012. Such growth and prosperity is not an anomaly, and if it is possible in Texas, you can be darn sure it is possible in Mexico. In fact, J.P. Morgan has estimated that, due to Mexican energy reform alone, Mexico’s potential GDP growth could increase by up to 0.8 percent, while foreign investment could increase by $20 billion dollars, per year, by 2016 or 2017.
Conclusion: The possibilities available to Mexico are limitless, and the national, energy, and economic security of the Mexico, Canada, and United States will be directly affected by our ability to harness these resources. North American energy independence is within our grasp, we must only commit ourselves to this task. I know that we can, I know that we must, and I look forward to doing what I can to make sure this occurs.</I>