PHARR, RGV – While the president of Mexico Andrés Manuel López Obrador is preparing to visit Campeche in the coming days to drill for several new oil wells, energy specialists here in Texas say the Mexican government should focus on short-term projects such as activating existing refineries.

This would be a better bet, the experts say, than long-term projects such new refineries, where the results may possibly not be known within a six-year presidential term.

Jorge R. Piñon

“In the last ten years both crude oil production and refining capacity in Mexico has been a total collapse because it has lost about 50 percent of its capacity,” said Jorge R. Piñon, director of Institutional Relations-Mexico at UT-Austin.

After describing the situation of the crude oil industry in Mexico during his participation at a Texas Oil & Gas Association “Energy Summit” at the Pharr Events Center on Wednesday, Piñon said that even in the face of such a bleak situation, the new government may show slight short-term results. 

“I think that during this sexennium a great part of the production that we have lost can be recovered, but overall it will take more than six years,” Piñon said.

“What we must concentrate on now is the reactivation of the six refineries that we already have in Mexico, many of which are not operating at capacity. In the long term if a new refinery is a good idea. But, our opinion is that in the short term, the emphasis and focus and capital investment should be in the six refineries that we already have in Mexico,” said Piñon.

Francisco Galván

Among those at the submitter were state legislators, local authority leaders and representatives of companies related to the energy sector.

“What we have to do is increase the production of Mexico, which is today at 1.8 million barrels per day, to the level it was at around three years ago. This is going to take time and cannot be done from day to night,” Piñon said.

The “energy summit” was a collaboration between TXOGA and the Rio Grande Valley Partnership. The State of Tamaulipas had a representation in the summit.

“The intention of the new president is to build the refinery so that we can produce our own fuel and under that concept and that context to lower the cost of fuel that Mexicans are consuming,” said Francisco Galván, international trade director for the state of Tamaulipas.

“But, right now it is a very uncertain situation, because we are seeing how the clean energies are replacing the old energy that is based on hydrocarbons. The focus now is more on wind energy, clean energy, gas.”

Galván added: “In Tamaulipas we are about to start a very important oil exploration and they are blocks that were put on sale and won by several international companies. We are in the process of starting the mesquite port in Matamoros that is precisely focused on the production of oil and gas.”

López Obrador said on Wednesday that he will go to Campeche “because we are going to start drilling a good battery of oil wells to stop the fall in production and start producing more crude oil.”

The Mexican president announced there will not be a cancellation of contracts, but a truce of three years for companies that already have hydrocarbon extraction contracts to invest and produce oil.

“With the contracts, a barrel of oil has not been taken out. So, we cannot continue to provide territories for the extraction of hydrocarbons if there is no investment, and most importantly, if there is no production,” said López Obrador during his third press conference as president.

“Our commitment is to give a truce of three years for results. Because what we do not want is to have the concession titles and they only be used to speculate. What we want is for oil to be produced because we need to extract crude oil,” he said.

Piñon is also director for the Latin America and Caribbean Energy Program at the Center for International Energy and Environmental Policy. He is responsible for supporting UT Austin’s academic, capacity, and research initiatives and programs within Mexico’s public and private sector stakeholders.

In his remarks at the “Energy Summit,” Piñon referred to the Mexico energy reforms and the fact that no results have been seen.

“What I believe that some people do not understand is that these are projects that cannot be carried out in the short term. These are projects that are going to take a while and unfortunately I think that they will not happen in a period of five years. It will be longer than that,” Piñon said.

“So you raise the expectations of the people when you say you can do it tomorrow. That was what happened with the energy reform when it was promised that the results of the energy reform would happen very early when we all knew that it was a long process of development that takes five to ten years.”

Piñon said the basic problem with the Mexico energy reforms was that the government of Peña Nieto did not know how to present it to the people and sell the proposal with long-term results.

“They promised short-term results, which we all knew would not happen. A deep-water oil field in the Gulf of Mexico takes five to seven to 10 years to monetize.”

Piñon explained also that Brazil today is the largest producer of oil in Latin America while Venezuela is even behind Mexico.

“The government of Venezuela gives gas. It is a government policy. Venezuela is producing 1.3 million barrels per day, a total collapse of the Venezuelan oil industry, when before it was producing more than 3.5 million barrels per day,” said Piñon.

“The problem in Venezuela is that it gives gasoline and therefore has no money to invest in the exploration and production of oil. Today Venezuela is producing less than Mexico. Brazil is today the largest producer of crude oil in all of Latin America. Brazil today produces more than Mexico and Venezuela.”

Piñon also explained how the price of the gasoline in not related to the building of more refineries.

“The price of gasoline is a reaction to the markets. The price of gasoline does not have to do anything to build more or less refineries. The price of gasoline is a function of oil prices and oil prices are in the hands of large oil producers such as Russia, the United States, Saudi Arabia and OPEC. So oil prices and gas prices are very difficult to control,” Piñon added.

Protesting LNG

During the Energy Summit, there were three people outside protesting.

“We’re showing our opposition to fracking and the three proposed Liquefied Natural Gas (LNG) export terminals and the pipelines that would bring gas to the terminals,” said Rebekah Hinojosa, a Sierra Club Rio Grande Valley organizer.

“They (LNG companies) would be big polluters and they would impact the Laguna Atascosa Wildlife Refuge which is important to attract for the endangered Ocelot and this pollution would also be terrible for the nearby communities of Port Isabel and their public health.”

Hinojosa said there is “tremendous opposition” to LNG export terminals and the pipelines that would feed them in the Valley, especially in the cities of South Padre Island, Port Isabel, Laguna Vista and Long Island Village. She said all have passed anti-LNG resolutions.

“We are actively sending comments about our opposition to the federal energy regulatory commission to demand that these companies don’t get permits to built here in the Valley,” Hinojosa added.

Asked about the protests, Todd Staples, president of the Texas Oil & Gas Association, said: “We know that there are people that spread misinformation and are just wrong in their facts.”

Staples said the oil and the natural gas industry strongly supports science-based initiatives and a regulatory framework. 

“We have safety protocols when you drill an oil or gas well. There are multiple layers that steel in cement that are used to protect our water supply,” Staples said.

“We respect everyone’s right to protest, but the reality today is that America is stronger today. Texas is better off because of the oil and natural gas and let’s think about the jobs that we are creating. We have pipelines, we have refining capability, we are exporting refined products all across the world.”

Staples added: “The Port of Brownsville is exporting crude all across of world. LNG facilities are being built in Texas, clean burning natural gas is making our nation and a world better. We do have a bright future.” 

State Sen. Eddie Lucio, Jr., D-Brownsville, also talked about the protestors and their demands. “Many of the issues are federal and not state. There are some things we can do in the State of Texas where we have power, but there are other issues that are federal. I have indicated to them that this issue (is for the congressmen), to the federal senators, to the president and not to us.”