IHS CERAWeek 2016: Conference Opening and Special Address

Daniel Yergin, IHS Vice Chairman and IHS Energy CERAWeek Conference Chairman, opened the 2016 conference by presenting Enrique Peña Nieto, President of Mexico, with the IHS CERAWeek Global Energy Lifetime Achievement Award to recognize his leadership and vision in conceiving and implementing the transformational energy sector reform in Mexico. Dr. Yergin indicated that no country has more profoundly modernized its energy sector in such a short time, and some of the benefits to Mexico's citizens such as lower electricity prices are already beginning to materialize.

After accepting the award, President Nieto spoke briefly about the structural reform process in Mexico, which began in December 2012 with the signing of the Pact for Mexico. He said that of the 13 planned reforms, 6 targeted the acceleration of competitiveness and economic growth, of which energy reform stood out as the most important economic change for Mexico in the past 50 years. The reform is creating new energy markets, characterized by openness, competition, transparency, and legal certainty and has been recognized for its depth, breadth, and speed of implementation, which has not been derailed by the complex global situation. In the electricity sector, the reform is fostering more competitive tariffs for industry, businesses, and homes. He went on to say that the new wholesale electricity market, which started in January 2015, allows for public and private companies, regardless of nationality, to produce and sell energy freely. President Nieto announced that in second quarter 2016, the Federal Electricity Commission will put a 372-mile (600 km) high-voltage direct-current transmission line to tender, an investment of $1.2 billion. President Nieto said that the line will allow wind and hydro energy generated in the Isthmus of Tehuantepec to reach central Mexico, and it will be one of the ways in which Mexico will achieve its clean energy goals, with targets of 35% by 2024, 40% by 2035, and 50% by 2050 in its generation portfolio.

President Nieto also highlighted the hydrocarbon sector's progress, in which Round 0 was accomplished in 2014 and, he said, in 2015, the first three bids of round 1 were done in accordance with the highest international standards of legal certainty and transparency. Despite the positive developments, President Nieto recognized that the reform still has several stages to go through and described the principles that will guide the process forward: the reform will proceed regardless of international developments; the implementation will continue to be characterized by transparency and accountability; and the ultimate goal is to have an energy sector characterized by regulatory and contractual practices of excellence, giving certainty to investors. He advised that the fourth part of Round 1 bidding, focused on deepwater assets in the Gulf of Mexico, will be issued in December.

President Nieto then spoke about the transitioning of the liquid fuels market. He said that part of the reform there calls for removing the restrictions on gasoline and diesel imports by non-PEMEX companies in 2017. President Nieto announced that restrictions will be removed effective 1 April 2016, resulting in better prices for end users. He also discussed the challenges and opportunities PEMEX faces, saying that although cutting expenses, achieving efficiencies, and prioritizing investments will be necessary, PEMEX needs to take advantage of the new possible partnerships that the reform opened for the company.

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.