2019: Lessons and Opportunities

The first year of a new administration is always characterized by a slowdown in activity. The country’s economic direction changes, government strategies for generating economic development and well-being are reoriented, and the objectives and priorities that will define the public agenda are reconsidered.

For this reason, a necessary pause is required to evaluate what has been done and what has been achieved. This 2019 has been a year of learning for the new administration and of analysis aimed at determining the foundations upon which the desired energy future can be built. The current administration’s vision for the energy sector represents a departure from the framework established by the previous administration, and within this break a series of actions have been undertaken that have profoundly transformed the industry.

1. Pause in Competitive Processes. The new administration has placed the energy sector’s competitive processes on an indefinite hold, particularly oil bidding rounds, farm-outs, and electricity auctions. Following three oil bidding rounds and an equal number of electricity auctions that committed significant investments for the country, the administration decided to review the contracts and the progress made on those commitments. It has repeatedly stated that if private sector commitments in these areas are fulfilled in full, additional competitive processes will be reactivated. Therefore, it will be important to monitor the progress of these projects during 2020.

2. Strengthening PEMEX and CFE. One of the current administration’s promises was to rescue and strengthen the state-owned productive enterprises by improving their financial position, restructuring their liabilities, and restoring their leading role within their respective industries. This year we have witnessed that process unfold. PEMEX is seeking to revive its role in oil exploration and production through service contracts, while CFE aims to install additional generation capacity through the PIDIREGAS model. Both approaches could begin to materialize in 2020.

3. Energy Self-Sufficiency. A fundamental objective of the current administration is to produce domestically everything the country consumes, from electricity to gasoline. This objective explains the proposed construction of the Dos Bocas refinery and efforts to increase crude oil processing through the National Refining System. The challenge is significant. Greater domestic processing implies lower imports and, consequently, lower revenues derived from the country’s export platform.

4. A Different Institutional Design. It can be argued that the current administration proposes a new institutional design based more on informal relationships and cooperation than on hierarchies and controls. Under this approach, the Ministry of Energy is responsible for energy policy and overseeing the construction of Dos Bocas, while the CEO of CFE effectively leads the country’s electricity policy and the CEO of PEMEX leads hydrocarbon production policy. Regulators, for their part, now maintain a closer relationship with the state-owned productive enterprises and the Ministry.

5. Opportunities Remain. It is important to emphasize that opportunities still exist for companies capable of developing innovative business models. Private energy auctions, distributed generation projects aimed at reducing costs and increasing renewable energy consumption, next-generation service stations, and risk analysis and management services are just a few examples.

If 2019 has been a year of reflection, we are confident that 2020 will be a year of action and implementation, focused on turning the opportunities offered by Mexico’s energy sector into reality. We hope that the five topics discussed here will serve as useful considerations for planning the year ahead.

This article was originally published by Petróleo y Energía, Volume 17, Issue 112, November–December 2019.
Date: December, 2019
Original: Printed Edition.
Archived Link: https://issuu.com/revistapetroleoenergia/docs/petrus_122-noviembre-diciembre [Archived]

Access to Energy and Human Rights After Mexico’s Energy Reform

We are living through an opportune moment to address the issue of access to energy from a human rights perspective.

Imagine un día sin energía. Hasta los elementos más básicos del día con día de todas las personas se verían impactados. La capacidad de movilidad se limitaría en gran medida; los hospitales, escuelas y oficinas verían disminuidas sus capacidades para llevar a cabo sus actividades; la comunicación no podría llevarse en tiempo real a falta de telefónos celulares, internet y redes sociales; y en los hogares no habría forma de tener los servicios básicos como iluminación y gas para cocinar.

Al imaginar este cuadro es posible señalar que las sociedades modernas no podrían vivir sin energía, al menos no como las conocemos hoy en día. Esto afectaría también otros derechos de las sociedades tales como la vivienda digna, la salud, la educación e incluso la alimentación. En este sentido, es evidente que la implementación y progresividad de estos derechos depende de que se garantice el acceso a la energía.

No obstante, pocas veces este tema de la energía se incluye en el marco de los derechos humanos. Si se considera esto en conjunto con la importancia social, económica y cultural de la energía, parece contradictorio que pocas veces se aborde el tema en las discusiones que tienen lugar dentro del marco de los derechos humanos.

En México, vivimos un momento propicio para abordar el tema del acceso a la energía con enfoque de derechos humanos. La Reforma Constitucional en materia de derechos humanos publicada en 2011, representó un enorme avance legal en la evolución de estas esenciales prerrogativas, al reconocer en el más alto nivel de la jerarquía normativa los principios que favorecen la consolidación de una sociedad más justa.

Este enorme paso que se da en la letra de la ley, debe traducirse, sin lugar a dudas, en el mediano y largo plazo en beneficios directos para los individuos y grupos, que impacten directamente en el mejoramiento de la calidad de vida de la sociedad y el fomento de la participación proactiva de la sociedad y los individuos.

Por otro lado, nos encontramos en el proceso de implementación de la Reforma Energética más profunda que ha tenido el país en los últimos 70 años. Una de las premisas más importante de la Reforma Constitucional en materia de Energía es que pone fin a los monopolios del Estado y abre el sector a la participación de nuevos suministradores de servicios tales como gas natural, gasolinas y electricidad, quienes incursionarán en el nuevo mercado energético del país.

Estudios económicos sugieren que los consumidores que han experimentado la transición de un mercado monopólico a un mercado abierto, no desarrollan rápidamente mecanismos para promover y proteger sus derechos, por lo que son más susceptibles a desarrollar nuevos mercados con distorsiones que impactan negativamente a los consumidores finales, afectando principalmente a los grupos vulnerables.

En este contexto, la Reforma Energética representa oportunidades y retos, pero también implica riesgos, toda vez que modifica la estructura de las relaciones entre los diversos actores. Por ello, todos, gobierno y sociedad, deberemos tomar conciencia de la necesidad de ser proactivos, garantizando condiciones justas en el acceso a la energía, para que en armonía con la evolución de los derechos humanos, ofrezcamos las condiciones mínimas de desarrollo para todo mexicano.

This article was originally published in El Universal.
Date: October 12, 2017
Original Link: https://www.eluniversal.com.mx/articulo/cartera/2015/10/12/acceso-la-energia-y-derechos-humanos-tras-la-reforma [online]

The Social Dimension of the Mexican Energy Reform

The Energy Reform represents one of the greatest efforts to achieve a profound transformation in one of the sectors with the deepest tradition in our country. Since the constitutional reform of December 2013, hundreds of laws, regulations, decrees, guidelines, general provisions, operating manuals, agreements, resolutions, and other related documents have been published.

The reform represents not only a change in the regulatory framework of Mexico’s energy sector, but also a paradigm shift aimed at creating a modern and efficient market operating under principles of competition and regulation. Since its enactment, policymakers and regulators have focused on promoting the reform’s economic potential: higher revenues, more jobs, lower prices, economic growth, and development.

However, the economic results have not yet been fully realized. On the one hand, the reform coincided with unfavorable conditions in international markets, such as the collapse of oil prices. On the other hand, reforms of this magnitude are not implemented overnight. In the United Kingdom and California, to cite just two examples, consolidating structural reforms in the energy sector took more than a decade. In this regard, considering only the economic dimension of the reform, the sector can be seen as moving forward, albeit cautiously. The pieces are beginning to fall into place, and a sector on the path toward consolidation is gradually emerging.

Nevertheless, the social dimension has remained a pending issue on the public agenda, particularly in its energy-related aspects. Many topics fall into this category: dispute resolution among private parties, land access and occupation, guidelines for the preparation of social impact assessments, consultation with Indigenous peoples, social witnesses, local content, consumer empowerment, energy poverty, access to energy, among others. Achieving the success of a reform of the scale of the Energy Reform requires that its social dimension not be overlooked. This should be approached as a deliberative and participatory process involving stakeholders from the public sector, private sector, academia, and civil society in order to create a public agenda that addresses the social aspects associated with the development of the country’s energy sector.

The success of the Energy Reform should not be measured solely in terms of economic outcomes, but also in terms of social inclusion, public acceptance, and social well-being. Only when the results of the economic dimension are matched by progress in the social dimension will we be able to speak of a truly successful reform.

This article was originally published by Mexican Academy of Energy Law (AMDE)
Date: August 20, 2016
Original Link: https://amde.com.mx/el-aspecto-social-de-la-reforma-energetica-un-tema-pendiente-en-la-agenda-publica/[offline]
Archived Link: https://web.archive.org/web/20190827004535/https://amde.com.mx/el-aspecto-social-de-la-reforma-energetica-un-tema-pendiente-en-la-agenda-publica/ [Archived]
Notes: Co-authored with Edgar Alvarado Domínguez, M.A.