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Mexico energy overhaul will bring benefits, challenges


Texas legislators met to hear testimony regarding the benefits and challenges presented by the Mexico energy reform in regards to the Texas economy. Jorge Piñon gave testimony and informed the lawmakers that while the reform can be beneficial for Texas, the path will not be easy. He warned of the fragile political climate that will result as Pemex faces competition for the first time in over 75 years. Despite that, Piñon urged Texas, saying that the energy reform is important enough to justify  an effort to create a partnership with regulators and companies across the border.

by Robert Grattan. Houston Chronicle,  September 28, 2014

Jorge Piñon

Jorge Piñon, director of LACP

EDINBURG – At a meeting just miles from the U.S.-Mexico border, Texas legislators heard a range of benefits their state can look forward to as Mexico remakes its energy sector – and also a stiff warning that capturing the windfall won’t be easy.

Over the past year, the Mexican government has approved a historical overhaul opening its energy industry to private investment after decades as a state-owned monopoly.

Testimony near border

To get a better sense of what the changes could mean in Texas, lawmakers have invited experts to brief them. Two committees of the Texas House of Representatives gathered on Friday to hear testimony in Edinburg, a city of 80,000 located 20 miles north of the border in Hidalgo County.

The Edinburg hearings followed a similar track as ones last week in Austin before a state Senate subcommittee.

But in Edinburg, where the airport is a base for National Guard helicopters that patrol the uneasy border, area representatives were especially eager for good news.

And in a series of nine presentations that lasted from the morning into the afternoon, experts from Texas’ universities and oil companies provided plenty.

Max Yzaguirre, CEO of the Yzaguirre Group analyst firm, cited projections that Mexico’s renaissance could open the floodgates to as much as $1.2 trillion in investment benefiting both sides of border.

Job and revenue growth

Texas could be one of the biggest beneficiaries on the north side. BBVA Compass predicted earlier this month that the overhaul and subsequent economic expansion could add more than 200,000 Texas jobs, about $3.5 billion in state revenue and $45 billion in Texas gross domestic product.

The reforms also could provide an important outlet for U.S. natural gas. Mexico hopes to switch much of its electric generation capacity to the cleaner-burning fuel – a plus for producers looking to sell the vast quantities of gas flowing from U.S. shale, said Erica Bowman, vice president and chief economist at America’s Natural Gas Alliance, an industry organization.

But speakers also warned that the road to a new energy boom – which could bring as many as 40,000 jobs to South Texas alone – will be rugged.

“If any of you think there’s a clear road map, you’re wrong,” said Jorge Piñon, director of the Latin America and Caribbean Energy Program at the University of Texas at Austin. “The biggest mistake we could make is raised expectations.”

Piñon cautioned that the political climate in Mexico could complicate the roll-out of the new order, as officials adapt to a culture in which the state monopoly Petróleos Mexicanos, or Pemex, faces competition for the first time in more than 75 years.

Piñon praised the lawmakers for partnerships that have brought Mexican nationals to Texas universities, but said they need to do more. He urged them to put aside political differences and to begin building partnerships with regulators and companies across the border.

“Please depoliticize Texas’ relationship with Mexico. It’s not easy: drugs, immigration, violence,” Piñon said, adding that energy reform is important enough to justify the effort.

Optimistic mood

“We in Texas can still have our differences with Mexico, but I think we can take it off the soapbox.”

Despite the frank descriptions of the challenges, the mood at the meeting was optimistic. Lawmakers and the other stakeholders called the reforms a benefit for Texas and Mexico.

In the U.S., the benefits could include closing the gap between the growth of the border regions and the metropolitan centers of Texas, Yzaguirre said.

And capital flowing into the northern region of Mexico might bring enough economic opportunity to quell the drug violence and break the hold of the cartels.

“People will prefer to have a job in the formal sector than a gun in the informal sector,” said George Baker of energy and policy group Energia. “In this scenario, Mexico’s security problems will be self-correcting.”


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