The Mexican Energy Reform brings new opportunities to Norway
As the Norwegian oil and gas market matures, the need to find promising markets to perform operations is increasingly important. It is necessary for companies to familiarize themselves with the laws, regulations, and the scope of foreign economies. To achieve this, the participation of international public entities, such as embassies and trade and investment departments, is crucial. It is important to understand the opportunities and limitations of any country. While other countries may have knowledge about the existence of reserves, there may be limitations to the participation of privately-held and international companies in upstream activities. Such was the case of Mexico, a country with a long history in oil and gas activities, where the energy sector was closed off for more than 70 years.
In 2014, the Mexican government implemented a series of structural reforms, including the Energy Reform, which provided a new framework that allows private and international companies to actively participate in exploration and production activities. “The structural Energy Reform has opened up the sector. We have had a monopoly where Pemex was the main company; however, it was challenging being the only company allowed to engage in exploration and production activities,” says Luis Javier Campuzano Piña, the former ambassador at the Embassyof Mexico. After 12 years of absence, the re-opening of the Embassy of Mexico in Norway came together with the Energy Reform.
In addition to providing consular services to Mexican nationals, the Embassy has focused on re-establishing political, economic, and cultural cooperation with Norway. “This has been very important for us because contacts with Norwegian stakeholders provide us with the opportunity to make Mexico more accessible to everyone,” says Mr. Campuzano.
Mexico does not possess the knowledge needed to exploit the deep-water resources in its territorial waters. Thus, the Embassy of Mexico in Norway is striving to promote the competitiveness of both countries and create synergies to capitalize on economic, business, trade, and investment opportunities. “Norwegian companies have acquired knowledge and expertise throughout the entire value chain. Companies with such capabilities are of significant importance to Mexico. A country that is opening up its energy sector grants a great opportunity for Norwegian companies to apply their knowledge. Norway, in particular, has developed a very high degree of knowledge in subsea and offshore exploration and production of oil and gas,” says Mr. Campuzano. As a response to Mexico’s need for expertise, several Norwegian companies participated in seismic analysis activities in the Gulf of Mexico as part of the country’s deep-water bidding campaigns. Furthermore, the Mexican authorities were pleased when Statoil won two contracts within the consortium during the fourth bidding. “Whenever Statoil begins operating in a country, it prompts the companies in the Norwegian oil and gas sector to follow suit,” comments Mr. Campuzano.
The Embassy of Mexico shows a keen interest in acquiring knowledge by encouraging Norwegian companies to share their experience in Mexico with other potentially interested parties. It works closely with partners such as ProMéxico, Innovation Norway, and Norwep to raise awareness of the challenges of performing operations in the country. “We think that it is important to consider the fact that the culture in foreign countries is usually different; thus, we provide relevant information to make it easier for Norwegian companies to have a soft landing in Mexico. Some of the goals of the Energy Reform are to enhance law enforcement, to comply with international standards of human rights, and to address the security challenges faced by the country,” points out Mr. Campuzano. He also puts emphasis on the fact that one of the priorities of the Embassy of Mexico is to provide information regarding these challenges and the actions the Mexican government takes to face them. He also says that it is crucial to keep cultural differences in mind and suggests contacting ProMéxico to approach the Mexican markets correctly.
In addition, the Embassy provides information about the size and scope of the Mexican economy and the country’s trade capabilities. Being the largest exporter in Latin America, Mexico evolved from a raw material to a manufactured goods exporter. In the 1980s, oil and gas accounted for around 80-90% of the total exports, whereas in the present they only represent 10-11%. Today, Mexico is 1st in flat-screen and medical devices exports, 2nd in computer exports, and is a major player in the automotive industry. “Our yearly foreign trade is valued in almost USD $800 billion, being roughly twice the Norwegian GDP,” says Mr. Campuzano. On he other hand, Mexico is updating its free-trade agreement with EFTA, expecting to improve business and trade opportunities. Mexico is expecting a consolidation of the oil and gas cluster and will strive to increase the competitiveness of the sector by focusing on making partnerships with the companies that can provide the know-how the country needs. “We are particularly interested in cooperating with Norwegian companies. We hope that in the future we will be able to compete with other international companies as we are further developing our oil and gas sector,” comments Mr. Campuzano. However, the possibilities offered by the structural reforms are not limited to the oil and gas sector.
Mexico shows growth potential in the maritime, aquaculture, and renewable energy industries and the fall in oil prices has encouraged the country to look for other possibilities in Norway. “Norway has developed innovative solar cell technologies that can be applied in Mexico, which is one of the most luminous areas in the world. We have almost 125 million inhabitants and an ever-growing demand for energy. A strategic alliance between these two countries could be immensely profitable,” he concludes. The incoming investments to the country and the creation of partnerships between Mexican and Norwegian companies will play a key role in capitalizing on opportunities in the oil and gas sector. The Mexican Energy Reform represents a new scope of opportunities for the Norwegian upstream and services sector in a promising market.
*Interview performed in the first semester of 2018. Note that structural changes were made in ProMexico's activities as of January 2019. Contact Norway Reports or the Embassy of Mexico to Norway for further information.