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MPhil in Engineering for Sustainable Development

global challenges, engineering solutions

Studying at Cambridge

Jorge Atala Palacios

The 2013 Energy Policy Reform in Mexico: An analysis of the potential impact in the energy supply sector and pathways towards sustainability.

 

Mexico is a major non-OPEC oil producer and exporter.  In 2003, the oil production peaked at 3.3 million barrels per day (bbl/d) while the exports represented almost 70% of it.  The Mexican economy became dependent on the oil exports as the economic growth is partly subject to external factors such as the international oil demand and the price of the barrel.  The oil and gas production is run by the state company PEMEX; this was decreed after the oil expropriation conducted by the Government in 1938.  Similarly, the electricity production and distribution is run by the state company CFE.

 

The oil fields are now facing a natural process of declination, increased levels of investment are required only to maintain the current level of production (2.5 million bbl/day in 2012).  Furthermore, the installed refinement capacity does not match the production, therefore Mexico needs to import oil products (mainly gasoline).  Finally, the lack of investment in technology is preventing PEMEX from producing oil from non-conventional sources such as from deep water oil fields, amongst others.

 

In December 2013, a change in the Constitution was made in order to allow private investment into the oil & gas sector as well as in the power supply.  This is better known as the Energy Policy Reform.  The main objectives are to allow economic growth by increasing the electricity and oil production along with the exports, increase the competitiveness of the Nation, and comply with international agreements and local regulations regarding Climate Change.

 

But, is the reform in the energy policy the correct path for a sustainable energy sector? 

 

Methodology

 

Based in statistical information from the International Energy Agency and the System of Energetic Information from the Mexican Ministry of Energy, I will use Sankey diagrams to plot the energy sector (production, transformation, and end use) according to the premises on which the Energy Reform was enacted and assessing its environmental impact (mainly GHG emissions).  This is to identify whether the change in the Constitution will allow a thriving and sustainable energy sector in the long term according to international trends or to propose alternatives for doing so.  Different scenarios are likely to be produced with different levels of intensity in terms of addressing Climate Change.

 

Initial Findings

 

The Energy Reform will increase the competitiveness of the oil & gas sector as well as the electricity production by increasing the number of players in each market.  At the same time, the State companies will become stronger as the demand will be distributed between the new competitors, allowing them to concentrate in the operations where they are already fully knowledgeable while maximizing the benefits.  This also benefits the nation as the increased risks of investment in high-tech processes is exclusively allocated to the investor, so the public finances become less prone to be affected because of the uncertainty of the profits.  On the environmental side, it does not seem to be a definitive and conclusive solution as the energy reform only focuses on the supply side whereas actions in the demand side are not being considered.  Moreover, a comprehensive strategy is required including other sectors of the local economy, not only those relate to the energy sector: infrastructure, institutions, and innovation.

 

In conclusion, the Energy Reform will indeed bring economic and environmental benefits, but the challenge is to break conventional schemes and create synergies with the rest of the components of the economy in order to become a leader in the field and enhance real sustainability.