#1Mexico's Energy Regulatory Commission: Challenges and Opportunities in Reforming the Energy Industry CRE TEXAS COMISIÓN REGULADORA DE ENERGÍA The University of Texas at Austin Guillermo I. García Alcocer Chairman www.gob.mx/cre @CRE_Mexico fComision Reguladora Energia You Tube cregobmx in Comisión Reguladora de Energía March 27th, 2017 Austin, Texas#2CRE "In terms of scope, depth and space of implementation, Mexico's energy reform ranks as the most ambitious energy system transformation worldwide in a long time" Paul Simons, International Energy Agency (IEA), Deputy Executive Director (February, 2017)* 圓 The Energy Reform ended the long- decades monopolies in the sector 4 Incorporates lessons learned and best international practices * Source: IEA, 2017. Active competition key policy to Mexico's successful energy reform $ Interest (trust) shown by international investors Will boost oil production, increase the share of renewable energy sources and increase energy efficiency 2#3The International Energy Agency's special report "Mexico Energy Outlook" compares the estimated benefits of the Energy Reform by 2040, with a No Reform scenario NO REFORM Oil production would be around 1 mb/d lower than in the Reform scenario REFORM NCRE Oil and gas production will increase and petroleum product imports will decrease Electricity rates for industrial consumers would be 14% higher in 2040 The cost of generating and delivering electricity to the residential sector would be 16% higher; the additional jea Mexico accumulated subsidy would be 50 billion dollars Mexico would not meet its clean energy targets, nor its GHG emissions reduction goals Energy Agency Energy Outlook World Energy Outlook Special Report Mexico's economy would be 4% smaller 46 է Lower electricty rates for industrial consumers Subsidies will be gradually phased out by 2035 Mexico will meet the 35% clean power generation target by 2024 and reduce its GHG emissions Mexico's economy will double, it will be more efficient and its energy intensity will improve Energy efficiency standards will significantly decrease Mexico's energy consumption Source: https://www.iea.org/publications/freepublications/publication/Mexico EnergyOutlook.pdf 3#4Mexico's landmark Energy Reform is now a reality, creating significant investment opportunities throughout the entire value chain N Estimated Investment: 242 billion dollars . Committed Investment: 70 billion dollars (30 billion more in 2017) CRE 41 Power Sector First Power Auction: 2.6 billion USD Second Power Auction: 4.0 billion USD Generation: 98.7 billion USD * Transmission: 15.3 billion USD * Hydrocarbons "Rounds One and Two" Round 1: 1st Tender: 2.7 billion USD 2nd Tender: 3.1 billion USD 3rd Tender: 1.1 billion USD 4th Tender: 34.4 billion USD Trión: 11 billion USD Round 2: 1st Tender: 11.3 billion USD 2nd Tender: 5.0 billion USD 3nd Tender: 1.0 billion USD Seismic data: 2.5 billion USD Natural Gas and Petroleum Products Gas pipelines: 16 billion USD Petroleum Products: 16 billion USD Transportation and Storage: 4.0 billion USD Distribution and Retailing: 12.0 billion USD A total of 82 companies from 18 countries have won contracts for the development of hydrocarbons and electricity projects • Distribution: 17.7 billion USD * *Total expected investment by PRODESEN throughout 2030. Source: Mexico's Ministry of Energy 4#5Electricity The Energy Regulatory Commission (CRE) has become the regulator of the mid and downstream segments of the oil and gas value chain, as well as the electricity supply chain Hydrocarbons CNH Comisión Nacional de Hidrocarburos Exploration / Extraction CRE SENER SECRETARÍA DE ENERGÍA Transportation Refining/ Processing Transportation Storage NCRE CRE 兄 童 Distribution Retailing & Commercialization CENAGAS CENTRO NACIONAL DE CONTROL DEL GAS NATURAL System Operator CRE 4 NICRE Generation # Transmission CENACE CENTRO NACIONAL DE CONTROL DE ENERGÍA System and Market Operation (ISO) CRE 4 Distribution GO Retailing & Commercialization NCRE 5#6What is the Energy Regulatory Commission (CRE)? • CRE is a coordinated energy regulatory agency, which promotes the efficient development of the energy sector and the reliable supply of hydrocarbons and electricity CRE has its own own legal status, technical and operational autonomy as well as budgetary self- sufficiency CRE CRE's Governing Board is composed by 7 Commissioners, including its President To designate each Commissioner, the President of Mexico submits a list of three candidates to the Senate The Senate appoints each Commissioner by a two-thirds majority vote Commissioners are designated for staggered periods of seven years, with the possibility of being re-elected for a single additional period 6#7CRE in comparison to other North American energy CRE regulators CRE Federal regulator of the mid and downstream segments of the oil and gas value chain, as well as the entire electricity supply chain. H H FERC Federal regulator for interstate transmission of electricity, natural gas, and oil. NEB Federal regulator for Inter-provincial and international oil, gas and electric imports and exports, as well as construction and operation of power lines and pipelines. NARUC Local regulators for energy, telecommunications, power, water, and transportation utilities. CAMPUT Provincial and territorial regulators in charge of the electric, water, gas, and pipeline utilities. NERC Not-for-profit international regulatory organization that develops protocols for the reliable operation of North America's electric systems. "Mexico's Grid Code includes 10 NERC standards in the Baja Califonia Region" FERC: Federal Energy Regulatory Commission. NEB: National Energy Board. NARUC: National Association of Regulatory Utility Commissioners CAMPUT: Canada's Energy and Utility Regulators. NERC: North American Electric Reliability Corporation 7#8Analysts agree that within a potential reconfiguration of NAFTA, Mexico and its North American Partners will share the basis for a close cooperation in the energy sector CRE Technology exchange Investment options Capacity building Sharing of industrial best practices i Cooperation in climate change $ Increased trade flows and complementarity Strengthen the regulatory coordination in North America Source: LA Times, 2017 Recovered from: http://www.latimes.com/world/mexico-americas/la-fg-mexico-pemex-2017-story.html and CRE Encourage infrastructure development 80#9The United States, Canada and Mexico must collaborate to develop policies and regulations that make the North American energy opportunity a reality Over the next 10 years North America will: Grow its GDP by more than 1% Reduce emissions by at least 5% CRE i Add more than 2 million jobs In doing so, North America will become more energy-self sufficient and; It will minimize the region's exposure to global price shocks It will increase global energy supply It will create new strategic relationships It will promote responsible development of the region's resources $ Source: Goldman Sachs. Recovered from: http://www.vox.com/sponsored/goldman-sachs-naes/episode-1-the-north-american-energy-opportunity 9#10North America could become a relevant energy hub, considering its natural resource and infrastructure base across energy markets There are pipelines with the capacity to ship approximately 4.84 billion cubic feet per day of natural gas to Mexico Several new pipelines will soon bring the total estimated capacity to 9.68 billion cubic feet by 2019 ☑ Oil & Petroleum Products Natural Gas 4 Electricity CRE Signing of the Electric Reliability Agreement to promote security of the interconnected electric system in North America (January 7th and March 8th, 2017) Signing of the MOU on Climate Change and Energy Collaboration by the North American Leaders: development of reliable, resilient and low-carbon electricity grids (February 12th, 2016) The United States is poised to become the world's top oil producer, Canada scaled its output to unprecedented levels and Mexico's landmark energy reform dramatically increased its production potential This liberalization of the fuels market in Mexico has attracted international companies *Source: Goldman Sachs (2014) http://www.vox.com/sponsored/goldman-sachs-naes/episode-1-the-north-american-energy-opportunity; Wilson Center (2017) U.S.Mexico Energy and Climate Collaboration; Petroleum Economist (2017), Memo to Washington: Don't mess with the booming US-Mexico energy trade. 10#11Mexico's upstream contracting and licensing "Round One" has started and yielded positive results Veracruz 5 6 10 11 0535 W www 13 Bloque licitado con ganador Bloque iditado sin ganador Campeche Tabasco Areas licitadas con ganador Areas licitadas sin ganador Goffe de Méxic TECOALLL PA MIZTON AMOCA HOKCHL PB HOKCHL PA TECOALLL POKOCH ICHALKIL XULUM MISON NAK CRE Estades Unides First Tender: Shallow Offshore Exploration Contract: Shared Production Awarded on July 15th, 2015 Outcome: 2/14 blocks awarded Talos Energy & Sierra Oil & Gas: 2 blocks awarded Total expected investment: 2.7 billion dollars Second Tender: Shallow Offshore Extraction Contract: Shared Production Awarded on September 30th, 2015 Outcome: 3/5 blocks awarded Equilibrium Price: $15 USD Fieldwood Energy & Petrobal: 1 block awarded Total expected investment: 3.1 billion dollars Italian In March 2017, oil company Eni became the first international company to discover reserves (light crude oil) since the reform was enacted Third Tender: Onshore Extraction Contract: License Awarded/Signed on May 10th, 2016 Outcome: 25/25 blocks awarded Equilibrium Price: $14 USD Roma Energy Holdings: 1 block awarded Total expected investment: 1.1 billion dollars 30 Contracts Signed 37 New companies from 7 countries, 26 are Mexican Source: Fondo Mexicano del Petróleo; SENER 2016. 60% of income to the State 68% awarded (30 of 44 blocks) 7 billion USD of investment http://rondasmexico.gob.mx 11#12In the Fourth Tender (1.4) 8 contracts were granted to 6 different bidders Cinturón Plegado Perdido Golfo de México Tamaulipas Veracruz Ignacio de la Llave Cuenca Salina Yucatan Campeche 240 320 km Bouros End, Digs, Goss, Barbatur Ogonision, Cr DE, DA UB, AIDL Gepping, Aard, IGH, IGP, peso, and Fourth Tender: Deepwater Exploration Contract: License Awarded on December 5th, 2016 Outcome: 8/10 contracts Total Expected Investment: 34.4 billion dollars Area 1 Area 2 Perdido Fold Belt Area 3 Area 4 Area 1 噩 Area 3 ==+ Saline Basin Area 4 Area 5 Winning Bidders CRE China Offshore Oil Corporation E&P Mexico Total E&P México and ExxonMobil Exploración y Producción México Chevron Energía de México, Pemex and Inpex Corporation China Offshore Oil Corporation E&P Mexico Statoil E&P México, BP Exploration México and Total E&P México Statoil E&P México, BP Exploration México and Total E&P México PC Carigali México Operation (Petronas) and Sierra Offshore Exploration Murphy Sur, Ophir México Holdings Limited, PC Carigali México Operations and Sierra Offshore Exploration 8 granted contracts for Deepwater exploration and extraction 12 winning companies from 8 countries (public, private, national and international bidders) Mexico will receive in average between 59.8% and 66.1% of the generated profits#13Pemex will partner with BHP Billiton to develop the Trion block Gulf of Mexico Block, Field and Exploration Prospects TRION Golfo de México N 95-300 Pozos Trión-1DL Productor AE-0092 Loc:Trion-101 Cymba 1 Trion-1001 Campo Triền Bloque Trión Triển-1 AE-0093 05w CRE Prospecto Exploratorio Winning Bidder BHP Billiton Petróleo Operaciones de México AE-0080 AE-0094 AE-0081 Km 25 3000 93 Brow Trion block: Required investment: Migration area: Discovered in 2012 USD$11 billion (exploration and production) 1,285 Km² Depth: +2,500 mts Total reserves (3P): First commercial barrel: Business proposal: Contract award: *Estimate as of December, 2016. 485 million barrels of oil equivalent* 2023 Partnership with Pemex, seeking to share risks and investment December 5th, 2016 13#1490% of the 2P Reserves and 95% of the Prospective Resources in NCRE Mexico, are still available for bidding 2P Reserves Allocated 17,792 MMBOE (Round 1) 273 10% National Prospective Resources Allocated 112,833 MMBOE (Round 1) 4,329 5% Available Pemex 14,919 84% State for bidding 2,873 16% 2,601 90% Pemex 24,459 22% State 88.373 Available for bidding 84,044 78% 95% ● A revised 5 year exploration and extraction plan was published in February, 2017 by the Ministry of Energy. MMBOE: million barrels of oil equivalent Source: CNH and the Ministry of Energy of Mexico http://www.gob.mx/sener/acciones-y-programas/programa-quinquenal-de-licitaciones-para-la-exploracion-y-extraccion-de-hidrocarburos-2015-2019 14#15The energy reform laid the foundations for an open and competitive natural gas market CH I CRE 1. Enhance natural gas availability throughout the country 2. Separate pipeline transportation from natural gas commercialization 3. Establish open access and pipeline capacity reserve conditions 4. Issue asymmetric regulation for high market concentration and in case of price distortions (First-Hand Sales in the south, gas release program) 5. Publish volumes, prices, discounts, locations and trade information for retailing and commercialization of natural gas 15#16Mexico's Gas Pipeline Network will expand considerably from 2012 to 2019 Total expected Mexicali Los Algodones 2012 2016 3 Los Algodones bis Sásabe investment 4 Cd. Juárez Nogales Naco Gloria a Dios San Isidro Agua Prieta 16 billion dollars 6 2 Cd. Acuña KM Monterrey Reynosa 8 Ojinaga Argüelles Samalayuca 11 Piedras Negras Río Bravo Puerto Libertad Colombia 12 El Encino Sur de Texas Camargo Guaymas New transportation infrastructure by 2019, according to the Five Year Gas Pipeline Plan: • • 10 new strategic gas pipelines 2 social coverage gas pipelines 7 interconnection points with the US 1 interconnection with Central America El Oro Topolobampo 143 La Laguna 510 Dos Ramones Escobedo 9 5 Durango 2019 Regasification Terminal Operating Gas Pipeline Concluded Gas Pipelines (2013/2014/2015) Gas Pipelines under Construction (2015/2016) Strategic Gas Pipelines included in the Five Year Plan "El Cabrito" Compression Station, included in the Plan Social Gas Pipelines, included in the Plan Interconnections Future Private Projects Mérida CRE Pipelines* 1 Kinder Morgan (operating) KM 2 Gasoductos de Chihuahua (operating) 3 Sempra Energy Transportadora de Gas Natural de Baja California (operating) Sempra Energy 4 Gasoducto Rosarito (operating) Sempra Energy 5 Gasoductos del Noreste (operating) Sempra Energy 6 Gasoducto de Aguaprieta (operating) Sempra Energy 7 Gasoductos de Tamaulipas (operating) Sempra Energy 8 Gasoducto de Aguaprieta- Sonora 9 (operating) Sempra Energy TAG Pipelines Norte (operating) Sempra Energy/Pemex 10 Arguelles Pipeline (operating) Energy Transfer Partner 11 Gasoducto de Aguaprieta -San Isidro- (operating) Sempra Energy 12 Gasoducto de Aguaprieta -Ojinaga- (operating) Sempra Energy 13 Midstream de México (operating) Howard Midstream Energy Partners Mazatláno Zacatecas Aguascalientes San Luis Potosí N. Reyes Altamira 4 of operations: second semester 2016) Tuxpan - Tula and Tula - Villa de Reyes (expected start of 1 2 Pipelines* Manzanillo - Guadalajara (operating) Naranjos Tamazunchale - El Sauz (operating) 3 El Encino - Topolobampo and El Oro - Mazatlán (expected start Guadalajara Tamazunchale Naranjos Tuxpan Tula Apaseo el Alto ativitas 4 Huexca Cempoala Cancún ㅁ Lázaro Cárdenas Ciudad Pemex Jáltipan 5 operations: first semester 2018) permit process. South Texas - Tuxpan. permit process. *Participation of American and Canadian capital in Mexico's Gas Pipeline Network Source: Five Year Gas Pipeline Plan 2015-2109, http://www.gob.mx/sener/acciones-y-programas/plan-quinquenal-de-gas-natural-2015-2019 Nuevo ☐ Acapulco Pemex Salina Cruz Centroamérica Tapachula ☐ 16#17CRE is continuously working to provide a regulatory framework that encourages natural gas integration ties between Mexico and the US Tijuana Mexicali Los Algodones Yuma Puerto Libertad Gloria Sásabe Agua Naco Prieta Juárez a Dios San Isidro Guaymas Samalayuca El Encino Ojinaga Piedras Negras Colombia CRE Regasification Terminal Operating Gas Pipeline Concluded Gas Pipelines (2013/2014/2015) Gas Pipelines under Construction (2015/2016) Strategic Gas Pipelines included in the Five Year Plan "El Cabrito" Compression Station, included in the Plan Social Gas Pipelines, included in the Plan Interconnections Nuevo progreso / Reynosa Argüelles Río Bravo Agua _Dulce CD South of Texas Mier El Oro 14 interconnection points Topolobampo ☐ La Laguna with the US Escobedo Los Ramones 4 interconnection projects with the US Durango Source: Five Year Gas Pipeline Plan 2015-2109, http://www.gob.mx/sener/acciones-y-programas/plan-quinquenal-de-gas-natural-2015-2019 17#18Geographic Areas of Natural Gas Distribution* Total investment** 1,847 Million dollars Pipeline network 52,818 Tijuana ND Mexicali $28.3 Hermosillo $44.9 Sinaloa $8.4 Cd Juárez $186.7 Chihuahua $86.7 Noroeste $8.3 Saltillo $74.6 La Laguna $44.7 kilometers Geographic Areas in Operation Piedras Negras $13.8 Nuevo Laredo $32.1 Norte de Tamaulipas $31.9 Monterrey CMG $98 GNM $415.3 Rio Pánuco Tractebel $30.1 GNN $7.4 Del Bajío GNM $154.9 Querétaro $69.3 Veracruz $7.1 Guadalajara $48.8 Geographic Areas with Construction permits Occidente $14 Morelia $11.6 */ Units in million dollars (USD) **/ Investment corresponds to Geographic Areas in Operation. Geographic Areas with Construction permits estimate an investment of 42.3 million dollars. CRE Valle-Cuautitlán- Texcoco-Hidalgo Suez $135.3 GNN $30 Toluca $33.1 CDMX $218.6 Puebla Tlaxcala $55 Morelos $1.1 18#19The distribution of natural gas has been considered a natural monopoly. However, if the relevant market is defined as the consumption of energy, we observe that it doesn't have most of the characteristics of a monopoly CRE Single supplier No substitutes Price controll: possibility to set the level and discriminate Barriers to entry for competitors No competition Economies of scale 19#20The Gas Release Program, an asymmetrical regulation instrument to Pemex, seeks to promote the participation of new stakeholders in the industry Contracts that represent 30% of the volume and will remain as customers of Pemex Contracts that represent 70% of the Release portfolio: approximately 2.5 bcf volume and will be available for release • 20% of the volume (0.7 bcf) February 1st, 2017 Phase I CRE ✓ Process duration: at least one year Public Act (random selection of contracts) . 20% of the volume (0.7 bcf) • Date to be defined Phase II • 30% of the volume (1.1 bcf) . Date to be defined Phase III ✓ CRE will be able to merge Phase II and Phase III and reduce the time-lapse between them Total commercialization portfolio: approximately 3.6 bcf Deadline for the reception of applications: March 10th, 2017 Bcf: billion cubic feet Mcf: million cubic feet OUTCOMES OF PHASE 1: Contracts subject to release: 111 contracts (758 Mcf) Contracts that remain with Pemex: 133 contracts (1,104 Mcf) 20 20#21On February 17th of 2017, CENAGAS executed the first annual auction of import pipelines' capacity. A total capacity of 733 Mcf/D was offered, of which, 29.2% (214 Mcf/D) was allocated Fábrica de Envases de Vidrio de Potosí Requested injection point: NET ETP - Delmita Los Ramones Granted capacity: 4.04 Mcf/D Results BP Energía de México Requested injection point: NET DCP-Gulf Plais Los Ramones Granted Capacity: 9.72 Mcf/D NCRE bp Industria de Alcali (Grupo Vitro) Requested injection point: NET ETP - Delmita Los Ramones Granted Capacity: 16.13 Mcf/D ALCALI Granted capacity: 214.72 Mcf/D BP Energía de México Requested injection point: NET EFM-Nueces - Los Ramones Granted Capacity: 184.82 Mcf/D bp The awarded contracts will be valid from July 1st, 2017 to June 30th, 2018 As a result of this process, BP, the largest natural gas trader in North America, begins its participation in the national market. Also, Mexican industries have begun to diversify their portfolio options to satisfy their supply needs *Mcf/D: one million cubic feet per day 21#22Prior to the Reform, Mexico's fuel retail model generated significant CRE inefficiencies: $ MÁX Fixed Price Regime National single price (prevented adequate cost recognition on a regional basis) • Fluctuations of international prices were reflected with a delay • Lack of efficient price signals resulted in underinvestment throughout the value chain • The excessive subsidy benefited the population with the highest income (200) billion pesos per year) Pemex did not recover logistical costs • Pemex lost resources for unacknowledged logistical costs in the overall gas price Underinvestment in the industry ⚫Limited infrastructure: low capacity and vulnerability (extreme weather events) ⚫Lack of incentives to improve service quality in gas stations • 40% of municipalities do not have gas stations 22 22#23Fuel price flexibility will trigger significant investments and create new jobs at the retail level. Also, it will enhance fuel availability and supply security for consumers CRE GASO 2,677 People/Station GASO 5,158 People/Station H GASO GASO 10,560 People/Station Represents 1,000 people H 11,242 People/Station Source: US Department of Transportation, Country Meters, "Global Health Observatory Data Repository" by World Health Organization (ONU); "Anuario estadístico de 2016" published by Agencia Nacional del petróleo, gas natural y biocombustibles 23#24Logistical routes for imports and supply of gasoline in Mexico Cost of transporting one barrel of gasoline: Pipeline Vessel (2 times pipeline cost) Train (6 times pipeline cost) Tank truck (14 times pipeline cost) O ---- CRE 24#25Price components of regular gasoline (pesos per liter) Excise Tax Law: $4.16 Fiscal incentive: $-0.50 Fee: $-0.15 Excise Tax Law: $4.30 Fiscal incentive: $1.120 (26.05%) $15.99 av. Excise Tax Law: $4.30 Fiscal incentive: $1.773 (41.23%) $15.99 av. $13.52 IEPS entidades - 16.3% Excise tax and VAT ~16.3% 2.61 av. 2.61 av. entities and VAT 17.0% 2.29 Excise Tax 2 ~ 15.8% 2.53 ~ 19.9% 3.18 CRE Excise Tax Law: $4.30 Fiscal incentive: $1.15 (26.74%) $15.85 (March 25th-27th, 2017) 2.61 av. Excise Tax Law: $4.30 Fiscal incentive: $1.773 (41.23%) ? 2.61 av. 3.0 2.53 Excise Tax 3.52 26.0% Quality Adjustment 0.16 av. - 13.6% Profit margin 0.81 av. 0.16 av. 0.81 av. 1.20 av. D 0.16 av. 0.81 av. 1.20 av. 11 Logistics 1.20 av. ~13.6% Profit margin, Logistics and 1.81 Quality Adjustment 13.4% 8.93 av. Reference 8.28 av. ~ 55.9% Reference Price 5.91 price ~51.8% 43.7% Average 2016 January 2017 *Excise Tax= effective component of Excise Tax | Margin=logistics + Margin ES *Max price 2016= Ref. price + margin + Excise Tax + Excise Tax entities and VAT *Max price. 2017 Profit.+ logistics +margin ES +Adjustment + Excise Tax+ Excise Tax entities and VAT *Source: COFECE (January 2017). 1 - 17 February, 2017 Daily update Liberalization D (Since February 18th, 2017) (Between March and December by region) 25#26Fuel price liberalization strategy in Mexico MAR-2017 S MAR-30th-2017 • Baja California • Sonora JUL-26th-2017 S OCT-30th-2017 •Baja California Sur • Durango . Sinaloa 1 ☛ Open Season final rulling SPrice Liberalization OCT-16th-2017 NOV-30th-2017 . • Aguascalientes • Ciudad de México • Colima • Chiapas • Guanajuato • Guerrero • Hidalgo . . ⚫ Morelos • Nayarit ⚫Puebla San Luis Potosí . • Oaxaca • Tabasco • Tlaxcala • Veracruz • Zacatecas • Jalisco • Querétaro . Estado de México • Michoacán 3 CRE 2 MAY-25th-2017 JUN-15th-2017 . Chihuahua Coahuila • Nuevo León • Tamaulipas Municipio de Gómez Palacio, Durango 4 NOV-30h-2017 > DEC-30th-2017 • Campeche • Quintana Roo • Yucatán 5 26 26#27The opening of refined product logistics (gasoline, diesel and jet fuel) has triggered the interest of new investors in the energy sector • • • MONTERRAENERGY Monterra Polyduct Route: Tuxpan, Veracruz - Tula, Hidalgo . Project: 1 storage terminal and 1 polyduct • Diameter and length: 18 inches and 270 Km . • Operational capacity: 100 thousand barrels per day Will transport: gasoline, diesel and jet fuel CRE's approval (TA): March 22, 2016 • Final ruling: July 1, 2016 . Opening: Second half of 2018 Estimated investment: 600 million USD invex⚫ Polyduct INI4 • Route: Tuxpan, Veracruz - Tizayuca y Tula, Hidalgo • • Diameter and length: 24 inches and 265 Km . Project: 3 storage terminals, 1 polyduct and 3 pumping stations Operational capacity: 140 thousand barrels per day . Will transport: gasoline and diesel • CRE's approval (TA): March 22, 2016 • Final ruling: 20 working days after the deadline for receipt of applications • Opening: First trimester of 2018 . Estimated investment: 350 million USD Nuevo Laredo Tamaulipas Monterrey, Nuevo León CRE Investment: 1.3 – 2.3 billion dollars Corpus Christi, Texas • • • • Tuxpan, Veracruz . Tula, Hidalgo Tizayuca, Hidalgo DosÁguilas HOWARD + ENERGY PARTNERS Frontera-Norte Polyduct Route: Corpus Christi, Texas Tamps. Santa Catarina, Nuevo León Nuevo Laredo, Project: 4 storage terminals and 1 polyduct Diameter and length: 12 inches and 242 Km (USA) and 218 Km (Mexico) = 460 Km Operational capacity: 90 thousand barrels per day Will transport: gasoline, diesel and jet fuel CRE's approval (TA): March 10, 2016 Final ruling: May 23, 2016 Opening: First trimester of 2018 Estimated investment: 500 million USD SIERЯA OIL & GAS Grupo TMM ( TransCanada • Route: Tuxpan, Veracruz - Central Mexico • Project: 1 marine terminal, 1 polyduct and 1 inland storage and distribution hub • Length: 265 Km • In September 2016, Novum Energy completed México's first private import of diesel fuel. Transportation of the diesel into Mexico was by road for a mining company • Will transport: gasoline, diesel and jet fuel • Operational capacity: 100 thousand barrels per day Estimated investment: 800 million USD 27#28Investment: 1.5 billion dollars CRE also grants permits for transportation of petroleum products by means other than pipeline, such as railways Ferromex GRUPO MEXICO Ferrocarril Mexicano, S. A. de C. V. Permit: PL/12953/TRA/OM/2015 Destinations: Guadalajara, Jalisco; Chihuahua, Chihuahua; Piedras Negras, Coahuila de Zaragoza; Nogales, Sonora, Mexicali, Baja California and Manzanillo, Colima. KANSAS CITY SOUTHERN CRE MEXICO Kansas City Southern de México, S.A. de C.V. Permit: PL/12952/TRA/OM/2015 Destinations: Puebla, Puebla; Distrito Federal; Cadereyta Jiménez, Nuevo León; Tampico y Ciudad Madero, Tamaulipas; Lázaro Cárdenas, Michoacán; Durango, Durango; Minatitlán y Coatzacoalcos, Veracruz; Salina Cruz, Oaxaca; Ciudad Valles, San Luis Potosí, Tula de Allende, Hidalgo, as well as Salamanca and Irapuato, Guanajuato. . In January 2017, for the first time, Pemex started importing diesel by train • • Volume: 75 thousand barrels once a week Destination: San José Iturbide, Guanajuato Terminal: Gas Natural del Noroeste S.A. de C.V. operated by Grupo SIMSA ㅏ소 FERROCARRIL G COAHUILA DURANGO Línea Coahuila Durango, S.A. de C.V. Permit: PL/13373/TRA/OM/2016 Destinations: Durango, Durango. Ferrocarril del Istmo F de Tehuantepec, S. A. de C. V. Permit: PL/13551/TRA/OM/2016 Destinations: Valladolid and Mérida, Yucatán Ferrocarril del Istmo de Tehuantepec, S.A. de C.V. Ferrosur GRUPO MEXICO FERROSUR, S. A. DE C. V. Permit: PL/12954/TRA/OM/2015 Destinations: Veracruz and Coatzacoalcos, Veracruz. • Permit holder: Kansas City Southern de México, S.A. de C.V. 28#29Gasoline and diesel storage is a business line which is also drawing investment attention 1 • Cabo Fuels Las Torres, S.A. de C.V. Capacity: 7,296 bls. Investment: 24.6 million pesos Location: La Paz, Baja California Sur 2 Combustibles de Oriente, S.A. de C.V. CRE Investment: 427 million dollars 10 Bulkmatic de México • (Distribución) Investment: 1 billion pesos Location: Salinas Victoria, Nuevo León • Capacity: 5,606 bls. • • Investment 143.3 million pesos Location: Matamoros, Tamaulipas 3 Hydrocarbon Storage Terminal, S.A.P.I. de C.V. • Capacity: 280,500 bls. • Investment: 1,073.4 million pesos • Location: Acolman, Estado de México La Paz 1 Nuevo Laredo Tamaulipas Monterrey, Nuevo Leó Corpus Christi, Texas 2 10 Matamoros, Tamps 11 Bulkmatic de México • • (Distribución) Investment: 1 billion pesos Location: Tula, Hidalgo 4 Interport FTZ S.A. de C.V. 5 . Capacity: 280,500 bls. • • Investment: 1,073.4 million pesos Location: Acolman, Estado de México Gas Natural del Noroeste S.A. de C.V. • Capacity: 48,000 bls. • • 6 Investment: 380.3 million pesos Location: San José Iturbide, Guanajuato Orizaba Energía, S. de R.L. de C.V. • Capacity: 2,310,000 bls. • Investment: 2,308.8 million pesos • Location: Tuxpan, Veracruz 7 VOPAK México, S.A. de C.V 8 • Capacity: 415,190 bls. • Investment: 787.1 million pesos Location: Veracruz, Veracruz Hidrocarburos del Sureste, S.A. de C.V. (Distribución) Capacity: 450,000 bls. Investment: 766.1 million pesos • Location: Progreso, Yucatán San Luis Potosí, SLP 8 4 5 11 6 Tuxpan, Ver Tula, Hidalgo San José de Iturbide, Gto 3 7 Veracruz, Ver Comercializadora Larpod, S. A. de C. V. (Distribución) Capacity: 11,007 bls. 9 • Investment: 19.2 million pesos Location: Puerto Madero, Chiapas New storage projects in development Storage permits granted Pipelines 29 29#30Furthermore, the new business environment allows greater competition and differentiation in product supply, services and retail prices at gas stations in Mexico 1 eco CRE Investment: 1 million dollars per new gas station (in case the current situation doubles, the investment would be 12 billion dollars) 2 3 Hidrosina OXOGAS OXO 8 4 lagas lagas 7 5 6 EV's Charging Station 0 Tijuana eco Gasolineras COMBU RED PETRO gasmart ELREY RENDICHICAS GASOL NERAS GASOLINERA Vip Gas GASTOP GASOLINERAS Nuevo Laredo Tamaulipas Monterrey, Nuevo León PETRO 2 Corpus Christi, Texas 6 OXXOGAS G500 SEVEN GRUPO GASOLINERO COMBU RED 7 San Luis XXGAS Potosí, SLP bp Tampico, Tamps UM 5 NEXUM Tuxpan, Veracruz 8 3 CDMX Hidrosina Announcement of competitors Chevron Gulf GLENCORE TEXACO. TESORO COSTCO Walmart MEXICO 4 Campeche Mérida lagas New storage projects in development Storage permits granted -- Pipelines 30#31Energy production and use accounts for two-thirds of GHG emissions at a global level. In this regard, Mexico is working closely with the international community to meet multilateral climate goals <2°C max global average PARIS2015 CONFÉRENCE DES NATIONS UNIES SUR LES CHANGEMENTS CLIMATIQUES COP21.CMP11 187 signatory countries 55 ratification instruments temperature increase are invited to submit their + 55% of global GHG* INDCS* conditions for entry into force1 On March 28th, 2015, Mexico became the first developing country to present its INDC. Mexico has committed to: 25% Unconditional reduction of its Greenhouse Gases and Short Lived Climate Pollutants emissions by 2030 Up to 40% Conditional reduction subject to a global agreement providing an international price on carbon, access to financing and technology transfer On September 21st, 2016, Mexico ratified the Paris Agreement 1 As of September 22nd, 60 Parties have ratified accounting for 47.6% of the total GHG emissions. INDC: Intended Nationally Determined Contributions; GHG: Greenhouse Gas NORTH AMERICAN LEADERS' SUMMIT 45% reduction of methane emissions in North America by 2025 CRE OTTAWA 2016 H 50% of clean power 甚 generation by 2025 Collaborating on cross-border transmission projects At least 6 transmission lines currently proposed or in permitting review, such as the Great North Transmission Line, the New England Clean Power Link, and the Nogales Interconnection, would add approximately 5,000 MW of new cross-border transmission capacity. 31#32CRE is currently working with CAISO and CENACE to develop shared grid reliability protocols to strengthen energy security on both sides of the border CALIFORNIA A Otay Mesa (SDG&E) Tijuana A Imperial Valley (SDG&E, IID) La Rosita ARIZONA A Three A Citizen Points Utilities (TECI) (UNSES) A Diablo A Azcárate (EPECO) (EPECO) Sásabe Santa Cruz Paso del Norte Valle de Juárez NUEVO MEXICO CRE | Due to the close bilateral relationship | I between both countries, Mexico supported | I the U.S. during the power outage in I I California in 2011. In return, the U.S. I I supported Mexico in 2016, when there was also a power outage in Baja California. 4 11 interconnection points with the US Voltage 40 kV Source: CENACE (2016) 230 kV 115 kV 161 kV, 138 kV and <34.5 kV Substation A Eagle Pass (AEP) 36 MW Piedras Negras TEXAS 100 MW A Laredo (AEP) Nuevo Laredo A Falcón A Planta Frontera (AEP) (AEP) 300 MW Guerreño A Rail Road (SU) A Military Highway (AEP) A Bronswille (AEP) Matamoros 32#33As a result of the two Long-Term Auctions, 15 states will benefit from the development of new clean energy projects in Mexico 4 34 companies from more than 10 countries, including Mexico 6.6 billion of investment in the coming years BC Son Chih TX 4 NCRE Increase of 5,000 MW to the current generation capacity in Mexico Maximum Price VS Average Price Maximum Price (dollars/MWh) Average Price (dollars/MWh) 70 60 48 31.4% Saving (%) 90,016 44.2% Ags- 64.1% 33.5 32,258 Clean Energy Package (Cumulative Energy + CEL) FIRST AUCTION Clean Energy Package (Cumulative Energy + CEL) SECOND AUCTION Capacity Jal Coah Gto Solar Wind NL SLP Mor Tamps Hydro Combined Cycle Oax Pue Yuc 33#34Awarded companies of the two Long-Term Auctions ▲ alarde Gestión de Proyectos Energéticos ENGIC enel Facciona ENVISION CanadianSolar yaldesa Energía alter enersun energías renovables Solar Jinko 1st Auction= 11 companies CFE COMISIÓN FEDERAL DE ELECTRICIDAD Alten energías renovables vičnergía X-ELIO eDF energies nouvelles Fisterra energy FRV enei Facciona NCRE Zuma Energía IEnova INFRAESTRUCTURA ENERGÉTICA Una empresa de Sempra Hanwha Q.CELLS solairedirect ENGIE MOTAENGIL Grenergy renovables opde ENGIE 2nd Auction= 24 companies 34#35Evolution of average solar prices in auctions, January 2010- September 2016 NCRE USD/MWh 350 300 250 Peru 200 150 100 50 South Africa India France Morocco Jordan USA Brazil Zambia Germany ⚫ China Argentina -Mexico Chile Saudi Arabia 0 UAE (Dubai) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 ΟΙ Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011 2012 2013 2014 2015 2016 Source: IRENA, 2017 35#36Energy-related opportunities for businessmen and households: Clean Energies CRE Mexico has a significant, constant and highly predictable renewable potential: a medium annual irradiation of approximately 5.5 kWh/m2 per day Daily average of solar radiation >6.15 kWh/m²- dia 5.66-6.15 kWh/m² - dia <5.66 kWh/m²- dia Source: SIGER, Instituto Nacional de Electricidad y Energías Limpias. *Sistema Geográfico de Información Fotovoltaica de la Comisión Europea Leaders of solar capture in Europe*: -Sevilla with 4.7 kWh/m² Leipzing with 2.7 kWh/m² - 36#37Installation prices of solar energy have decreased significantly over the last 5 years. Utility-scale solar is already cost competitive with conventional forms of electricity generation. CRE Dollar / Watt installed $8.0 $6.0 $4.0 $2.0 Residential Non-Residential ≤500 kW Non-Residential >500 kW Utility-Scale $0.0 2010 2011 2012 2013 2014 2015 Source: Scientific American. The Price of Solar Is Declining to Unprecedented Lows (2016); Tracking the Sun IX: The Installed Price of Residential and Non-Residential Photovoltaic Systems in the United States (2016); Utility-Scale Solar 2015: An Empirical Analysis of Project Cost, Performance, and Pricing Trends in the United States (2016) 37#38Number of systems installed 700,000 Formalized contracts 2016 In December 2016, CRE issued a new set of regulations to foster the sustainable integration of distributed generation nationwide 600,000 500,000 400,000 300,000 4 4 Distributed generation installed capacity: 247.6 MW which represent 0.35% of total capacity Additional investment of nearly 220 million dollars in 2016* Projection for 2017: 202% growth in installed capacity for distributed generation 200,000 100,000 0 1 9 2007 2008 2009 2010 45 231 671 1,988 4,620 9,016 16,986 2011 2012 Note: Elaborated with information provided by CFE. Preliminary data up to December 31st, 2016. *Considering an average investment of 1.7 million dollars per MW of installed capacity, according to Bloomberg 2013 2014 2015 682,259 Trend 2014 Trend 2015 Trend 2016 634,542 29,560 74,750 2016 2017 2018 160,031 111,284 2019 2020 2021 223,482 2022 2023 304,359 2024 405,616 2025 38 530,443 CRE 467,827#39There are applications available to optimize the roll-out of distributed solar energy and calculate the benefits and savings for consumers https://www.google.com/get/sunroof#a=112%20Stanley%20St%2C%20Redwood%20City%2C%20CA%2094062%2C%20EE.%20UU.&b=100&f=lease&np=15&p=1&sh=1 Google Project Sunroof About Us Solar 101 Installation Process FAQ 112 Stanley St, Redwood City, CA 94062, EE. UU X Q Analysis complete. Your roof has: 1,830 hours of usable sunlight per year Based on day-to-day analysis of weather patterns 1,434 sq feet available for solar panels Based on 3D modeling of your roof and nearby trees $9,000 savings Estimated net savings for your roof with a 20-year lease FINE-TUNE ESTIMATE Fine-tune your information to find out how much you could save. What's your average monthly electric bill? We use your bill to calculate how much electricity you use based on typical utility rates in your area. 100 Your recommended solar installation size This size will cover about 100% of your electricity usage. Solar installations are sized in kilowatts (kW). 3.75 kW $0 Buscar en Internet y en Windows o e $500 (264 square feet) CRE Shade Sun 2016 Google-Datos del mapa 2016 Google Condiciones del servicio 11:04 p. m. 24/08/2016 39#40Mexico is taking steps in the right direction in terms of strengthening its transparency, accountability and anti-corruption frameworks. Recent legal reforms and policies are designed to reinforce the rule of law and enable a more attractive business environment $ Establishment of a National Anticorruption System (NAS). Constitutional amendment and 7 legal reforms. NAS: institutional coordination platform among federal and local authorities. Checks and balances. CRE 00 Steering Committee led by an independent citizen to oversee the NAS's performance. $O ${ Streamlined and strengthened procedures focused on preempting, overseeing and penalizing corruption. Establishment of a National Transparency System (NTS) covering federal, state and municipal authorities. New transparency framework enhancing access to public information, increasing the number of regulated entities and promoting open government best practices. 40#41CRE has published online tutorials and launched a workshop program to explain the application process and issuance of permits. Obtaining a permit is easy, fast and transparent Workshops CRE Gas LP Electricidad 10:00-12:00 hr Contacto 12:00-13:30 hr Contacto Petrolíferos 16:00-18:00 hr Contacto Gas Natural 10:30-12:00 hr Contacto Aidé Rojas Erick Vallejo [email protected] 5283 1500 ext. 1064 5283 1500 ext. 1141 Ma. Elena Hernández [email protected] 5283 1500 ext. 6036 March 2017 Danae Burgueño [email protected] 5283 1500 ext. 3017 DOM LUN MAR MIE JUE VIE SAB 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 积 26 27 28 29 30 31 Hearing Online Request Service 16 days, on average, to schedule and celebrate a hearing 41#42Mexico's Energy Regulatory Commission: Challenges and Opportunities in Reforming the Energy Industry CRE TEXAS COMISIÓN REGULADORA DE ENERGÍA The University of Texas at Austin Guillermo I. García Alcocer Chairman www.gob.mx/cre @CRE_Mexico fComision Reguladora Energia You Tube cregobmx in Comisión Reguladora de Energía March 27th, 2017 Austin, Texas