Binational Energy Consortium Launching for Burgos Basin

A binational Burgos Basin energy consortium is being created and organizers are looking for members from south Texas and northeastern Mexico to join.

A conference was held at Texas A&M International University in Laredo on Friday to explore the concept and the next step is to meet with United States and Mexico officials in March to confirm the name of group.

In his opening remarks, City of Laredo Mayor Pete Saenz said the recent Mexican energy reforms have potentially created “a huge, economic game changing dynamic for border communities.”

Saenz said the reforms provide South Texas an opportunity to become leaders in the marketing and supply of various goods, materials and services to Mexico, in addition to becoming leaders in the exploration, development, production, transportation and marketing of hydrocarbons from the Burgos Basin.

“In an effort to attract large scale corporate investment, we need to identify ourselves as a unified region that spans nearly 300-350 border miles and which contains and offers multiple resources some of which include: our vehicular/commercial bridges and rail bridges, our seaports, airports, industrial park acreage and manufacturing plants; our customs, warehousing, logistics, transportation and trade experience.” Saenz said.

Laredo Mayor Pete Saenz

Laredo Mayor Pete Saenz

“Just as importantly, our region offers an abundant understanding and appreciation of the Mexican culture, its language, customs and business traditions.”

In addition to Saenz, leaders attending the TAMIU event included Webb County Judge Tano Tijerina, TAMIU President Ray Keck, TAMIU Provost Pablo Arenaz, Ofelia Garza of CANACINTRA; Javier Solis, secretary of economic development for Nuevo Laredo, Guillermo Dominguez Vargas, of the Comisión Nacional de Hidrocarburos in Mexico, and Maria Calderón-Porter, assistant vice president for global initiatives at TAMIU.

Calderón-Porter, who is also director of the Binational Center at TAMIU, discussed the idea of setting up a consortium when making a presentation at the 21st Annual U.S.-Mexico Border Energy Forum in Monterrey last October. She said she would like to see binational, bicultural and bilingual energy industry workers transfer seamlessly from the Eagle Ford Shale to the Cuenca de Burgos.

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Fossil Fuel Boom Does Not Stop Mexico from Wind Energy Development

Mexico expects some $14 billion of investment in wind farms between 2015 and 2018, which will more than triple installed capacity in the country, the energy ministry said on Monday.

The planned investment aims to raise Mexico’s wind energy capacity from some 2,551 Megawatts (MW) to 9,500 MW, Energy Minister Pedro Joaquin Coldwell told local radio.

Mexico’s state-run electricity company CFE is due to oversee a sizeable chunk of the investment, aiming to develop eight wind parks generating 2,300 MW at a cost of some 52 billion pesos ($3.55 billion), the ministry said.

 

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U.S. – Mexico Consortium Wins Pipeline Contract

A consortium including an energy company controlled by billionaire Carlos Slim won a contract to build a 230 km (143 mile) pipeline to supply gas to central, northern and western Mexico, the state power company said on Thursday.

The consortium, which consisted of Slim’s Carso Energy and U.S. companies Energy Transfer Partners and MasTec Inc, presented the lowest bid of $767 million for the work.

That bid was significantly below the $1.365 billion budgeted for the project by Mexico’s state power company CFE.

The Waha-Presidio pipeline will run through Texas and connect with a pipeline in Mexico’s northern Chihuahua state, the CFE said in a statement.

Last year, CFE announced various…

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Dir. of Port of Brownsville Disagrees with Sierra Club’s Take on LNG

Eduardo Campirano, director and CEO of the Port of Brownsville, has dismissed the findings of a recent report from the Sierra Club about the impact of liquefied natural gas terminals on the region.

The 12-page report, titled “The Environmental Impacts of Liquefied Natural Gas on the Rio Grande Valley,” says the Port of Brownsville’s efforts to land five LNG export terminals could bring “industrial pollution, the risk of disaster, and habitat destruction to the Rio Grande Valley.” It was produced by the Lower Rio Grande Valley Group of the Lone Star Chapter of the Sierra Club.

Campirano says the findings in the Sierra Club’s report are wide of the mark. “Safety is paramount for any new large industrial concern at the Port of Brownsville,” adding that the LNG industry in the United States has an “excellent” safety record.

“The industry as a whole has technical and operational guidelines that address safe and secure operations of these facilities. There are multiple layers of protection that ensure the safety of the workers at these facilities as well as the safety of the communities in which they are located,” Campirano said.

He said the same holds true for LNG vessels.

“There are multiple codes, standards and regulations that apply to the LNG industry to maintain safety of the operation of LNG facilities, and the transfer and transportation of LNG. Some of the examples cited in the report by the Sierra Club are examples of incidents that have occurred in foreign countries that do not maintain the same standard as those imposed in the U.S.”

Campirano also said there is “rigorous regulatory control” over the LNG industry in the United States. He said there are four primary federal agencies that have specific regulatory enforcement roles in the U.S. They are the Department of Energy (DOE), the Federal Energy Regulatory Commission (FERC), the U.S. Department of Transportation (DOT) and the U.S. Coast Guard (USCG).

“The FERC is the agency that is responsible for the siting and construction of onshore and near shore LNG import and export LNG facilities. FERC requirements address every aspect of LNG construction and operations including engineering and design, operational safety and delivery, location and geographic risk, etc.,” Campirano said.

 

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LNG Exports to Create More Economic Opportunity in Valley and Texas

by Julian Alvarez, President and CEO of Rio Grande Valley Partnership

Much of the nation’s growth in natural gas production has taken place in Texas and in particular, the rapid expansion of production in the Eagle Ford Shale in South Texas.

As the nation’s second most populous state and the largest producing state, Texas and the Rio Grande Valley are uniquely positioned to be at the forefront of the historic opportunity presented by expanding exports of LNG.

LNG exports give the U.S. the ability to assert global energy leadership, strengthen its economy and create good-paying jobs for the hard working men and women in the Rio Grande Valley. The Rio Grande Valley Partnership is focused on creating the relationships and developing programs that advance the region by increasing economic growth and improving the quality of life in the Rio Grande Valley.

The Eagle Ford Shale is providing both of these. The shale play has seen a growth in hotels, restaurants, retail outlets and distribution centers. More importantly, it has created an environment that is beneficial and supportive for the growth of small businesses and entrepreneurialism. As we all know, small businesses are the back bone of every community.

Unfortunately, the recent energy boom has its naysayers, including some in the business community. A small but vocal group of companies have warned of negative impacts of expanded LNG exports on America’s “manufacturing renaissance” and energy prices in Texas. Yet, numerous studies continue to demonstrate their argument is flawed.

Expanding LNG exports will create jobs and provide economic benefits to the Rio Grande Valley region. LNG exports would incentivize new infrastructure investments worth billions of dollars in American communities. A recent study by ICF International estimates that LNG exports will create up to 155,000 jobs for Texans in construction, operations, exploration and production by 2035 and contribute up to $31.4 billion to the local economy as new wealth is generated in the state.

In a press release earlier this year, our own State Senator Juan “Chuy” Hinojosa highlighted the benefits of the energy industry to the Rio Grande Valley region. “We are seeing tens of thousands of new jobs created, higher wages being paid, billions of dollars in investments in the region.” Senator Hinojosa called this boom an Energy Renaissance.

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Mexico Welcomes the World to Its Shale Fields

When the World Shale Oil Summit met in Dallas last month, North America (the United States and to a lesser extent Canada) naturally took center stage. However, sponsor CWC promotes this annual gathering, now in its fifth year, as an international event so shale opportunities around the globe were also discussed. While an entire morning was devoted to Asia, Mexico tended to dominate many of the international discussions. Small wonder since the country is perennially ranked among the top 10 in terms of shale resources and is opening its doors to international E&P players for the first time in three quarters of a century. It is also is just across the Rio Grande from Texas and its vast network of pipelines and service contractors. Furthermore, geology doesn’t recognize international borders and one of the hottest plays in the US, the Eagle Ford, extends into Mexico.

In the 12 months since Mexico adopted the changes to its constitution necessary to allow international players in, the country has made remarkable progress implementing them. Following Round Zero, in which national oil company Pemex chose the acreage it will retain, Mexico’s Energy Secretariat (Sener) has moved quickly to outline the blocks to be offered in Round 1. This call for bids, which will kick off in January 2015, includes tracts in two unconventional plays: eight blocks with dry gas potential on the Burro-Picachos trend and 62 blocks with shale oil potential in the Tampico-Misantla Basin. The former, located just south of Del Rio, Texas, cover 900 sq km and hold prospective resources of about 142 million boe. Meanwhile the Tampico-Misantla Basin acreage comprises 7,401 sq km on the Gulf Coast near Tampico; shale oil potential is estimated at 8.9 billion boe in prospective resources.

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NOT CANCUN

Robert Clark, manager of unconventional oil and gas at Wood Mackenzie, told attendees at the shale summit his company believes the Jurassic play in the Tampico-Misantla Basin has the better potential. Known as the Pimienta tight oil play, it is believed to be an analog to the Barnett and has shown better productivity. Also this acreage is close to established operations and therefore should be cheaper to drill.

In Round Zero, Pemex had to relinquish most of its unconventional acreage, keeping only specific areas both on the Eagle Ford trend and in the Tampico-Misantla, where they drilled a well in 2012 that is to date Mexico’s oil shale oil producer. Located in the Tamaulipas province, Anhélido 1 had an initial production of 429 bo/d and 1.3 MMcfg/d from the Jurassic Pimienta Formation. Final recovery is expected to be in the range of 250,000 to 500,000 boe. As is the case with much of the acreage Pemex retained in Round Zero, there is a good chance the company will be looking for partners with technical expertise to further explore and develop its leasehold in this play.

Regarding opportunities in the Mexican extension of the Eagle Ford, Clark sees a number of problems facing operators who are thinking of crossing the Rio Grande. First of all, in Mexico the Eagle Ford is gas prone. It is also in a very isolated and waterless terrain. And, being close to the border, it is also in one of the most dangerous places on earth. Security will prove tough and very expensive. In other words, it is no country for old men.

“Don’t put your money in the Eagle Ford basket,” Clark advised. “The Pimienta trend isn’t in Cancun but it is far enough south to be safer.”

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Stratfor Analyzes Next Steps in Mexico’s Energy Reform

Mexico has taken its first official step toward implementing the energy reform that Mexican President Enrique Pena Nieto signed into law roughly a year ago. The government recently unveiled many of the contractual terms for the first 14 shallow offshore blocks that will be auctioned off to oil companies early next year. Bidding for the blocks will end July 15, 2015, and the results will be announced shortly thereafter.

Since 2004, Mexico’s oil production has dropped from about 3.4 million barrels per day to around 2.3 million barrels per day for a number of reasons. Petroleos Mexicanos, commonly known as Pemex, has fallen significantly behind its international peers in terms of technological expertise, and high tax burdens have limited the company’s exploration efforts. (Until the energy reform law was passed last year, Pemex was the only company allowed to explore and produce oil in Mexico since the country’s oil industry was nationalized in 1938.) At the same time, the supergiant Cantarell Field, which was the main source of Pemex’s production boom in the late 1990s and early 2000s, is quickly being depleted.

But now that the energy reform has passed, Mexico City has announced it will auction off 14 new offshore exploration blocks. Pemex does not control these blocks, but it can attempt to qualify for and bid on the blocks like any other company, though its limited financial resources could hinder its success. Once the initial auction is complete, Mexico City will hold subsequent auctions for unclaimed deep-water offshore blocks, unconventional natural gas blocks and onshore heavy oil blocks later in 2015. Meanwhile, Pemex will be seeking joint-venture partnerships for the blocks it currently controls, including the shallow-water Bolontiku, Ek and Sinan fields; the heavy-oil Aatasil-Tekel-Utsil field; the onshore Rodador, Ogarrio and Cardenas-Mora fields; and the deep-water Kunah-Piklis, Trion and Exploratus fields.

The first 14 blocks up for auction cover a relatively small area and are only expected to collectively produce about 80,000 barrels of oil per day, but they are just the first of many blocks that Mexico will auction off. The process serves as an important benchmark that shows the energy reforms are proceeding smoothly, but even more important, contractual terms provide insight into how contracts for more lucrative blocks will be structured in the future. Mexico City is offering 25-year production-sharing contracts for the blocks with the option to renew the agreements twice for an additional five years. Production-sharing contracts and joint ventures are boons for international oil companies because they allow changes in ownership to be reported to the U.S. Securities and Exchange Commission. It seems likely that because such contracts have been offered for the first 14 blocks, Mexico City will continue using the production-sharing contract in future auctions as well.

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Oil Price May Slow Development of Mexico’s Burgos Basin

Mexico is getting ready to welcome the U.S. shale revolution into its borders after 75 years of state monopoly. The timing couldn’t be worse.

As a flood of supplies from Texas to North Dakota sends oil into a nosedive, U.S. producers are reducing investment budgets for 2015. The cuts dim the chances they’ll take their fracking and horizontal drilling capabilities down south anytime soon.

After changing the constitution last year to allow foreign oil investment into its territory, Mexico is having to adjust, too. Regulators are considering reworking and potentially delaying leases for the country’s portion of the giant shale formation that encompasses the Eagle Ford in Texas.

“They’re going to have all of the issues of depressed price that the people in the Eagle Ford are having now,” said Michael P. Darden, global chair for oil and gas transactions at law firm Latham & Watkins LLP in Houston.

Energy ministers from the U.S., Canada and Mexico are set to meet Dec. 15 in Washington to discuss the implications of Mexico’s energy reform for the rest of the continent.

Mexican offshore assets have drawn interest from oil majors from Exxon Mobil Corp. (XOM) to Royal Dutch Shell Plc (RDSA) as the end of the monopoly triggers a race to gain a foothold in the country. The question is how quickly producers will be willing to move into the higher-risk, more costly prospects.

With Mexican shale possibly having to wait, cheaper offerings in shallow waters might have to do for now.

“In response to the falling prices, the government is bidding out the most attractive, better margin projects first,” said James K. Alford, a partner focusing on Mexico energy reform for the law firm Locke Lord LLP in Washington.

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Mexico’s Burgos Basin Provides Boom for Texas Law Firms

Carlos Valencia and Tatiana Escribano are two of the most sought-after corporate legal advisers in Mexico.

Until two years ago, they were partners at Dallas-based Thompson & Knight’s Mexico City office. They moved their practice to DLA Piper, a 4,000-lawyer firm headquartered in Chicago and London. One month ago, Valencia and Escribano switched firms yet again, joining global giant Baker & McKenzie.

Chances are good the duo will be poached again by yet another firm.

Big law firms in Texas and beyond are jockeying for position to attract corporate clients seeking to invest tens of billions of dollars in Mexico.

The reason: The border nation is reforming its energy market. For the first time in 75 years, Mexico’s rich oil and gas reserves will be open to private foreign investors for exploration and production.

Dozens of law firms, most of them based in Texas or with prominent Texas operations, are seeking to expand into Mexico. Some have opened new offices or want to do so.

Other firms are creating joint ventures with Mexico firms or raiding firms that have lawyers experienced in Mexican law.

“I think the law changes will absolutely transform the legal market in Mexico, but more importantly, those changes will transform the country, period,” said Luis Gomar, the partner-in-charge of Dallas-based Strasburger & Price’s Mexico City office.

The competition is definitely heating up.

“What is happening in Mexico is extraordinary, and our business interests and legal needs in Mexico are going to significantly increase with these energy reforms,” said Clay Scheitzach, senior vice president and senior corporate counsel at Xerox Business Services in Dallas.

“Energy companies and nonenergy companies are going to need more lawyers to help us with contracts, dealing with business-to-business and labor disputes, and other legal issues that will surface under Mexican law,” he said.

Law firms are debating whether they need to open outposts in Mexico or try to attract clients from their existing Texas offices.

Four Texas-based law firms — Haynes and Boone, Thompson & Knight, Gardere Wynne Sewell and Strasburger & Price — have lawyers permanently based in Mexico. Norton Rose Fulbright is seeking to open an office.

 

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Natural Gas Pipeline Provides Tax Windfall to Rio Grande City

A natural gas pipeline carrying natural gas from the Eagle Ford Shale play into Mexico is complete, snaking its way through Starr County — and the city’s coffers are enjoying a much-needed influx of cash as a result.

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NET Midstream, a Houston-based gas company, announced the completion of the 120-mile-long pipeline ahead of schedule this week, ahead of the December 1 deadline.

The pipeline will carry up to 2.3 billion cubic feet per day of compressed natural gas from Nueces County and feed into a gas line owned by Pemex, the state-owned gas company in Mexico.

Nearly $2 million collected from sales and use taxes added some cushion to Rio Grande City’s general fund, thanks to a warehouse within city limits that stored pipeline material during assembly, said Elisa Beas, deputy city manager in Rio Grande City.

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“This is like having inherited something and you don’t know what to do with it,” Beas said jokingly. “But no, we do know what to do with it, we are just being very careful considering all the options.”

The money from the project is sitting in the city’s general fund — the discretionary account that officials can tap from to fund projects.

 

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