Mexico needs to invest in natural gas pipelines and further its market opening as its energy demand increases, Acclaim Energy’s Francisco Treviño, sales director for Mexico and Latin America, told NGI’s Mexico GPI.
Acclaim is an independent consultancy that works with North American commercial and industrial consumers to identify and implement supply strategies and risk control for companies that participate in deregulated markets. Acclaim, which has offices in Houston and Monterrey, Mexico, manages more than $2.5 billion in energy spending a year.
Treviño previously was an energy consultant and served as a federal congressman from 2002-2003 and a state congressman in the Nuevo León state from 2012-2015. From 2007-2012, he was a delegate at Mexico’s Federal Bureau of Environmental Protection, known as Profepa.
Treviño holds a a masters degree in business from the Instituto Panamericano de Alta Dirección de Empresa (IPADE) business school and an undergraduate degree in industrial engineering from the Universidad Autónoma de Nuevo León.
Editor’s Note: NGI’s Mexico Gas Price Index, a leading tracker of Mexico’s natural gas market reform, offers the following Q&A column as part of a series of periodic interviews with market experts of natural gas in Mexico. Treviño is the 130th expert to participate in the series.
NGI: Your firm published a piece about the reform in congress that seeks to dissolve Mexico’s Comisión Reguladora de Energía (CRE) and Comisión Nacional de Hidrocarburos (CNH), which has been a dominant theme of conversation in the sector in recent weeks. What are your thoughts on the possible passage of this legislation and its potential impact on Mexico’s energy sector?
Treviño: President Andrés Manuel López Obrador presented the initiative on Feb. 5, precisely on the day that celebrates the creation of Mexico’s constitution. Among this package of initiatives, there are several that seek to modify Mexico’s constitution, and the one that pertains to the energy sector seeks to eliminate seven autonomous bodies, which include the CRE and CNH. The justification has mostly been budgetary, and the government says the intent to dissolve the autonomous bodies is a question of savings.
This initiative was already voted on by a congressional committee, the Committee of Constitutional Points, and it was approved. That said, a new congress is in place as of September, and this new legislature will have to go back and analyze the initiative, and it will again have to be approved by congressional committees. I think this will give the congressional house some more time to reflect and analyze this bill and decide how to proceed.
It’s important to remember that this is a constitutional reform and its approval requires a two-thirds approval in the congress and in the senate. After that it has to be approved by more than half of the 32 state congresses to finally be approved. So, there’s a way to go and a several step process to get there. Does the possibility exist that the initiative will get approved? Yes, it does. And that will be up to the function of the incoming legislature to decide.
NGI: Do you think President-elect Claudia Sheinbaum will push for the approval of this initiative to dissolve the CRE and CNH?
Treviño: It’s going to be interesting to see what path the president wants to follow. We know that she’s extensively studied the energy sector and is very knowledgeable about the industry. So, it’s hard to know if she will follow in López Obrador’s footsteps. Does the possibility exist that she will and this initiative will pass? Yes. The risk exists that the CRE and CNH will disappear. But they won’t just be adrift. If this bill is passed, the function and operations of the CRE and CNH will be assumed by the energy ministry (Sener).
But before this happens, it’s important to remember that this constitutional reform doesn’t take into consideration or include guidelines on how the CRE, for example, would operate. It’s not explained in the initiative. So, if approved, this text would have to be included in the secondary laws that explains the new functionality of the CRE. There will be a long process to modify the secondary laws to be able to implement these changes. There’s nothing to fret about yet. At this point, their only option is to wait and to give opinions and contribute to the conversation so that if in fact these changes are implemented, that they are done in the best possible way.
NGI: It seems like there’s some fear in the Mexican energy industry that the CRE and CNH will disappear from one day to the next, and, as you explained, it sounds like that won’t be the case.
Treviño: Right, it won’t just happen with one stroke of a pen. There are a lot of legislative steps that must be accomplished first and it’s unknown if the initiative will pass exactly as it is now, or if there will be some modifications made first. The role of senators and lawmakers is to analyze, and I also think the experience of President-elect Sheinbaum should be factored into the equation. One thing she’s likely to do is make decisions in favor of the industry, and it’s not in her best interests to damage the sector.
NGI: What do you think should be the natural gas and energy sector priorities for Sheinbaum’s government?
Treviño: I think that some of Sheinbaum’s recent comments about the need to continue with private participation in the sector are positive. That is something that will continue to contribute to the development of the sector. I think the incoming government has to invest in transmission and distribution lines to be able to expand the capacity for the ability to receive more energy supply, particularly in certain regions.
In terms of natural gas specifically, there needs to be…continued investment in natural gas pipelines. The Sistrangas system has the commitment and responsibility to meet increases in demand in the country in terms of natural gas supply. There are still some cities in this country that don’t have natural gas infrastructure available. So, I think it would be a very good and important move by President-elect Sheinbaum to invest in both natural gas pipelines as well as transmission and distribution lines for electricity.
NGI: In addition to more infrastructure, do you think there are any other areas of the natural gas sector that Sheinbaum should prioritize during her administration?
Treviño: I think she should continue with the opening of the market. The market is currently open, but I think one thing that will need to be improved — and Sheinbaum mentioned this herself — is to limit the amount of injunctions and legal challenges in the industry and to cease turning to the courts to make decisions and determinations for the sector. There needs to be more order and legal certainty in the sector.
There needs to be clear determinations for how natural gas shippers will participate in the market, or how marketers of natural gas participate in the market. There needs to be clear regulations for natural gas — not only the fuel that passes through pipelines — but also how to regulate liquefied petroleum gas.
Another important issue for the industry is, of course, the fact that Mexico imports around 78% of its demand for natural gas from the U.S. We are increasingly reliant on the U.S. for supply and are further from being self-sufficient in terms of meeting our own needs. We need more robust infrastructure and to maintain existing infrastructure to assure that supply is secure. We also need, and have needed for years, to develop more natural gas storage infrastructure.
It’s a known fact that, in the regions where there is more available natural gas supply, there is more economic development.
NGI: Do you think Mexico will continue to increase imports of natural gas from the U.S. during the Sheinbaum administration?
Treviño: There’s really no other way to do it. We rely so heavily on the U.S. natural gas supply for our electricity generation, for example. Sheinbaum and her team are saying they want to increase green energy during her administration, and to do so, natural gas is going to be needed as the transition fuel, both for our own electricity generation and consumption in Mexico.
We’re not self-sufficient in terms of meeting our energy demands and, while there is of course the opportunity to develop our own fields and drill more wells to produce natural gas, the idea of fracking in Mexico has been highly debated and controversial. I think Mexico should explore all its options to not depend so heavily on the U.S. for natural gas supply. But, in the meantime, we don’t have any other options than to depend on the U.S. for natural gas. It’s a need.
