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U.S.- MEXICO CHAMBER OF COMMERCE

U.S.- MEXICO CHAMBER OF COMMERCE. DALLAS, TX SEPTEMBER 23, 2008. INDEX. 1.-National Development Plan 2.-CFE Background National Electric System Energy Demand

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U.S.- MEXICO CHAMBER OF COMMERCE

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  1. U.S.- MEXICO CHAMBER OF COMMERCE DALLAS, TX SEPTEMBER 23, 2008

  2. INDEX 1.-National Development Plan 2.-CFE Background National Electric System Energy Demand Investment opportunities 3.-PEMEX Reforms Investment opportunities Gas, LPG pipelines Cogeneration 4.-Private Industry 5.-Conclusions SEPTEMBER 2008

  3. Mexico’s National Development Plan establishes the basis of using natural resources for actual generations without affecting future generations. Development shall be from now on clean, preserving environment and with the reconstruction of ecological systems. Objective is to achieve a human and social development in harmony with nature. Main strategy is to stop and revert water, air and soil contamination. According to these principles SEMARNAT(Ministery of Environmental) together with CFE, PEMEX and private companies have been working in a project of new environmental norms to be applied to current and any new industrial installations. PEMEX, CFE and private industry will develop future projects and those related to existing plants accordingly.

  4. 2. CFE Background Two vertical integrated companies comprise the Mexican industry. CFE and Luz y Fuerza del Centro (LFC) have traditional held control over electricity production, transmission, distribution and sale to the public, as set forth in the Constitution.

  5. Over several decades, a State monopoly was the most adequate scheme for integrating the country’s electricity grid and expanding coverage throughout the national territory. The available technology and the scale of projects, as well as the required sources of investment, called for the centralization of the electricity industry in the public sector as the natural foundation for the consolidation of infrastructure. Under these conditions, the electricity industry became a strategic area exclusively run by the State.

  6. The 1992 amendments to the Ley del Servicio Publico de Energía Eléctrica (Public Electricity Service Act) provided for limited private domestic and International participation in the sector. This change came about as a result of the need to add private efforts to the government’s in order to increase electricity supply in view of budgetary constrains. As a result of these reforms, the private sector participates in electricity generation under the following modalities:

  7. Self-supply. The generation of electricity to meet an industrial facility’s own energy needs. • Cogeneration. Electricity generated simultaneously with steam or other types of secondary thermal energy to be used in an industrial process, or the generations of electricity form the surplus thermal energy of an industrial process. • Independent power producer (IPP). Generation of electricity to be sold to CFE under a power purchase agreement (PPA). • Small production. Generation of a capacity under 30 MW to be sold to CFE in its entirety.

  8. Export of electricity produced under the cogeneration, IPP or small production modalities. • Import of electricity exclusively for self-supply purposes. • Emergency electricity generation during public service breakdowns. The State still holds the exclusive right to generate electricity for public service; the private sector is not allowed to sell energy to end users.

  9. NATIONAL ELECTRIC SYSTEM TOTAL INSTALLED CAPACITY

  10. Total Installed Capacity Operated by CFE IPP 22.95% Eolic 0.171% Nuclear 2.73% Hydroelectric 22.14% Coal 5.21% Termoelectric 44.87% Geothermal 1.93%

  11. Total Installed Capacity Operated by CFE

  12. ENERGY DEMAND-INVESTMENT OPPORTUNITIES Expected growth in energy demand during period 2007-2016 will be 4.8% yearly. Nevertheless in the period 2006 – 2007 was lower. From December 2006 to December 2017 total installed capacity will grow form 48,759 MW to 69,004 MW. (These figures doesn’t include auto supply and Cogeneration) (Privates)

  13. CFE will install in that period 63 new generation plants with a total capacity of 24,775 MW Investment will de 20,000 MMUSD. CFE will invest an average of 5,000 MMUSD per year during the next ten years in electrical infrastructure. CFE will try to have no more of 40% of electrical capacity based in natural gas. Following years will use conventional technologies, like combined cycles using natural gas and coal plants. Some eolic plants will be added.

  14. CFE (National Power Company) has an installed generation capacity in excess. The generation installed capacity has growth above the power demand. Nevertheless currently five new power plants and a LNG Terminal are under construction: La Yesca (Hydroelectric)- 750 MW Pacifico II (coal)- 651 MW Planta Norte (Durango)- 450 MW Baja California-272 MW San Lorenzo (conversion to CC)-116 MW The above due to following reasons: Some power plants are coming to the end of useful life Increase of use of natural gas in those plants using fuel oil.

  15. CFE will also invest in emission control projects in Mazatlan, Guaymas, Tula and Tuxpan. This after the Punta Prieta emission control project was a success.

  16. 3. PEMEX New Generation of Reforms. The natural gas reform initiated during 1995 was aimed mainly at establishing adequate conditions to promote private investment in storage, transportation and distribution activities. For that purpose, restrictions to foreign trade were eliminated, and marketing activities were opened to private participation not subject to regulation due to its competitive potential. Although the reform was successful in this regard since the private sector is now the prime participant in Mexico’s infrastructure development significant drawbacks still prevail due to Pemex’s dominating position in the market.

  17. Marketing. Pemex currently exerts a legal monopoly over natural gas production and a natural monopoly with respect to the National Pipeline System (SNG).

  18. Transportation. Although the development of natural gas transportation infrastructure is open to private participation, Pemex has continued to build transportation pipelines, primarily related to electricity projects.

  19. Investment Opportunities

  20. PEMEX will bid following projectsduring 2008-2009 Natural Gas Pipelines. Next projects: • Punta Piedra-Poza Rica-Santa Ana • Tamazunchale-San Luis de La Paz. • Manzanillo-Guadalajara. • San Isidro-Chihuahua. LPG Pipelines. Next Projects: • Juárez-Chihuahua. • Chihuahua- La Laguna. • Abasolo. • Poza Rica-Atotonilco.

  21. Besides the project in progress Reconfiguration of Minatitlán Refinery, Pemex has already published bid for the project “Clean Gasolines” for Tula and Salamanca refineries. Also a new refinery is planed for Tuxpan or a site in the Pacific coast along with the reconfiguration of Salina Cruz refinery probably for 2009.

  22. Cogeneration. Congress approved cogeneration reform in January 2006 allowing PEMEX to develop cogeneration projects for self supply. First project announced by PEMEX was Nuevo Pemex to be build in the complex with the same name in state of Tabasco located southeast México. Bid is due January 2009. Potential of cogeneration projects in PEMEX is around 3,000 MW.

  23. COGENERATION PROJECTS PEMEX

  24. CAPACITY PLANT

  25. Prívate Industry Opportunities are found mainly in mining sector, bererages, food, steel manufacturing.

  26. CONCLUSION Mexican market offers a wide spectrum of investment or project execution opportunities in fields like power generation, oil exploration, oil refining, gas pipelines etc. Decline of oil production from Cantarell opens an opportunity to enter to deep waters exploration. We expect the energy reform that has heen studied in the Congress will be approved during 2009. International companies working in power generation.

  27. like Iberdrola, Abener, Isolux, Union Fenosa,Techin, etc. have been working in the country since several years. Other companies like Petrobras, Sinopec, have joined with mexican companies (Diavaz, parent company) to develop projects in PEP(Pemex Exploration Production). Current situation in Mexico is similar to that in Brasil some years ago

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