Mexico will likely halt oil auctions for at least two years, dealing a blow to its oil industry.
Mexico’s president-elect Andres Manuel Lopez Obrador (AMLO) will reportedly suspend oil auctions for at least two years, according to the Wall Street Journal, with some experts believing that his administration won’t hold any new oil auctions at all during his six-year term. He has also vowed to review the 107 contracts already awarded to companies through auctions over the last few years to check for corruption, although he has said he would not try to invalidate them so long as they check out.
Also, AMLO wants to revise some of the energy laws that govern the oil and gas sector, which could dramatically alter the landscape for foreign oil and gas companies. He long opposed the historic reforms that ended seven decades of state control over the energy sector, although he moderated his position during this year’s presidential campaign. Rolling back the reforms would be exceedingly difficult, requiring a change to the country’s constitution.
Instead, AMLO wants more modest, though still significant, legislative changes. The WSJ reports that he will pursue legislative tweaks that bolster the power of state-owned Pemex, while weakening the regulatory body that has pursued a technocratic approach and presided over the oil auctions over the last three years.
AMLO’s desired changes include allowing Pemex to choose its own private-sector partners, without needing the approval from regulators. Current rules require Pemex to partner with the highest bidder for blocks put up for a farm-out. He wants the government to be able to award Pemex with oil blocks directly. And he wants to make Pemex the sole marketer of oil produced by private firms, the WSJ reports.
These changes would amount to a partial rollback of the energy reforms, re-empowering Pemex and government control over the oil sector. Moreover, as president, AMLO chooses the head of Pemex, granting him a lot of leverage over the company.
“If licensing rounds are canceled and joint ventures are the only vehicle for entry to the country, it reflects a consolidation of power within” Pemex, Maria Cortez, Latin America Upstream Senior Research Manager at Wood Mackenzie, told Bloomberg in an email. ”That could be viewed negatively by outside investors.”
On top of that, the WSJ says AMLO will push to raise local content rules, which would require a higher percentage of domestic involvement in oil projects. That means that if a company like ExxonMobil or Chevron or some other outside entity wants to drill for oil in Mexico, it would need to source a certain percentage of equipment and services from within Mexico. The idea is to capture a greater portion of the benefits of oil and gas development for the country, while also building up expertise for local industries.
However, many of these changes will be loathsome to the international oil companies, who will view them as onerous burdens that inject higher levels of uncertainty into their investments. Oil companies have repeatedly blamed strict local content rules in Brazil for years of cost inflation and delays.
“If all of this is confirmed, it would send a signal that the continuity of the oil opening may be in doubt,” Pablo Medina, an analyst with Welligence Energy Analytics, a research firm based in Houston, told the WSJ in an interview.
Meanwhile, in addition to the legislative changes to the energy reforms, AMLO’s core energy plan consists of pouring billions of dollars back into Pemex for oil exploration, with a particular focus on revitalizing the downstream sector. He wants $2.6 billion to rehabilitate Mexico’s six aging oil refineries, plus more than $8 billion to build a new refinery from scratch. The idea is to cut down or even eliminate gasoline imports from the United States.
Mexico’s oil production has been declining for over a decade, falling to 1.9 million barrels per day recently, down from 3.4 mb/d in the mid-2000s. The IEA sees output falling by another 130,000 bpd this year, due to the aging offshore oil fields, although that is a narrower decline compared to the 235,000 bpd the country lost last year.
AMLO is aiming to boost production by 600,000 bpd over the next two years, which will be a monumental task. If he is to succeed, AMLO is betting that Pemex will lead the way.
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Pioneering technology expert tells ADIPEC Energy Dialogue up to 80 per cent of plant shutdowns could be mitigated through combination of advanced electrification, automation and digitalisation technologies
Greater use of renewables in power management processes offers oil and gas companies opportunities to create efficiencies, sustainability and affordability when modernising equipment, or planning new CAPEX projects
Abu Dhabi, UAE – XX August 2020 – Leveraging the synergies created by the convergence of electrification, automation and digitalisation, can create significant cost savings for oil and gas companies when making both operational and capital investment decisions, according to Dr Peter Terwiesch, President of Industrial Automation at ABB, a Swiss-Swedish multinational company, operating mainly in robotics, power, heavy electrical equipment, and automation technology areas.
Participating in the latest ADIPEC Energy Dialogue, Dr Terwiesch said up to 80 per cent of energy industry plant shutdowns, caused by human error, or rotating machinery or power outages, could be mitigated through a combination of electrification, automation and digitalisation.
“Savings are clearly possible not only on the operation side but also, using the same synergies between dimensions, you can bring down the cost schedule and risk of capital investment, especially in a time when making projects work economically is harder,” explained Dr Terwiesch.
A pioneering technology leader, who works closely with utility, industry, transportation and infrastructure customers, Dr Terwiesch said despite the increasing investment by oil and gas companies in renewables and the growing use of renewables to generate electricity, both for individual and industrial uses, hydrocarbons will continue to have an important role in creating energy, in the short to medium term.
“If you look at the energy density constraints, clearly electricity is gaining share but electricity is not the source of energy; it is a conduit of energy. The energy has to come from somewhere and that can be hydrocarbons, or nuclear, or renewables.” he said.
Nevertheless, he added, the greater use of renewables to generate electricity offers oil and gas companies the option of integrating a higher share of renewables into power management processes to create efficiencies, sustainability and affordability when modernising equipment, or planning new CAPEX projects.
The ADIPEC Energy Dialogue is a series of online thought leadership events created by dmg events, organisers of the annual Abu Dhabi International Exhibition and Conference. Featuring key stakeholders and decision-makers in the oil and gas industry, the dialogues focus on how the industry is evolving and transforming in response to the rapidly changing energy market.
With this year’s in person ADIPEC exhibition and conference postponed to November 2021, the ADIPEC Energy Dialogue, along with insightful webinars, podcasts and on line panels continue to connect the oil and gas industry, with the challenges and opportunities shaping energy markets in the run up to, and following, a planned three-day live stream virtual ADIPEC conference taking place from November 9-11.
An industry first of its kind, the online conference will bring together energy leaders, ministers and global oil and gas CEOs to assess the collective measures the industry needs to put in place to fast-track recovery, post COVID-19.
To watch the full ADIPEC Energy Dialogue series go to: https://www.youtube.com/watch?v=QZzUd32n3_s&t=6s
Utility-scale battery storage systems are increasingly being installed in the United States. In 2010, the United States had seven operational battery storage systems, which accounted for 59 megawatts (MW) of power capacity (the maximum amount of power output a battery can provide in any instant) and 21 megawatthours (MWh) of energy capacity (the total amount of energy that can be stored or discharged by a battery). By the end of 2018, the United States had 125 operational battery storage systems, providing a total of 869 MW of installed power capacity and 1,236 MWh of energy capacity.
Battery storage systems store electricity produced by generators or pulled directly from the electrical grid, and they redistribute the power later as needed. These systems have a wide variety of applications, including integrating renewables into the grid, peak shaving, frequency regulation, and providing backup power.
Most utility-scale battery storage capacity is installed in regions covered by independent system operators (ISOs) or regional transmission organizations (RTOs). Historically, most battery systems are in the PJM Interconnection (PJM), which manages the power grid in 13 eastern and Midwestern states as well as the District of Columbia, and in the California Independent System Operator (CAISO). Together, PJM and CAISO accounted for 55% of the total battery storage power capacity built between 2010 and 2018. However, in 2018, more than 58% (130 MW) of new storage power capacity additions, representing 69% (337 MWh) of energy capacity additions, were installed in states outside of those areas.
In 2018, many regions outside of CAISO and PJM began adding greater amounts of battery storage capacity to their power grids, including Alaska and Hawaii, the Electric Reliability Council of Texas (ERCOT), and the Midcontinent Independent System Operator (MISO). Many of the additions were the result of procurement requirements, financial incentives, and long-term planning mechanisms that promote the use of energy storage in the respective states. Alaska and Hawaii, which have isolated power grids, are expanding battery storage capacity to increase grid reliability and reduce dependence on expensive fossil fuel imports.
Source: U.S. Energy Information Administration, Form EIA-860, Annual Electric Generator Report
Note: The cost range represents cost data elements from the 25th to 75th percentiles for each year of reported cost data.
Average costs per unit of energy capacity decreased 61% between 2015 and 2017, dropping from $2,153 per kilowatthour (kWh) to $834 per kWh. The large decrease in cost makes battery storage more economical, helping accelerate capacity growth. Affordable battery storage also plays an important role in the continued integration of storage with intermittent renewable electricity sources such as wind and solar.
Additional information on these topics is available in the U.S. Energy Information Administration’s (EIA) recently updated Battery Storage in the United States: An Update on Market Trends. This report explores trends in battery storage capacity additions and describes the current state of the market, including information on applications, cost, market and policy drivers, and future project developments.