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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Headline crude prices for the week beginning 5 November 2018 – Brent: US$72/b; WTI: US$62/b
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It is a well-known fact that the oil and gas industry has a lot to offer in terms of opportunities - paycheck, lifestyle, and work-life balance. However, like everything else in life, it has a flip side as well. If you are planning to make a career in oil and gas industry, it is important to know the cons as well. Here is a list of risks associated with working in oil and gas industry that you must know to make an informed decision.
Highly competitive: survival of the fittest
Oil and gas industry is highly competitive and dynamic in nature. The job requires high level of expertise and productivity. With digitization and automation of the industry, the work functions are changing rapidly. The employees who cannot cope up and upskill with changing time and need will be automatically pushed out of the system. The foremost challenge in oil and gas industry is to stay relevant and keep upskilling.
Long work hours
Some job functions in oil industry like offshore rig workers have to work in 12-hours shift, seven days a week and for seven to 28 days in one stretch. Sometimes, overtime is also expected due to emergency or to manage the project deadlines. However, the oil companies do give equal amount of resting period to the rig workers to compensate for the long working hours. Even then, the continuous long hours is strenuous for the workforce.
The accident-prone work environment
Although rigorous safety trainings are provided to the workforce along with numerous safety measures and laws in place; accidents do occur. Sometimes, these accidents can be life-threatening. Here is quick overview of the possible accidents that you might encounter:
Risk of confined space and fall- The line workers in oil and gas industry sometimes work in confined spaces like mud pits, reserve pits, storage tanks, sand storage, and other excavated areas, where they are exposed to potential risk of ignition of inflammable vapors, exposure to harmful chemicals, and asphyxiation. Additionally, these kinds of workplaces involve risk of falls, slips and trips too which can cause severe injuries and can even turn fatal. Though the companies are extremely careful and take all safety precautions, but the risk cannot be ruled out.
Additionally, frequent exposure to chemicals used in refineries and drilling operations can impact long-term health. To offset these dangers, oil and gas companies provide comprehensive training to employees to ensure safety protocols and site-specific features.
Working in remote location
The oil and gas professionals have to work on remote location for exploration, offshore duties, pumping stations, gas plants and more. The workers in remote location often feel isolated and they are on their own to cope up with numerous work-related accidents and health hazards.
Working in oil and gas industry is extremely rewarding in terms of career growth, travelling opportunities and compensation. However, the above points must also be considered before stepping into this industry. It is important to mention here that majority of oil and gas companies are aware of the risks associated and thus have sound safety measures in place to avoid any contingency. Moreover, the government and regulatory bodies also impose strict regulations for safety and security of the workforce. Therefore, in many cases, the risk associated is considerably reduced. So, before you accept any offer from any oil and gas companies, you must carefully verify the safety measures and policies of the company. Once, you are assured, your career in oil and gas will be highly rewarding.
If you are looking for relevant opportunities, check out NrgEdge.com to kickstart your career in oil and gas industry.
Due to shortage or limited availability of oil and gas, companies today are evaluating how they can harness alternative energy sources. The alternate fuel market is targeting hydro and thermal power plants, however solar and wind are catching up fast as preferred energy sources. There are still reservations about nuclear energy considering the risk of nuclear waste or manufacturing of nuclear weapons. However, strategies are shaping up to minimize the risk and maximize the profitability potential. Until then, sources such as solar and wind are being focused upon more and new sources like biofuels are explored extensively.
How will the shift towards alternate energy impact traditional oil and gas market?
There have been huge investments in the different alternate energy avenues by most of the big oil majors. These heavy investments on various alternate technologies by big oil majors and other oil companies around the world indicates a positive outlook towards the scope of clean fuel energy. However, the feasibility of its application is still questionable. Whether or not it will be able to meet the energy needs of the world while upholding its profitability is a question that is bothering the world.
Let us understand what the shift means for the companies in the energy sector.
Rate of employment
Among all renewable energy sources that have been studied, bio energy has been most influential. The fuel is created and transported within a confined space. The work is extremely labor-intensive and hence scope of employment increases. Hydropower and wind power will generate job opportunities during construction and project development phase. However, once the unit is commissioned only few operational staff will be required to perform the operational work.
Traditional energy is more expensive than renewable energy. If renewable energy can be produced on large scale, it can eliminate the gas shortage. Even other forms of renewable energy are much cheaper in comparison to traditional oil and gas sector. The cost benefits will be transferred to the consumers and they’ll be able save considerable amount on utility bills.
Improved Brand Image
It makes good business sense to make a move from traditional energy resources to renewable ones. The environmentalists have been arguing about the negative impacts of using and overusing the non-renewable source of energy. The shift towards alternate energy will boost the brand image of the traditional oil and gas company.
Higher market penetration and Mass access to energy
Due to dependence on fossil fuels which are non-renewable sources and expensive, a significant number of people in the world have no access to power. A chunk of people in Asian and Sub-Saharan Africa area are still using traditional biomass for cooking. However, if the alternate energy can completely replace the traditional oil and gas then it will have a deeper penetration into the market and majority of people will have access to it.
Ethical Investment Avenue
Renewable sector is considered as an attractive and ethical investment avenue for the ones who wish to invest outside traditional channels and are futuristic in outlook. The rising investment on alternate energy is impacting the job creation and community cohesion, which is again a positive move.
How the alternate energy is transitioning the oil and gas?
Big oil companies and other oil companies are making practical, well-researched, and steady approach towards renewable energy spanning from solar panels to genetically engineered algae. However, there are still many companies which are in research/experimentation phase and do have a concrete plan in place.
The pathway to clean fuel technology that operates with efficiency and profitability is getting paved. More than 100 countries in developing as well as developed nations have set a clean fuel target and are working towards it. The European Union has set a goal to meet its 20% energy requirements via renewable sources by 2020.
The world has acknowledged climate change and are working together to shift from carbon-intensive to carbon-neutral environment which might pave the way for generations to come.