GAME CHANGER

Mexico 2015 | ENERGY & MINING | INTERVIEW

TBY talks to Pedro Joaquín Coldwell, Secretary of Energy (Sener) of the United Mexican States, on the correlation between market transparency and efficiency, new programs and regulations to secure energy stability, and efforts to diversify the national energy market.

Pedro Joaquín Coldwell
BIOGRAPHY
Pedro Joaquín Coldwell has a degree in Law from the Universidad Iberoamericana, and was a Professor at the same university between 2001 and 2006 in the Department of Political and Social Sciences. He has been an active member of the Institutional Revolutionary Party (PRI) for many years, serving his home state of Quintana Roo at the state and federal level, as well as serving as one of its Senators from 2006 to 2012. He has served as Mexico’s Ambassador to Cuba and headed the Secretariat of Tourism (SECTUR) and the National Fund for Tourism Development (FONATUR).

To what degree will energy reform allow Mexico to make the most of its resources?

The Energy Reform brings profound changes to the hydrocarbons and electricity sectors, and the oil industry will increase its investment capacity through the granting of contracts to private companies alone, or else in association with Pemex. More capital and advanced technology will enable the exploitation of Mexico's deep water and unconventional fields, and enable recovery from mature fields, which previously were unprofitable. With this, Mexico seeks to modernize its energy infrastructure and increase domestic production of oil and natural gas, which in recent years has seen a clear downward trend. The electricity sector will be operated through a wholesale electricity market with the participation of public and private companies on equal terms. The new regulatory framework is primarily aimed at promoting investment, ensuring transparency, and improving the competitiveness of the industry and commerce through reduced electricity rates. Regarding the use and development of renewable energies for the generation of electricity, the reform establishes specific policies such as Clean Energy Certificates and the creation of a law regulating the activities of prospection, exploration, and extraction of geothermal reservoirs. In conclusion, constitutional reform pertaining to the energy sector is integral because through its new regulatory framework, the industry will attract more investment in most of the hydrocarbons and electricity activities, modernizing and strengthening infrastructure, increasing the supply of energy at better prices, and witnessing the development with a more social and environmental responsibility.

What will be the main role of the Oil Revenues Stabilization Fund of Mexico, and what mechanisms will it put into place to increase transparency in the awarding of contracts to companies?

The Energy Reform provides that income derived from the exploration and extraction of hydrocarbons shall be administered by the Mexican Petroleum Fund for Stabilization and Development. By constitutional mandate, the resources this fund receives will be used to establish long-term savings that will minimize the impact of unanticipated events on the public finances of the national economy, as well as ensure sufficient resources for future generations. The items for which 60% of these savings will be allotted include the universal pension system, science projects, technology and renewable energy, investment in infrastructure, and human capital formation. To ensure the transparency of the fund, its committee is composed of four independent members and three representatives of the State: Ministry of Finance, Ministry of Energy and the Bank of Mexico, who will serve as its fiduciary institution. In this task, the Bank of Mexico will publish quarterly reports on the activities of the Trust and the main results, with prior approval of the committee. Also, external audits are conducted to examine the same accounting information.

By 2024, 35% of the electricity generated in Mexico will come from renewable sources. What steps is Sener taking to achieve this objective?

In terms of sustainability, the Energy Reform sets new instruments and renews existing ones in order to increase the use and development of clean energy sources. The new regulatory framework includes the creation of a wholesale market, which is open to generators and consumers, for the purchase and sale of electricity, under clear conditions of transparency and a competitive environment. Also in this market, Clean Energy Certificates will contribute to achieving the goal of generating 35% of non-fossil sources by 2024. Another important aspect of the reform is the creation of a specific law for the promotion and use of geothermal energy. Regarding research and technology, Sener has developed various activities, among which are international cooperation mechanisms to promote the development of innovation in the country and the creation in 2014 of the Mexican Energy Innovation Centers (CEMIEs) in terms of solar, wind and geothermal energies.