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Energy reform in Mexico to benefit US business

There is a picture of large steel white pipelines that help transport natural gas as an energy source.
01 Jan 2014

Trade analysts looking at economic relations between the United States and Mexico say that recent Mexican reforms to their energy laws represent an opportunity for trade growth in the United States, but also necessitate proper protocols and legislation to make labor exchange logistically feasible. Expanding to Mexico could soon present a significant opportunity for many U.S. energy businesses. 

Mexico's energy reform
Diana Villiers Negroponte of the Brookings institute noted that Mexican President Pena Nieto's sweeping energy reform bill will have wide-ranging effects across the energy sector, opening doors for collaboration with the United States. 

In particular, the legislation establishes a protocol for the advancement of hydrocarbon extraction, which Negroponte noted will follow a series of rounds of contracts offered to private companies. For the United States, this likely means many opportunities for private-enterprise partnerships with organizations like state-owned PEMEX, which will be one of the first allowed to explore extraction opportunities in Mexico, but which may currently lack the technology and know-how to perform optimally. 

"PEMEX, the Mexican oil company, does not have the ability on its own to be able to do deepwater drilling," Matt Salmon (R-Ariz.) told KPBS. "They're going to need expertise from companies like ours."

For border towns, opportunity and pressure
In addition to the energy legislation, areas on the border between the United States and Mexico will likely also need to evaluate logistical issues. Some legislators such as Ron Barber (D-Ariz.) say that with the new reforms in place and cooperation between labor forces on the border on the rise, the Department of Homeland Security must take the free movement of personnel into consideration when designing its own border-security protocols.

Because the energy reforms in Mexico are expected to have such a major impact on collaboration initiatives between the United States and Mexico, especially in resource-rich areas in places like the Arizona border, cutting through the red tape before state-sanctioned contracts are awarded will be key to success. Negroponte noted that PEMEX will be allowed to operate in just a three to five year development windows following the earliest ,"Round Zero" contracts issued in the 90 days following passage of the legislation. Results impeded by bureaucratic disorganization on behalf of organizations like the Department of Homeland Security could doom potentially lucrative energy contracts.

Taking the next step
Negroponte said that while PEMEX has a head start, the demands of the government will be high, and President Nieto is expected to model Mexico's energy reform agreement on some of the most advanced and successful in the world.

For U.S. businesses interested in nearshoring or expanding to Mexico, the bill is yet another indication of Mexico's national commitment to energy reform and sophisticated manufacturing, which is encouraging for all enterprises. In addition to the drilling of hydrocarbon reserves in the energy industry, many manufacturing facilities in Mexico are also embracing alternative energy resources, and have shown a dedication to clean energy initiatives, just like in the United States. As collaboration between the nations increases with favorable trade initiatives, and energy agreements like this, both countries can expect to see returns. 

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