Mexican Hydrocarbons Aff Plans & Solvency



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Gonzaga Debate Institute 13

Brovero/Lundeen – Mexican Hydrocarbons Aff

Mexican Hydrocarbons Aff




Plans & Solvency



Plan Ideas




The plan will be some combination(s) of technical assistance (expertise, infrastructure, tech), regulatory assistance, and/or THA cooperation.



1AC – Solvency



Generic Solvency




The regulatory cooperation done by the plan locks in regulatory reform gains


Wood, Mexico Institute director, 13

[Duncan, “Growing Potential for U.S.-Mexico Energy Cooperation”, http://wilsoncenter.org/sites/default/files/wood_energy.pdf, p. 41, AFB]


The last major area for hydrocarbons cooperation between the U.S. and Mexico concerns regulation. As Mexico contemplates the opening of its oil and gas industries, an issue of considerable concern is that of strengthening the regulatory agency, the Comisión Nacional de Hidrocarburos (CNH) and of designing national regulations that will provide a level playing field between public and private sector actors, and will ensure the efficient and safe functioning of the industry. Of particular concern, given the experience of recent years, is to guarantee environmental protection and operational safety, especially in deep water exploration and production (E&P). Institutional ties between the CNH and U.S. regulatory agencies have been slowly developing since the creation of the Comisión in 2009, and were particularly important in the context of the Transboundary Hydrocarbons Agreement. It is imperative that this cooperation is consolidated and strengthened into the future, and offers a low cost opportunity in one of the least sensitive areas of the Mexican oil and gas sector.


Tech assistance and regulatory co-op solves relations & economy


Wood, Mexico Institute Director and CSIS Senior Associate, 3/14/13

[Duncan Wood, Professor, ITAM Senior Adviser, Woodrow Wilson International Center for Scholars, Mexico Institute, Renewable Energy Initiative, a Senior Associate with the Americas Program at the Center for Strategic and International Studies (CSIS) in Washington D.C., 2013 (“Subcommittee Hearing: U.S. Energy Security: Enhancing Partnerships with Mexico and Canada,” Hearing Before the Subcommittee on the Western Hemisphere of the Committee on Foreign Affairs, House of Representatives, Mexico Institute, 3-14-13, Available Online at http://www.wilsoncenter.org/publication/subcommittee-hearing-us-energy-security-enhancing-partnerships-mexico-and-canada, Accessed on June 30, 2013)][SP]


I have been asked to talk to you all today about the opportunities for energy cooperation between Mexico and the United States. For the past 17 years I lived and worked in Mexico as a university professor and for the past 6 years I have worked intensively on policy research relating to Mexico’s energy sector. I have worked closely with the government, with Pemex and with the private sector on multiple issues relating to the Mexican energy industry, and between 2007-2009 I ran the Red Mexicana de Energia, a group of leading Mexican energy experts who advocated for a more open and inclusive discussion of energy reform in the country. Last year I was fortunate enough to lead a group of experts which produced an influential report that lay out the guiding principles for the oil industry reform that is expected later this year under the Enrique Pena Nieto government.

Looking ahead to the next four years of interaction between governments of Mexico and the United States, there is the potential for an enormously fruitful relationship in energy affairs. Much of this depends on two key factors, political will and the internal changes that are underway in Mexico’s energy sector. In the past, political sensitivities concerning U.S. involvement in the Mexican hydrocarbons industry have limited the extent of collaboration in the oil and gas sectors. This continues to be a cause for concern in any U.S.-based discussion (from either the public or private sectors) of Mexican energy policy and the potential for collaboration, but in recent years there has been a relaxation of sensitivity in this area. Partly in response to the perceived need for international assistance in resolving Mexico’s multiple energy challenges, and partly as a result of a productive bilateral institutional relationship between federal energy agencies, there is now a greater potential for engagement than at any time in recent memory.

I have identified three main areas in which bilateral energy cooperation holds great promise in the short to medium-term. First, given the importance of the theme for both countries, there is great potential in the developing collaboration through the Transboundary Hydrocarbons Agreement, signed in early 2012. Second, the two countries should work towards the creation of a truly integrated market for electric power at the regional level should be priorities for the two countries, with a special emphasis on the question of a more complete cross-border transmission network. Third, in the area natural gas, where Mexico’s impressive potential for shale gas can only be realized after a significant reform of the sector to allow for greater private participation, U.S. firms have the opportunity to be leaders in the development of the resource, building on their experience in the Eagle Ford formation. In the meantime, major investments are needed in pipeline infrastructure, both to bring gas across the border from the United States into Mexico, and within Mexico to bring the gas to the millions of potential consumers who are currently without access to natural gas.

Underlying all three of these areas are broader concerns about regional economic competitiveness and the consolidation of economic development in Mexico. The first of these concerns derives from the hugely important comparative advantage that the North American economic region has derived in recent years from low-cost energy, driven by the shale revolution. In order to maintain this comparative advantage, and to ensure that the integrated manufacturing production platform in all three countries benefits from the low-cost energy, the gains of recent years must be consolidated by fully developing Mexico’s energy resources. With regards to the second concern, economic development, a number of commentators, analysts and political figures in Mexico have identified energy reform as a potential source for driving long-term economic growth and job creation, and the potential opportunities for foreign firms are considerable. While the United States cannot play an active role in driving the reform process, the implementation of any future reform will benefit from technical cooperation with the U.S. in areas such as pricing, regulation and industry best practices.

In the time that remains I would like to focus my attention on the Transboundary Hydrocarbons Agreement. While I understand that there have been delays in presenting the treaty for ratification, and that last year’s electoral cycle was partly responsible for this, it is now important to focus on the implications and optimal timing of the ratification process. In terms of the implications, we should consider two points: first that approving the treaty will create new levels of legal certainty for U.S. and Mexican firms operating in the Gulf border regions, encouraging them to engage in the risk-taking required to produce oil from deep waters; second, the agreement has far-reaching implications in terms of regulatory cooperation between the two countries that is fundamentally necessary in the aftermath of the Macondo disaster and crucial for boosting Mexican standards. In terms of timing, I would argue that ratifying the agreement before the Mexican energy reform debate begins in earnest will encourage the process forward; however, a ratification that occurs during the reform process may be viewed in such a way in Mexico that it complicates the debate.



Now is the time to lock in bilateral framework for energy cooperation


Wood, Mexico Institute director, 13

[Duncan, “Growing Potential for U.S.-Mexico Energy Cooperation”, http://wilsoncenter.org/sites/default/files/wood_energy.pdf, p. 44, AFB]


The potential for effective collaboration between the two countries on questions on energy and climate change is huge. As a region, North America currently offers the most positive outlook in the world in terms of cheap, clean energy, largely thanks to the shale revolution that has taken place in recent years. Moreover, also thanks to shale, the United States, Canada and Mexico all have the chance to become energy independent and become net energy exporters to the world. The governments of the U.S. and Mexico should therefore undertake intensive discussions early in the new administrations to identify priority areas in the short- and medium-terms and should create institutional mechanisms through which these priorities can be pursued. In many cases these discussions will be bilateral, but on some long-term issues, such as climate change, for example, it makes sense to adopt a more regional approach, incorporating Canada into the process.

As Mexico undertakes a new energy reform process, the landscape for hydrocarbons and electricity will be subject to significant change. Mexico’s new government has decided that the existing state-led approach to oil and gas exploitation is no longer valid, and no longer serves the interests of the nation. This change will offer new opportunities for U.S. firms and potential competitiveness gains for the American economy. The establishment of a clear agenda for talks on bilateral cooperation is therefore a priority that should not be underestimated.


Natural Gas Scenario Solvency




Technical cooperation key to accessing Mexican natural gas capacity – that will drive growth


Wood, Mexico Institute director, 13

[Duncan, “Growing Potential for U.S.-Mexico Energy Cooperation”, http://wilsoncenter.org/sites/default/files/wood_energy.pdf, p. 38, AFB]


Underlying all three of these areas are broader concerns about regional economic competitiveness and the consolidation of economic development in Mexico. The first of these concerns derives from the hugely important comparative advantage that the North American economic region has derived in recent years from low-cost energy, driven by the shale revolution. In order to maintain this comparative advantage, and to ensure that the integrated manufacturing production platform in all three countries benefits from the low-cost energy, the gains of recent years must be consolidated by fully developing Mexico’s energy resources. With regards to the second concern, economic development, a number of commentators, analysts and political figures in Mexico have identified energy reform as a potential source for driving long-term economic growth and job creation, and the potential opportunities for foreign firms are considerable. While the United States cannot play an active role in driving the reform process, the implementation of any future reform will benefit from technical cooperation with the U.S. in areas such as pricing, regulation and industry best practices.

Hydrocarbon Sector Solvency




Now is the key time – failure to adopt new regulatory model will trigger disastrous decline


Wood, Mexico Institute director, et al. 12

(Duncan, November, 2012, Wilson Center – Mexico Institute, “A New Beginning for Mexican Oil: principles and recommendations for a reform in Mexico’s national interest” , June 24, 2013. JB)


The evidence presented above clearly demonstrates that there is the need for a radical change in the ¶ management and organization of Mexico’s hydrocarbons sector. The current system has shown itself to be unable to respond to changing circumstances and has left us on the brink of a disastrous decline in oil ¶ production and reserves. Moreover, new drops in production and reserves may well be around the corner ¶ and the national economy can no longer rely on Pemex as the sole provider of oil and gas. It is clear that the utility of the current model has been exhausted, and that a profound rethinking of the goals of Mexico’s energy industry must be undertaken.

The fundamental shifts in the global oil and gas industries described above highlight the need for Mexico’s national energy model to be responsive and flexible. The current model was created for an oil industry ¶ that was focused on onshore shallow water production, an economy that was closed and based on ¶ consuming national oil production, and the restrictions imposed by the constitution, while the federal ¶ government’s insistence on maximizing rent from the national oil company has meant that Pemex has not been able to respond to the challenges of the modern oil and gas industry. Any new model must be openended enough to allow for adaptation in the face of significant change.

In other words, Mexico’s oil and gas model must be flexible enough to allow policy makers to adapt to new developments and challenges. Rather than proscribing options, the legal framework surrounding the sector ¶ should afford future governments the capacity to pursue hydrocarbons strategies that serve the national ¶ interest.




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