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GEM in Mexico

June 30, 2014

Last week I had an opportunity to participate in a Colorado delegation to Mexico City, arranged by the Biennial of the Americas, and led by Governor Hickenlooper and the Consul General of Mexico’s Denver consulate, Señor Carlos Bello. The delegation consisted of about 80 people drawn from a cross-section of Denver’s business, cultural, and academic communities.  There were two themes to the trip and the workshops within it: energy/environment, and education/culture.  Much as I would have liked to participate in both the energy and the education groups, as GEM straddles both worlds, we had to choose one or the other, and I chose the energy group.

In case you haven’t been following events in Mexico, it’s an extremely dynamic and challenging time for their energy sector.  After seven decades of exclusive state ownership, earlier this year the Mexican government amended the constitution to open the energy sector to private – including foreign – participation.  This applies to both the oil and gas and power generation/distribution industries.  The secondary legislation is being written now – this will provide the details of exactly how this newly-opened sector will work.  From the Mexican point of view, not only are there many opportunities for new business, but the two state-owned giants, Petróleos Mexicanos (Pemex) on the oil and gas side and the Comisión Federal de Electriciad (CFE) on the electricity side, have to face a new reality as they redevelop themselves from protected monopolies to productive state enterprises in a competitive market.  As a result, business and individuals on both sides of the border have what really is a once-in-a-lifetime opportunity to participate in a market that is both mature and brand new all at once, and right on our doorstep to boot.

GEM is no exception here, and we are exploring ways to get involved that make sense for us as an educational institution and as a thought leader in the energy business.  If anything evolves beyond the concept stage, I’ll write about it here.

The thematic highlight of the trip came Tuesday morning with the twin clínicas (workshops).  These were:

  • Preparing Tomorrow’s Workforce Today, which focused largely on STEM (Science, Technology, Engineering, Math) education, mainly at K-12 levels;
  • Balancing Energy Production and Environmental Protection, which took a broad look at the next stage of energy development in Mexico.

I was invited to participate as a respondent on the energy/environment panel – in the panel format there were three initial presenters from Mexico and three respondents from the US who were to follow and react to the presenters.  In our panel the presenters were Veronica Irastorza, Principal of NERA Economic Consulting and former Undersecretary of Energy for Planning and Transition, Oscar Martínez Senior Environmental and Sustainability Manager for Coca-Cola Mexico, and Marcelo Mereles, Partner in the consulting firm EnergA and former Advisor of International Affairs in the office of the Director General of Pemex.  My fellow respondents were Tom Murray, VP of Corporate Partnerships for Environmental Defense Fund, and Ricardo Bracho, Senior Program Manager at NREL.  If you don’t know Ricardo, he’s a GEM alum (Cohort I) – he of course did a great job, and I have to tell you that I was really proud to have GEM so prominently represented in a group like this.

I think the discussion was very productive, everyone learned a lot, and several business connections and possible business ideas were developed.  For me the key takeaways were about the intriguing blend of similarities and differences between the US energy market and what we believe the Mexican market will be.  I think the Mexican market will be more infrastructure-driven at least in the early years than the US is, with pipelines and electrical grids needed to enable energy production to reach markets.  In the oil and gas sector particularly, I think the immediate opportunities will be in deepwater (for majors) and in rework/ rehabilitation of previously uneconomic wells (for smaller companies).  There seems to be more of a wait-and-see attitude on shale development; I do think that will be a very big market eventually, but it might be slower to take off than others.  Of course services like engineering and pipeline construction will also be early needs.  On the power side I think small-scale distributed generation will come first, whether from fossil fuels (mainly gas – Mexico uses very little coal) or from renewables, starting with biomass and moving to solar, wind, and geothermal).  Geothermal, in particular, has a lot of interest in Mexico.

I was struck by the commitment on the Mexican side to environmental protection and by their interest in the social issues we face in Colorado, especially on unconventional development.  There has been a little bit of local backlash already to Mexican energy development (interestingly, both renewable energy and fossil fuels), and our Mexican colleagues are watching us to see how we manage the issue of social sustainability here.

My overall impression was that Colorado enjoys a very favorable reputation in Mexico, both as a destination and as a working partner.  The Governor’s office and our business, industry, and cultural associations are working very hard and very effectively to build this and are doing very well at it.  We have a great relationship and get wonderful support also from our Mexican Consulate here in Denver and from Consul General Bello and his team.  There are huge opportunities in the Mexican energy space just on the horizon; we in Colorado are very well-positioned to take part, and I plan to do everything I can to encourage all of our energy businesses to take a long look at Mexico, even if they haven’t worked internationally before.

Give me a call if you want to learn more.

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