1. Presentation name (Name of presenter) (Position) (Division/Post name, City) Mexico’s Changing Energy Landscape and Opportunities for Canadian Suppliers Presentation by François Rivest Senior Trade Commissioner Embassy of Canada to Mexico

2. Mexico: 5th most important destination for Canadian exports* Canadian Exports to Mexico in 2013: 9.847 billion USD Main Canadian products exported to Mexico: Manufactured goods (over 50%), vehicles and auto parts, iron and steel products, cereals, and meat. *Using respective import statistics for consistency.

3. In Latin America: The most important trading partner for Canada Globally: 3rd most important trading partner in terms of bilateral trade * Mexico is …

4. Canada-Mexico Bilateral Relationship 2013 Highest level in history $35.7 billion USD NAFTA= 750% more bilateral trade between Canada and Mexico

5. State of the Energy Sector in Mexico Mexico’s crude oil production declined from 3.4 mbd (2004) to 2.5 mbd (2013). Over last decade, gas consumption increased 70%, but production only 46%. Without reform, the country could become a net importer of energy by 2020.

6. Mexico’s Energy Reform Oil and Gas State will enter into a wider spectrum of contracts with the private sector. Upstream oil & gas sector: State will be able to enter into service; profit sharing; production sharing; and/or licensing contracts with the private sector. Midstream and downstream oil & gas sectors: State to enter into licensing contracts with the private sector. Sovereign wealth fund to manage oil revenues.

7. Mexico’s Energy Reform Electricity Private sector will participate in electrical power generation (construction, maintenance and operation of electrical grids), transmission, and distribution. Inclusion and encouragement of renewable and clean energy in Mexico’s energy matrix. Additional organizational and operational autonomy and flexibility granted to CFE.

8. New Institutions and Roles The National Hydrocarbons Commission and Energy Regulatory Commission will be independent regulatory agencies. The Ministry of Energy will be responsible for the selection of which reservoirs and blocks to contract and contract specifications. The CNH remains in charge of E&P regulation, and will take over from Pemex as the institution carrying out tendering and supervising development plans.

9. Pemex Round Zero Pemex requested to ‘keep’ 83% of 2P reserves. Sener has until September to define the areas that Pemex will be entitled to keep. The target for Round 1 bids for contracts and licenses is June 2015.

10. Secondary Legislation Clearer definition of licensing contracts. Will set out the procedures for establishing recuperation costs, and the percentages due to Pemex and to the Mexican state. Governance: Pemex, Sener, CNH, CRE. Impact on FDI and value chain.

11. Rule of Law and Political Risks Challenges to licensing regime. Referendum law and PRD opposition. Institutional capacity.

12. Pemex procurement from Canada

13. Entry Channels Key contractors & integrated service companies –International –Mexican Representatives, agents, and partners

14. Opportunities in E&P Geology: world’s 6 th largest shale gas recoverable reserves and 8 th largest for shale oil. Reform: –Private investment in deepwater drilling, shale oil & gas and mature fields. –500,000 bpd produced by private sector within 4 years.

15. Opportunities in Transport Encouraging opportunities for pipelines. Upcoming Pemex and CFE bids. Uncertainty on whether some facilities will revert to Pemex Gas.

16. Opportunities in Electricity Main areas of opportunity: (1)power generation (2)electricity grid.

17. Energy Reform Milestones August 12, 2013: Reform presented to Congress by President. December 13, 2013: Mexican Congress passes energy reform. December 20, 2013: Reform signed into law by President Peña Nieto. March 2014: Beginning of congressional discussions on secondary laws. March 21, 2014: Round 0: Pemex applies for blocks it wishes to continue operating. June 2014: Issuance of secondary laws (now expected in 2 nd extraordinary Congress session). September 21, 2014: Deadline for Sener to confirm areas allocated to Pemex and to decide on which fields to open up for private investment. June 2015: Target for first bids for contracts and licenses.

18. Key Considerations Economics of future contracting models? Level of ambition in blocks to be tendered to private sector. Transparency in the bidding and contracting processes.

19. Our network in Mexico

20. Connect with the TCS tradecommissioner.gc.ca Canadian Embassy Mexico City mexico.commerce@international.gc.ca Consulate General Monterrey mntry@international.gc.ca Consulate Guadalajara gjara@international.gc.ca