Commentary: Why the Texas energy industry is watching Mexico’s election

Mexico’s energy policy has a complicated history with significant impacts on its surrounding communities — particularly Texas. For over 70 years, Mexico’s energy sector was largely under the control of a monopoly. The energy sector was almost exclusively operated by PEMEX and CFE; however, in 2013 Mexico amended its constitution and ended its nationalization policy regarding energy, effectively opening the sector to foreign investment. While these reforms were made with the ultimate intention of increasing value in Mexico’s energy sector, they have been the source of significant debate within the country.

Now why does this news matter to the Texas natural gas industry? South Texas sits on one of the largest natural-gas reserves in the world: The Eagle Ford Shale. Approximately 3 billion cubic feet per day of natural gas is pulled from Eagle Ford, according to Eagle Ford Shale’s website, which is great news, since the biggest customer of Texas’ natural gas supply sits just south of the border.

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Texas Secretary of State Rolando Pablos estimates that Mexico purchases almost 60 percent of the country’s natural gas supply from the United States — and a very significant portion of that is supplied by Texas. So, as South Texas ramps up natural gas production, it seems that Mexico is ready to purchase — and as Mexico’s need for energy expands, so will its need for natural gas.

However, it appears that a serious obstacle in the way of Mexico consuming more Texas natural gas in the future is Mexico’s international pipeline capacity. Fortunately, projects like the new interstate pipeline crossing through Cameron County — which is projected to yield that county $56 million in property taxes — are making dents in supplying Mexico with more natural gas. However, if we assume that more international pipelines can be built to match demand from Mexico, the real growth will come when Mexico updates its own grid of natural gas pipelines to expand who can be reached.

Pursuant to the protocols in place following Mexico’s energy reform, two groups — SENER and the CRE — could “ssue permits enabling private firms to participate in refining, gas processing, transportation, storage, distribution and petroleum marketing activities. These protocols have effectively enabled private firms to participate in the transportation and distribution of natural gas.

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As a result, the expansion of natural gas to more people in Mexico may not have to be on hold until the Mexican government decides to move — because the expansion of natural gas may fall in the hands of private actors. This could be huge for the South Texas natural gas industry, since private actors tend to move quicker than government entities — and the faster the expansion occurs, the faster the demand for natural gas can rise.

Unfortunately, there is a potential roadblock in the way of expansion. The current frontrunner in the upcoming Mexican presidential election, Andres Manuel Lopez Obrador, has taken an adverse position to the Mexican energy reform. Many are concerned that if he wins he will repeal the reforms — and this concern has put some energy growth plans on hold.

If Lopez Obrador wins, the future of Texas’ natural gas expansion seems fairly uncertain — and an industry that brings so much investment and high-paying jobs to Texas may see a drop in growth. So, while it is always important for Texans to keep a close eye on the elections of our neighbors to the south, the stakes of this election certainly carry more significance than we have seen in recent years.

Ricco Miguel Garcia is attorney in San Antonio. Samuel David Garcia studies law at Harvard.

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