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Energy Reform in Mexico: An opportunity for Canada?

Energy Reform in Mexico: An opportunity for Canada?

Posted by Ricardo Vázquez on July 31, 2014

The structural reform that is being done in Mexico in its energy sector, has generated great appetite in international corporations which want to invest in a sector that remained completely closed for competition.

By now, Mexico has remained closed to private participation, national or international, in a sector that is a national monopoly (Petróleos Mexicanos, Pemex) Nevertheless, advances are being made in the elaboration of secondary laws of the Energy Reform that will open itself to private investment and many great companies have shown interest in this new scenario.

Very particularly, the possibility of enabling commercial relations between Mexico and Canada is now open, specially in the mining and gas sector, where Canadian companies are very experienced, but the oil sector cannot be discarded either.

According to the Mexican Mining Chamber, coal producers will be able to explore and exploit natural gas without the need of a leasing, awarding directly the contract of exploitation of the energy input known as cushion gas. Therefore, mining companies will be able to exploit shale gas without the need of managing an additional concession.

It can't be overseen the fact that Canadian mining companies are the main external participants in the aforementioned sector in Mexico.

Another example of this is that during last June,the Canadian Oil Company Pacific Rubiales Energy Corp., announced the creation of a Mexican branch in the middle of great international expectations. This subsidiary is called Pacific Rubiales E&P Mexico.

And it is precisely in this example that it is seen how the relationship between these two countries is getting closer, since the Mexican conglomerate called ''Alfa'', one of the biggest in the country, reported to the Mexican Stock Exchange (BVM, in Spanish) that last May it had acquired through Toronto's Stock Exchange 97.000 common shares of Pacific Rubiales, which represent the 0.0312% of the Canadian company's value titles. As a result of this acquisition, Alfa increased its holding to 31.4 million shares of Pacific Rubiales Energy Corp., natural gas and oil producer, and that represent 10.3% of value titles.

Right after that, in early June, Alfa made another acquisition of shares to increase the participation to 12.26%.

Mexico is about to start an opening to direct foreign investment to the world in the energy sector, and successful models could be replicated, such as the Canadian one.

Canada, on the other hand, is aware of the great opportunities given by Mexico in terms of gas and oil, electricity production and pipeline construction. Canada big companies might be interested in participating in this process, since great opportunities will be generated.

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