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Mexico’s Energy Reform the Fallout of Change….

Had someone told me I would spend the last 18 months deeply vested in the Mexican Energy Reform I would have laughed and told them they were crazy. I knew nothing of the Oil and Gas Industry and certainly didn’t think of oil in a broader context than the liters that went into my car every here now and then. And if I were to be truly honest, a man has always been coquettishly solicited to execute that task too on my behalf.

When a local Oil Professional solicited my insights for a website and business plan specific to Oil and Gas, it began to dawn on me that my knowledge instinctively of a country and culture was paramount to the success of this man’s endeavor.  I took the challenge on with enthusiasm and began a crash course in the Oil and Gas Industry and consumed information at a rate that seemed faster than speeding light.

I have in the last year and a half, followed the reformation and the progression and with the mind of a true marketing and advertising professional, began to watch with an intensity the developments south of the border.

For more than 75 years the Oil and Energy sector of the Mexican Government has been state owned and operated. This concept was the brain child of Mexican President Lázaro Cárdenas in 1938. While the world went to war, President Cardenas created a monopoly in Mexico with the idea that the people’s “donations” toward the cause would help finance the exodus of the foreign Oil and Gas companies working in Mexico from other countries. The long and the short of the outcome of this strategy resulted in what has become the media focus of Mexico to the rest of the world since. Oil spills, drug lords seeking corrupt payoffs, the theft of oil barrels, and gas for that matter, as well as outdated and unsafe refineries that have resulted in death and the lining of a myriad of pockets for personal gain from private parties to union leaders.

Despite gallant efforts over the decades to follow the inception of the monopoly, Mexico was unsuccessful. The idea was that Mexico would be self sustaining, but the fact is, PEMEX was never a successful competitor in the market and the lack of technology, and knowledge left Mexico limited in her ability to play in the world market beyond simple extraction processes.

Fast forward to 2012. President Enrique Peña Nieto began to propose economic reforms. A new age, new technology and yes, even Facebook (Mexico has the largest number of Facebook users to date) brings the new millenium into what has been historically a third world country by most standards, it becomes apparent that  that there is a mass amount of oil in Mexico and a technological highway to it that could in fact change the country’s economics drastically for the better….it would seem, anyway.  This is dicey as there are two sides to this now.

In the light of the reformation, the benefits offer Mexico the opportunity to allow into the country those Oil and Gas companies that can and will provide the technology, equipment and professionals needed to build new refineries, and oil wells. Extraction of renewable energy from wind and solar is possible as well. The people of Mexico will for the first time in history, get to choose their provider for the services, and a new market will open in which companies compete for business as it is done in the United States. The rates charged to the people will decrease significantly with the competitive market and at the risk of stating the obvious, all of this alone will produce jobs and educational resources for young Mexican’s wanting now to get into this foreign industry. This in concept is extraordinary and seems to be well on it’s way. The second tier legislature on this reformation included a mandate; 30% of the labor force must be Mexican countrymen.

The reformation changes the minds of many, offering hope for education, through private training companies and Universities will offer new Petroleum Engineering courses. For perspective, many of the United States Colleges and Universities turn out Oil and Gas Professionals by the thousands. Mexico has one University in which the Petroleum Industry in part, is taught, and it turns out less than 100 per year by comparison. This is staggering to me now understanding the magnitude of the industry and the global impact.

Seemingly this all seems very positive. There are those however that disagree. The new policies have what can be deemed as devastating impact. PEMEX will see layoffs. What is ironic about this is the fact that many on the payroll never show up to work. They receive pay because somewhere somehow they were the brothers, sisters cousin uncle so and so, and by relation he gets a paycheck! These employees with what this writer can only call “THE DREAM JOB”, will suddenly find themselves “unemployed”. An irony unto itself I might add.

Gas stations. Layoffs. You remember a time when we pulled into a gas station and a guy came out with a smile and whites, and pumped your gas? With only two states in the union to date, still using these attendants (Oregon and New Jersey) this is part of American History. However, in Mexico this attendant is still very much a part of the gas station experience. He pumps the gas. He takes the money. He issues the receipt. He washes the windows and with pride, and a smile, wishes you a good day. Now I am still a woman, and I still hate the whole “pump my own gas” thing, so I am always elated when in Mexico I don’t have to! Unfortunately, in Mexico, with the reform, this role in Mexico will also become obsolete. This position becoming obsolete has an impact on 400,000 gas stations in the country. Why? Because foreign play in Mexico creates competition and competition is done through cutting costs and cutting costs first means cutting jobs and creating more”efficiency”.

It seems by all intents and purposes a conundrum. Damned if you do and damned if you don’t.  The government of Mexico clearly was not successful in running the sector and the people stand to lose by deprivatizing. The consensus of opinion seems to be that Mexico is in need of an entirely new system in order to maximize the resources beneath the surface of the country.

Change is a hard tortilla swallow no matter where in the world you are. Some embrace it but the majority are reticent to it. VIsionaries and dreamers can see the possibilities in the ideas and concepts and can even execute the logistics necessary but they are among an elite group. The common man, the one this change impacts the most, stands to feel the effects the most. How that will play out, no one knows. We can only speculate, and watch and see what happens.