The ongoing energy reform in Mexico is set to “reverse the country’s declining oil production, increase the share of renewables in the power sector, and slow the growth in carbon emissions, providing a solid foundation for robust economic growth in the coming decades” according to the International Energy Agency (IEA).
In its Mexico Energy Outlook recently published, IEA noted that the Reforma Energetica that started in 2013 has led to deep changes in the energy sector, ending “the longstanding dominance of Petróleos Mexicanos (PEMEX) in oil and gas, and of the Comisión Federal de Electricidad (CFE) in the electricity sector, opening up key parts of the energy sector to new players, investment and technology.”
As a result, IEA expects Mexico’s total oil production, which has been declining in recent years, to rise to 3.4 mb/d by 2040, up almost 1 mb/d from today. The increase comes in large part from new offshore developments, including deepwater drilling, and helps restore Mexico’s position as a major global oil producer and exporter, IEA said.
The report also finds that Mexico’s innovative auction system provides “a substantial boost to Mexico’s clean energy efforts in the power sector.”
Moreover, more than half of the country’s new power generation capacity installed between now and 2040 is to be renewables-based, “tapping Mexico’s large wind and solar resources,” IEA said.“New investment in electricity is essential to meet rapid growth in electricity demand, and allows Mexico to reach its target of producing 35% of electricity from clean sources by 2024” it added.
“This is not a reform, it’s a revolution on an unprecedented scale,” commented Fatih Birol, executive director of the IEA.
“This transformation touches every sector of the Mexican energy industry and goes well beyond” he said, adding “however, let’s not underestimate the task ahead, it is a huge undertaking and there will be challenges but the reform has made remarkable progress.”
The report comes a year after Mexico took the first steps in November 2015 to join the IEA, the agency explained.
“The accession of Mexico would be a major step forward for the IEA’s new 'open door' policy and allows deeper cooperation in coming years” it added.
“The Mexico Energy Outlook motivates us to continue in the path traced by the Energy Reform and to double our efforts,” stressed Pedro Joaquín Coldwell, Mexico’s secretary of Energy.
“The challenge for Mexico is to turn into reality the positive predictions presented by the IEA” he noted, adding that “the report includes some very convincing findings on what Mexico would have faced if the reform has never been enacted.”
IEA estimates without the changes envisaged by the reform, the cost to the economy would be “substantial”, reducing the size of Mexico’s GDP by 4% in 2040, resulting in a total economic loss of $1 trillion over the period of the outlook.