CERAWeek by IHS Markit

Mexican Energy Minister Coldwell sees energy growth stronger with NAFTA

Key Points
  • Mexico's Energy Minister Pedro Joaquín Coldwell said North America's energy trade would continue even if NAFTA ended.
  • Keeping NAFTA would increase energy trade, Mexico's Energy Minister said.
  • The U.S. imports Mexican oil and sells it gasoline and natural gas.
  • Over the last two years, government reforms have spurred investment in Mexico's energy sector.
Pedro Joaquin Coldwell, Mexico's Energy Secretary, speaks during the 2018 CERAWeek by IHS Markit conference in Houston on Wednesday, March 7, 2018.
Aaron M. Sprecher | Bloomberg | Getty Images

Mexico's Minister of Energy, Pedro Joaquín Coldwell, said North America's energy trade would continue even if NAFTA is ended, but it will be more powerful if the free trade agreement is successfully revamped.

"I don't think it would be threatened, but if it continues, it would enhance its growth," he said. "I can say that the energy chapter in NAFTA is a chapter of coincidences among the three countries. There are conditions that make North America the most competitive region in the world."

Coldwell said NAFTA is important for energy integration even though the crossborder connections were there long before the 1994 agreement. But since then, the energy relationship has boomed. There is an eighth round of negotiations expected in the efforts to revamp the North American Free Trade Agreement between the United States, Mexico and Canada.

"It's obviously very important because it's important for energy integration in the region. In 1994, when NAFTA was signed, back then interregional trade was one-third. It's nearly half. Energy trade is double the rest of goods and services," he said.

Coldwell was speaking to CNBC at the annual CERAWeek conference hosted by IHS Markit in Houston, where 3,500 industry officials gathered from across the world. Mexico's minister appeared on a panel with Canada Natural Resources Minister James Carr and U.S. Energy Secretary Rick Perry and discussed how the interconnections of the energy industry tie the three countries together naturally. The U.S. imports Mexican oil and sells it gasoline and natural gas, while the U.S. buys oil, gasoline and power from Canada, while selling it oil and natural gas.

The opening of the energy sector in Mexico represents nearly $200 billion in investment.
Pedro Joaquín Coldwell
Mexico's Minister of Energy

President Donald Trump is expected to announce steel and aluminum tariffs later Thursday and to include exemptions for Canada and Mexico tied to NAFTA. "We don't know how this regulation is going to unfold, but our Ministry of Economy is in close negotiations with Washington on this respect," Coldwell said Thursday. "Steel is a very important input for our industry, and there are many things necessary for the energy industry, like pipelines, rigs, so it's not convenient for the price to rise."

An industry in transition

Mexican's energy sector has been transformed in the past two years by a reform program to open up its industry. The government of President Enrique Peña Nieto is expected to leave office in December after the July election. Coldwell said no matter who takes office, the reform program cannot be altered and is constitutionally guaranteed.

"The energy reform in Mexico has no reason to be changed with a change in government and elections, because it's been very successful. The opening of the energy sector in Mexico represents nearly $200 billion in investment," he said. "To cancel those investments will also translate into canceling thousands of jobs." Coldwell said the energy sector is ultimately expected to result in 800,000 Mexican jobs.

U.S. Energy Secretary Perry told CNBC that the Mexican reforms should be secured because they are in place constitutionally. "They are good for the Mexican people," he said.

In the final 10 months of Peña Nieto's term, five more bidding rounds are expected for onshore and offshore projects. There will be bidding for transmission lines to connect renewables with centers of consumption and for clean energy. There is also an opportunity for bidders to bring the type of drilling, or hydraulic fracturing used in Texas, south of the border.

"Eagle Ford continues into northeastern Mexico. On Sept. 5 we are going to have our first bidding award for unconventionals — nine blocks of gas," he said.

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