TPT September 2016

G LOBA L MARKE T P L AC E

P AIN ON BOTH SIDES OF THE BORDER According to the US Energy Information Administration, US natural gas pipeline exports to Mexico reached 102.6bn cubic feet in April 2016, up from 77.2 BCF just a year before. “We export natural gas to Mexico more than anything else,” said Bloomberg ’s Mr Munro, speaking of the US. “More than coal, more than oil, more than electricity. So that’s where the real potential damage lies.” It was pointed out by TheStreet that Mexico’s liberalisation of its energy market compounds the issue. Importing more American natural gas to serve the heavily-industrialised northern parts of the country, Mexico has been sending its own gas supplies south. A change in US policy in relation to free trade with Mexico would, Ms Stewart wrote, “put this process in jeopardy and throw off plans laid out by businesses and consumers on both sides of the border.” These are edited excerpts from industry sources who weighed in on developments that may lie the other side of presidential election day in the US (8 November): › S&P Global Platts, a provider of information and benchmark prices for the commodities and energy markets, expects natural gas exports from the US to Mexico to average 5.3 billion cubic feet per day (BCFPD) in 2021, accounting for 57 per cent of Mexico’s natural gas supply. US production will grow by 15.1 BCFPD over the same period. “If Mexican demand fails to materialise due to upcoming political [ie Trumpian] changes in policy, prices and producers in the US will be affected,” said Javier Diaz, manager of energy analysis and consulting at the firm. › Since opening up its energy sector to foreign investment, Mexico has held a series of auctions of its oil fields. One early bidder, Houston-based Fieldwood Energy LLC, announced in January that it already had signed a production- sharing contract in partnership with PetroBal, a Mexican company. Other big US oil companies like ExxonMobil, Chevron, Marathon Oil, Occidental Petroleum and Anadarko Petroleum likely have an eye on Mexico’s oil bidding as well. However, noted Ms Stewart, should a Trump presidency change US-Mexico relations, the opportunities on the horizon could evaporate. Said Mr Diaz of Platts, “It would affect the whole value chain in energy if such a disruption happens.” › Doug Holtz-Eakin, president of the American Action Forum, sees possibility for even wider impact. “If [Mr Trump] pursues a NAFTA renegotiation, it would harm our relationship with Canada as well,” Mr Holtz-Eakin told TheStreet . “At the moment we have a fairly integrated North American energy supply system, and this would choose to fragment it.” Wind, solar and other forms of energy could take a hit as well, warned Mr Holtz-Eakin: It is important, he said, “not to think this is just a couple of oil companies.”

Oi l & gas What would a Donald Trump presidency mean for the US oil and gas sector? Mexico offers a bracing preview Ending a 75-year state monopoly, in 2013 Mexican President Enrique Peña Nieto proposed a series of reforms to trans- form his country’s energy sector, opening it up to foreign investment. The reforms became law in 2014. Since then, foreign investment has poured into Mexico “and the energy has flowed in both directions,” observed Emily Stewart, a staff writer for the New York-based digital financial media company TheStreet . She noted that many US-based energy companies have benefited. Taking advantage of Mexico’s shift from fuel oil toward natural gas as a power source, US energy companies have participated in auctions for Mexican oil contracts and cooperated with state-owned petroleum company Pemex to develop its oil holdings, increase production, and improve technology and infrastructure. But, wrote Ms Stewart recently, expert opinion suggests that all that may be in jeopardy if Donald Trump is elected the next president of the United States. Mexico is the second-largest trading partner the US has and, at $19bn, fossil fuels represent its fourth-largest export. Stephen Munro, a policy analyst with Bloomberg New Energy Finance , pointed out that, as a developing economy, Mexico has a far greater potential for growth than Canada. In the matter of energy exports, he told TheStreet , it represents “the single most important continental market that American energy firms have.” Ms Stewart stated it plainly: Mr Trump’s pledges to build a wall at the US-Mexico border, shut down immigration, and curtail or renegotiate the North American Free Trade Agreement (NAFTA) could have major implications for the American energy sector. (“Here’s How Trump’s Wall Could Block US-Mexico Gas and Oil Pipelines – Mexico’s liberalization of its energy sector has opened up numerous opportunities for business for US companies, but a President Trump could potentially roll that back,” 13 July) Alan Krupnick, senior fellow of the Washington-based independent and non-partisan Resources for the Future Center for Energy and Climate Economics, said that what Mr Trump fails to see is that his policies are “extremely short-sighted and without logic” and would work against the interests of North American companies active in Mexico. Chief among the companies with the most to lose under a Trump presidency are those that have built infrastructure to move natural gas from the US into the Mexican market. They include Kinder Morgan, NET Midstream, TransCanada and the Sempra Energy subsidiary IEnova.

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S EPTEMBER 2016