A Look in the Energy Issues in the U.S. and Mexico

Transcription

1 A Look in the Energy Issues in the U.S. and Mexico What could we expect in this key aspect of our bilateral relationship? Raul Felix Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a partner means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an office means an office of any such law firm. What is the importance of Energy for Building a North American Community? In the words of former Canadian Foreign Minister Lloyd Axworthy: How do you deal with the artificial political boundaries drawn in the North American continent? and How could we build a North American community? At this stage we are not talking of an economic integration similar to European Union. However we need to acknowledge the fact that both the Canadian and Mexican economies have become interwoven to that of the U.S Baker & McKenzie 2

2 What are our federal governments saying? The Joint Declaration in Montebello, Quebec, Canada in the framework of the North Americans Leader s summit Sustainable Energy and the Environment The further development of clean and sustainable energy is critical to reduce the effects of climate change and air pollution, while fuelling the North American economy. We support an integrated approach to climate change, energy security and economic development, and support the development and deployment of clean energy technologies. Cooperation among our major economies on a range of policy tools and sectoral approaches will advance these objectives. In particular, we ask our ministers to explore ways to cooperate on national auto fuel efficiency standards. We also ask our ministers to develop projects under the newly signed energy science and technology agreement, cooperate on moving new technologies to the marketplace and collaborate on energy efficiency Baker & McKenzie 3 Different perspective on the same energy issue? Industry and Final Users Commodity Basic input in their industrial process (a key element to remain competitive). Remains vigilant of regional variations in the price for the short and medium term. Producers participate in a market that limits the trade of energy output across borders. Governments National Security Policy Part of a long term policy to assure growth and independence from less reliable energy suppliers. Develops policies to assure power availability in the short and long term. Set the rules and policies to participate in national markets and to promote or restrict trade between countries Baker & McKenzie 4

3 Energy Output & Business Opportunities Final Users & Governments do share the need to have reliable sources of energy. A regional approach between trading partners would allow business and our communities to cooperate in terms of energy output/input and use more efficiently the infrastructure developed across the region. In several instances the transmission costs associated with the delivery of power in certain regions would be more efficient if governments would incentive regional projects under common policies and a more simplified licensing process Baker & McKenzie 5 Overview of the Mexican Energy Market 2006 Baker & McKenzie 6

4 Investment in the Natural Gas Industry EXPLORATION EXPLOITATION STORAGE TRANSPORTATION DISTRIBUTION FINAL USERS PEMEX Private Investment 2006 Baker & McKenzie 7 Natural gas infrastructure Pacific Ocean Gulf of Mexico International interconnection Pipeline Potential pipeline LNG terminal LNG terminal under construction LNG terminal with interested investors Potential LNG terminal Potential underground storage Source: Sener with data from CRE investment promotion office Julio Valle Peña w w w. e n e r g i a. g o b. m x 8

5 Investment in the Power Sector Definition by Exception. Generation Transmission Distribution \ Sale Public Utility, Nuclear Power. National Electric System (SEN). Cogeneration, Selfsupply, Small Production, PIE, Export/Import Emergencies. Different to the SEN Activities reserved to the Nation Activities allowed to the private investment 2006 Baker & McKenzie 9 Mexico-U.S. Border Power Interconnections 2006 Baker & McKenzie 10

6 Power supply vs. Technology 70 [GW ] Not defined 60 Geothermal and Wind Hydro 30 Combined cycle 20 Steam Dual Gas turbine Nuclear Coal Source: Sener, Prospectiva del sector eléctrico GW: Gigawatts investment promotion office Julio Valle Peña w w w. e n e r g i a. g o b. m x 11 Power Maquiladoras Combined Cycle Gas-Fired Plants lead this cross border exchange. Purchase Gas US Sale in US Produce Electricity Mexico Sale in Mexico 2006 Baker & McKenzie 12

7 Strategic Consideration for final users - Private Investors will look for alternatives to satisfy the growing energy demands and to take advantages of business opportunities: - LNG facilities to diversify gas suppliers. - Cryogenic land terminals. - Importation and Exportation of Electricity. - Exportation of Power generated from renewable energy sources. - In the near future we will have: - Bio-fuels processing facilities (U.S.) - Energy crops (Mexico), Forestry By-products (Canada) Baker & McKenzie 13 Strategic Consideration for final users - Industry will look for the most cost efficient alternatives to satisfy its energy needs. - The incorporation of externalities due to the enactment of policies such as green house emissions restrictions (carbon tax/ cap & trade systems) will have an impact on the power generation industry that will be transferred to the final users. - Enactment of policies that create incentives for the diversification of energy sources: a) Subsidies for the development of bio-fuels, b) Mandatory supply of power generation from renewable energy sources, c) Carbon Tax, d) GHG Cap & Trade systems, e) Fuel efficiency and Energy Saving measures Baker & McKenzie 14

8 Regardless of what is your attitude towards climate change: T.J. Rodgers: CEO of Cypress Semiconductor and major investor on the tenth largest solar generation company (Sun Power): The group that is the most vehement about global warming represents to me some of the worst people of the world, I dislike them so much it s difficult to listen to what they say objectively. Or like the Nobel Committee that cited the Panel on Climate Change: for two decades of scientific reports that have created an everbroader informed consensus about the connection between human activities and global warming." 2006 Baker & McKenzie 15 Strategic Consideration for final users How would large emitters of GHG comply with a fragmented regulatory market? What would be the economic impact on the competitiveness of the North American region under a carbon constrained market? How would North American companies could coupe with Carbon Neutral requirements imposed by the EU? Would it be preferable to have several state regulatory regimes to offset GHG? How about a national system? How feasible would it be to have a regional approach to GHG? 2006 Baker & McKenzie 16

9 The Global Emissions Trading Market CCX, RGGI California? Australia? US Federal system? Kyoto CDM / JI projects CER/ERU forward stream supply via ERPAs Spot market will emerge when sufficient volume has been issued and made available Large Final Emitters Canada Keidanren Voluntary Agreement Japan EU25 EU ETS AAU supply via GIS? Russia, Ukraine, Former Eastern Bloc countries International Transaction Log, European Community Transaction Log, National Accounts 2006 Baker & McKenzie 17 Future Directions Kyoto will continue to be a critical part of global trading regime. EUETS is a rolling scheme and success will depend upon allocations. Increase of regional schemes with focus on California, US states, US federally, Australian states and NETS, Canada? Voluntary markets- huge growth? Linking will be the key with CDM as the base for a global offset 2006 Baker & McKenzie 18

10 Baker & McKenzie 19 Stern Report Strong outlook for global emissions trading. EUETS has potential to grow 2.5 times if expanded to include the power and industrial sectors of Australia, Canada, EU, Japan, USA. Inclusion of the top 20 global emitters would expand EUETS by 5 times = between US $87 billion and US $350 billion Baker & McKenzie 20

11 Questions? Raul Felix Juarez office Baker & McKenzie 21