Mexico’s Impending Oil And Gas Boom Gets Oscar-Worthy Scolding

CREDIT: AP/ Rebecca Blackwell

Oscar-winning Mexican film director Alfonso Cuaron responds to a question during a press conference in Mexico City, Wednesday, April 30, 2014.

With Mexico’s entire energy sector on the verge of opening up to international entities for the first time since 1938 when the country nationalized the industry, it would seem that all eyes would be on the momentous reforms. But some prominent Mexicans are concerned that just the opposite is happening and that citizens aren’t paying enough attention to — or getting enough information about — the range of impacts the changes will have across a number of sectors, including the environment.

On Monday, this year’s Oscar-winning director for the film “Gravity,” Mexican Alfonso Cuarón, wrote an open letter to Mexican President Enrique Peña Nieto posing ten questions about how the reforms will be enacted. The questions, published as full-page ads in Mexican newspapers, call into question the motives of the world’s multinational oil companies and Mexico’s ability to manage their impending entrance into the country’s fossil fuel sector. Addressing economic, social, regulatory and corruption issues, the second and third questions focus on the environment:

2) What will be the specific effects on the environment with this huge increase in oil exploits? What measures will be taken to protect it and who will take responsibility in the case of spills or disasters?

3) Hydrocarbons are non-renewable and their effect on the environment is huge. Are there any plans to develop technologies and infrastructures for alternative energy in our country?

In the letter, Cuarón attributes his lack of information to a propagandist government campaign throughout the passing of the reforms over the last year and the accompanying lack of in-depth public discussion. “I am not informed because the government which you lead has not shared with me — with us Mexicans — key elements that are indispensable to understand the reach and the nature of these reforms,” he wrote.

Cuarón’s pleas did not go unheard. He is one of Mexico’s most famous contemporary artists, and upon his winning the Oscar in March, President Peña Nieto gave him personal congratulations. Then on Thursday night, Peña Nieto actually responded to Cuarón’s questions in a point-by-point, 5,000-word document that addresses each question at length.

Regarding environmental impacts, Peña Nieto said in part that the reforms “emphasized exploitation of resources in an environmentally responsible manner, minimizing foreseeable damages to the environment while at the same time ensuring the ability to respond to any accident or unforeseen event,” according to Google Translate.

And for their impact on alternative energy sources, he said there are “concrete plans to develop technologies and alternative energy infrastructure, and they are already being implemented. In addition, the initiative for secondary reform legislation includes various measures to promote the use of clean energy and renewable energy.”

Latin America’s largest solar farm is currently under construction in Mexico, and the country has substantial solar- and wind-power resources.

Peña Nieto’s responses did not come easy because in many ways the answers, just like the outcomes of the reforms and the secondary legislation, are yet to be written.

On Wednesday, the Mexican government — including key figures like Energy Secretary Pedro Joaquin Coldwell to whom Cuarón targeted his letter — unveiled proposed rules for the opening of the oil and gas sector. While the broad reforms passed in December, the true nature of the changes will be written in the secondary legislation now being debated.

“The bills appeared to be aimed at drawing a large amount of investment quickly,” reported the Wall Street Journal, saying they looked “designed to ramp up the private production of oil and gas quickly by offering contract terms that are more attractive than in other countries such as Brazil, which saw many major oil companies take a pass on its latest bidding round last year.”

Houston-based oil analyst George Baker told the WSJ that his “first impression is that they have been listening to voices outside Mexico and creating something that offers a package of incentives and assurances to the global oil industry.”

While the global oil industry may feel assured about quick and easy access to oil reserves, especially off the coast in the Gulf of Mexico, the people of Mexico remain less convinced of the domestic benefits, such as cheaper gas and electricity rates. Mexicans pay very high gas and electricity rates, and as part of the reforms government officials are promising to bring down costs within two years.

According to a survey by the polling firm Demotecnia, around 42 percent of Mexicans oppose the participation of private companies in the oil market. This is in part because the oil industry, including state-owned PEMEX, has been a symbol of national pride for over 70 years and also partially over concerns surrounding the government’s ability to manage the environmental and corruption challenges as expressed by Cuarón.

The reforms are also opposed by the main leftist political group, the Party of the Democratic Revolution (PRD). Peña Nieto is head of the ruling Institutional Revolutionary Party (PRI).

In March, oil and gas companies filed bids worth $1.1 billion for drilling rights in the Gulf of Mexico. As coastal communities and wildlife continue to recover from the Deepwater Horizon disaster four years ago, this is a reminder of the high risks along the treacherous road ahead for the offshore drilling industry.

While more than half of Mexico’s oil and gas reserves are located in the Gulf of Mexico, the rest is mostly inland — where exploration is also due to take off as the country is yet to experience the hydraulic fracturing going on just across the border in Texas. The Eagle Ford shale, which has helped fuel Texas’ boom, extends well into Mexico. Until now the only thing preventing it from being fracked was an international border. However, with the law of the land in Mexico about to change, there will likely be closer to the more than 5,000 wells sunk on the Texas side than the current 25 or so south of the border.