Rogelio Hernández Cázares, President, National Hydrocarbons Commission (CNH) • Interview

As the main guardian of national assets, CNH works to safeguard reserves and prevent them from being extracted faster than they can be replaced.

What is your vision for CNH?

The most important task for our administration will be the management of the fields granted in recent rounds and contribute to the national production of hydrocarbons. We have to be a facilitator and regulator at the same time. The market is excessively regulated, so we want to deregulate it to avoid complications for companies that want to meet the required standards. Mainly, we want to reduce the time it takes for regulatory processes and approvals. The commission has worked on this and must continue to improve. For example, there were approval processes that took 180 days that today only take 60 days. But we must reduce these times further. We will also carry out a process of improving regulations and coordinating processes with ASEA. We aim to be facilitators and allow companies to start producing in the short term the highest volume possible. Right now, five out of the 35 companies who won contracts in the rounds are already producing. We expect another five to start the extraction phase in 2020. We have not held any new bidding rounds, due to the policy implemented by the Secretary of Energy. Some 112 contracts were tendered previously, so we will not add any new ones in 2020. Once they start production, there will be more income from oil operations for the Fondo Mexicano del Petroleo (FMP), which will be a new source of income for federation. This will likely influence the decision of whether or not new bidding rounds will be held in the future.

What are the main plans for the Pemex exploration fields in 2020?

There are authorized plans for the 17 priority fields that maintain a stable production for Pemex. Most of the fields that Pemex is exploiting are in a declining phase and have surpassed the maximum curve of production. In order to maintain production levels, we need to start working these new fields urgently. These will enter a growth phase in 2020, and production will increase. In order to reach the goal for the end of the year, they will need to also work on other new fields.

In terms of extraction and exploration, in what ways is the oil and gas sector incorporating new technologies and more sustainable methods?

In terms of exploration, technology allows us to better estimate and find out if there is oil in a given location. 1P and 2P exist to determine the degree of likelihood to find oil in a certain area. There are satellite techniques and diverse seismic studies that help determine with higher certainty if there are hydrocarbons in place. In theory, this should reduce extraction and exploration costs, and reduce hydrocarbon prices in the long term. Technology helps the industry be more competitive. Projects that are currently in the exploration phase have a higher chance of finding wells than in the past; however, in the long term, the hydrocarbon industry will transition to gas because there are many investments to use gas to produce electricity, while also transitioning to renewable energies such as solar or wind.

What is the future of oil in the world’s broader energy transition?

It will depend on what the largest economies do. Eventually, we know that fossil fuels will stop being used because they are a limited resource. The US has said that we will use fuels until 2050, but there are some studies in Europe that say they will stop being used sooner. We have not reached the point where the world can function on renewable energies alone, but we eventually will. The current issues with solar and wind are that they are not available 24/7. Our role is to follow up on the current contracts with companies and Pemex’s production. With all of these contracts, we have information on how much each operator produces, which allows us to have a complete overview of the market. ✖

CNH manages 111 contracts and 396 Pemex entitlements