You are on page 1of 19

http://www.worldenergy.org/documents/p001391.

doc
STRATEGIES ! "I#ERSI!I$ATI% I% REG&'ATE" E%ERG( )AR*ETS:
T+E %AT&RA' GAS A%" E'E$TRI$ ,-ER I%"&STRIES I% )E.I$
1
STRAT/GIES "E "I#ERSI!I$ATI% "A%S "ES )AR$+/S /%ERG/TI0&ES
R/G'E)E%T/S: 'ES I%"&STRIES "& GA1 %AT&RE' ET /'E$TRI0&E A&
)E.I0&E
Gerardo Bazn Gonzlez*, Alberto Elizalde Baltierra** and Juan Eibenschutz Hartman***
* Advisor, General Director Office, Petrleos !e"icanos
**Anal#st, $or%orate Direction for O%erations, Petrleos !e"icanos
*** General Director, &ational $ommission of &uclear 'afet# and 'afe(uards
A2str3ct
)he aim of this *or+ is to sho* a structured and s#stematic a%%roach to anal#ze the strate(ies
of diversification underta+en b# the 'tate,o*ned com%anies Petrleos Mexicanos and
Comisin Federal de Electricidad, durin( the %eriod -./0,1223, in the !e"ican ener(#
mar+et that has been stron(l# dominated b# the 'tate control4 5urthermore, *e e"%lore the
future of these strate(ies b# usin( a 'tren(thens, 6ea+nesses, O%%ortunities and )hreats
7'6O)8 matri"4 )his anal#ze also include chan(es in re(ulation that should ha%%en in order
to consolidated the %ro%osed strate(ies4
R4sum4
9:ob;ectif de ce travail est de montrer une a%%roche structur<e e s#st<mati=ue %our anal#ser
les strat<(ies de diversification suivies %ar les com%a(nies %ubli=ues Petrleos Mexicanos et
Comisin Federal de Electricidad, %endant la %<riode -./0,1223, dans le march< <ner(<ti=ue
me"icain =ui a <t< fortement domin< %ar le control de l:>tat4 De %lus, nous e"%lorons l:avenir
de ces strat<(ies en utilisant la matrice de 5orces, 5aiblesses, O%%ortunit<s e !enaces
755O!84 $ette anal#se inclut aussi les chan(ements dans la r<(ulation =ue devraient avoir
lieu afin de consolider les strat<(ies %ro%os<es4
1. Introduct5on
Historicall#, !e"ico:s ener(# sector has been divided into t*o s%ecific and *ell defined
se(ments? h#drocarbons and electricit#4 'ince the nationalization of !e"ico:s ener(#
resources 7-./0 for h#drocarbons and -.32 for electricit#8 both mar+ets had been dominated
and controlled b# three decentralized %ublic entities of the !e"ican Government? Petrleos
Mexicanos 7PE!E@8 in the oil and (as industriesA Comisin Federal de Electricidad 7$5E8
1
and Luz y Fuerza del Centro 795$8
/
in the electricit# mar+et4 Ho*ever, until the earl# .2:s
there had been small e"ce%tions to the 'tate control in the ener(# mar+ets, such as %rivate
investments in natural (as distribution and co(eneration and self,su%%l# %o*er %lants4 After a
-
DraftBversion4 Cncom%leted En(lish revision4
1
5or sim%lification %ur%oses, *hen *e refer to $5E it also considers 95$4
/
95$:s activities includes %o*er (eneration, transmission and, the most im%ortant, distribution in the central
re(ion of the countr#4
set of ener(# reforms, ne* %rivate com%anies have entered the %o*er (eneration se(ment
since -..1, and the natural (as do*nstream activities since -..D4
Petrleos Mexicanos is the onl# le(al entit# em%o*ered to o*n %ro%ert# and carr# on
business in the e"%loration, e"%loitation and transformation of h#drocarbons 7crude oil and
natural (as8 *ithin !e"ican territor#4 O%erationall#, Peme" is divided in one cor%orate and
four decentralized subsidiar# entities of technical, industrial and commercial nature, *ith their
o*n e=uit# and le(al %ersonalit#? Pemex Exploracin y Produccin 7Peme" E"%loration and
Production8, Pemex Refinacin 7Peme" Eefinin(8, Pemex Gas y Petroqumica !sica 7Peme"
Gas and Basic Petrochemicals8 and Pemex Petroqumica 7Peme" Petrochemicals84 Fn terms of
oil and natural (as %roduction, Peme" is *orld*ide ran+ed /
rd
and --
th
res%ectivel#4 Fn the
classification of to% %etroleum com%anies b# sales, PE!E@ is situated in the G
th
%lace4
$5E is the electric com%an# entitled for the (eneration, distribution and commercialization of
electricit# throu(hout the countr#4
Even thou(h that the commercial and o%erational activities of both com%anies had been
limited to the nature of their business, in man# cases the divisor line bet*een their activities is
unclear4 5urthermore, as final consumers demand centralized ener(# services and technolo(#
allo*s satisf#in( ener(# needs in a centralized form, the limits of the electric and
h#drocarbons mar+ets is fuzz# and its necessit# to ada%t to ne* strate(ies becomes (reater4 Fn
this sense, PE!E@ has been %artici%atin( since the -.H2:s in the %o*er (eneration sector,
*ith the o%eration of self,su%%l# and co(eneration %lants, mean*hile the $5E has o%erated in
the %ast natural (as distribution s#stems and more recentl#, $5E has entered in the li=uefied
natural (as 79&G8 business *ith !e"ico4
)hrou(hout the develo%ment of this *or+, *e realized that there is no formal literature, at
least for %ublic usa(e, that a%%roaches the anal#sis of future ener(# strate(ies for
diversification in the !e"ican ener(# sector4
)he aim of this *or+ is to sho* a structured and s#stematic a%%roach to anal#ze the strate(ies
of diversification to be underta+en b# Petrleos !e"icanos and the Comisin Federal de
Electricidad durin( the %eriod -./0,1223, in a ener(# mar+et dominated b# a stron( 'tate
control4 5urthermore, *e e"%lore the future of these strate(ies, and the chan(es in re(ulation
that should ha%%en in order to consolidate them or to create ne* ones4
Fn the first section of this %a%er 7section 18, *e revie* and anal#ze se%aratel# the re(ulator#
frame*or+ for the electric %o*er and natural (as industries4 Fn the follo*in( section, *e stud#
the strate(ies follo*ed b# the t*o main %la#ers of the ener(# sector in !e"ico, PE!E@ and
$5E, es%eciall# *hen chan(es in re(ulation have occurred4 5inall#, in section H, *e anal#ze
the %ast, %resent and future trends of $5E and PE!E@: strate(ies of diversification, b#
develo%in( a stren(ths, *ea+nesses, o%%ortunities and threats matri"4
6. Regul3tory !r3mewor7
Fn (eneral terms, the !e"ican ener(# sector is re(ulated b# t*o differentiated re(ulator#
s#stemsA one for the electric %o*er industr# and another for natural (as, *hich in recent #ears
had been differentiated from crude oil and the h#drocarbons industr#4

1
)hese re(ulations had been develo%ed in !e"ico b# the Ee(ulator# Ener(# $ommission, *ho
has re(ulator# attributions in both industries, es%eciall# in sub;ects that ta+e into account
%rivate %artici%ation4
As follo*s *e *ill sho* the s%ecifics of each industr#4
6.1 Electr5c ,ower Industry
)he first electric %o*er s#stems for %ublic service a%%eared in !e"ico at the end of the @F@
centur# and its develo%ment *as underta+en b# %rivate com%anies under a fairl# control of
the 'tate4
Fn -./G, the former President 9zaro $rdenas created the Comisin Federal de Electricidad
7$5E8 as a state,o*n com%an# in order to or(anize and o%erate a national %o*er (rid *ith
(eneration, transmission and distribution activities4 5rom -./G to -.32, the $5E o%erated in
the countr# *ith t*o others forei(n %rivate com%anies under the re(ulation of the Electrical
Fndustr# 9a* enacted in December -./0 7)able -84
T32le 1. +5story o8 the Electr5c3l Industry Regul3t5on 5n )e95co: 193;<Tod3y.
'3w or Act St3rt5ng d3te End5ng d3te It cons5ders
sel8<supply
pl3nts
It cons5ders
cogener3t5on
d588erent 8rom sel8<
supply pl3nts
Electrical Fndustr# 9a* December -./0 December -.GD Ies &o
Act of the Electrical Fndustr# 9a* Au(ust -.H2 October -.HD Ies &o
Act of the Electrical Fndustr# 9a* October -.HD !a# -../ Ies &o
Electrical Ener(# Public 'ervice
9a*
December -.GD Fn force Ies Ies*
Act of the Electrical Ener(# Public
'ervice 9a* in 'elf,'u%%l#
!atters
!a# -..- !a# -../ Ies &o
Act of the Electrical Ener(# Public
'ervice 9a*
!a# -../ Fn force Ies Ies
" From #ecem$er %&&'(
)ource* Elizalde +%&&,-
)he Electrical Fndustr# 9a* re(ulated, amon( other activities, the concessions and %ermits to
develo% self,su%%l# %o*er %lants in the industrial sector4 )he first %ermit of this +ind *as
(ranted in -.H14 )he aim of these %lants *as to %rovide more reliabilit# for the electric
su%%l#, instead of see+in( ener(# efficienc# or %roductivit# %ur%oses4 )he raisin( availabilit#
of %o*er su%%lied b# (rid constrained its initial develo%ment4
Fn -.32, 11 #ears after the nationalization of the oil and (as industr#, the former President
Adolfo 9%ez !ateos nationalized the electric %o*er su%%l# b# means of addin( a %ara(ra%h
to the Article 1G of !e"ico:s Political $onstitution as follo*s? J$orres%onds e"clusivel# to
the &ation (eneratin(, transmittin(, distributin( and su%%l#in( electricit# for the %ublic
service %rovisionKL4
/
Fn -.GD, the Electrical Ener(# Public 'ervice 9a* re%laced the Electrical Fndustr# 9a* 7)able
-84 Fts Article /
rd
dictated that the self,su%%l# %lants underta+en to satisf# %articular interest
*ere not considered as %ublic service su%%l#4 6hile the Article /3
th
established as necessar#
condition to (rant self,su%%l# %ermits the im%ossibilit# or inconvenience of the $5E (rid to
%rovide the service4 Fn -.0/, the $on(ress modified the Electrical Ener(# Public 'ervice 9a*
and facilitated the develo%ment of self,su%%l# %ro;ects4 )he onl# condition for (rantin(
%ermits to self,su%%l# %lants *ere that this +ind of %ro;ects should have increased the ener(#
efficienc# of the s#stem, for instance b# the simultaneous %roduction of electricit# and steam
7co(eneration8 or the utilization of *aste (ases or fuels (enerated in an industrial %rocess4
An# sur%lus of electricit# %roduction had to be sold to the $5E4 )hese chan(es encoura(ed
the construction of self,su%%l# %ro;ects *ith co(eneration schemas in different industrial
sectors, es%eciall# in PE!E@4 Bet*een -.0H and -.00 *ere installed about -,H22 !6 in
PE!E@:s facilities li+e refineries, (as %rocessin( and %etrochemical com%le"es due to
chan(es in la* and also b# the hi(h (ro*th e"%erimented b# the oil and (as activities durin(
the middle of the 02:s 75i(ure -84 )he electric %lants in oil facilities served to (ive them a
more reliable %o*er service that the (rid *as not able to %rovide4
2
D22
-222
-D22
1222
1D22
-.H1 -.H/ -.HH -.HD -.32 -.0H -.0D -.03 -.00 -..H 122D
Iears
F
n
s
t
a
l
l
e
d

c
a
%
a
c
i
t
#

7
!
6
8
,E)E.=s Electr5c ,ower Inst3lled $3p3c5ty: 19>6<600?
-.0/ amendments to
the Electrical Ener(#
Public 'ervice 9a*
and (ro*th of oil and
(as activities in the
countr#
)ource* ur.os +%&&/- and PEME01s fi.ures(
!5gure 1. ,E)E.=s ,ower Electr5c Inst3lled $3p3c5ty: 19>6<600?.
)he -..1 amendments to the Electrical Ener(# Public 'ervice 9a*, and its re(ulations,
created a si(nificant o%enin( of the (eneration se(ment to %rivate com%anies in order to
attract the additional investment needed to ensure the availabilit# and su%%l# of electricit#4
Accordin( to -..1 reforms, there are toda# four +inds of %rivate %artici%ation in the electric
%o*er (eneration? -8 self,su%%l#, 18 co(eneration, /8 small,scale %roduction and H8
inde%endent %roduction4
H
-4 'elf,su%%l#, Generation of electricit# for #our o*n usa(e, under the follo*in( conditions?
i4 )he electricit# comes from %lants intended to meet the needs of a set of co,o*ners or
%artners, and
ii4 )he %ermit holder a(rees e"%ressl# to use the electric %o*er solel# *ithin the
%erimeters authorized b# the 'ecretariat4
14 $o(eneration is understood to be?
i4 Production of electric %o*er to(ether *ith steam or some other t#%e or secondar#
thermal ener(# or bothA
ii4 Direct or indirect %roduction of electric %o*er from thermal ener(# not utilized in the
%rocessA or
iii4 Direct or indirect %roduction of electric %o*er usin( fuel %roduced in the %rocesses4
/4 'mall,scale %roduction is understood to mean the (eneration of electric %o*er intended for?
i4 'ale to the $5E of all electric %o*er %roduced4 )he %ro;ect ma# not have a total
ca%acit# of more than /2 !6 in an area determined b# the 'ecretariat of Ener(#4
ii4 'elf,su%%l# for small rural communities or isolated areas lac+in( in electric %o*er
service, in *hich case the %ro;ects ma# nor e"ceed - !6A and
iii4 E"%orts u% to a ma"imum limit of /2 !64
H4 Fnde%endent %roduction is the (eneration of electric %o*er %rovided b# a %lant *ith a
ca%acit# of more than /2 !6, intended e"clusivel# for sale to the $5E or for e"%ort4
)he Ener(# Ee(ulator# $ommission 7$EE,Comsin Re.uladora de Ener.a8 is char(ed *ith
(rantin( %ermits for electric %o*er (eneration, im%ortation or e"%ortation for an
indeterminate %eriod4 Permits for inde%endent %o*er %roducers are (ranted for a rene*able
%eriod of /2 #ears4
Fn Januar# 1223, the !e"ican Administration %ublished, in the 5ederation Official Gazette, a
Decree that modifies the Article 3
th
of the Ee(ulator# 9a* of the Article 1G
th
in Oil !atters of
!e"ico:s Political $onstitution, and the Article /rd of Petrleos !e"icanos and 'ubsidiar#
Affiliates: Or(anic 9a*4 )his Decree establishes ne* attributions to PE!E@ to %artici%ate in
the %o*er electric (eneration se(ment *ith co(eneration s#stems in order to achieve its
electrical self,sufficienc# or to sale %o*er to the (rid, as follo*s?
JPetrleos !e"icanos, its 'ubsidiar# Affiliates and $om%anies *ill be able to co(enerate
electric %o*er and to sale sur%lus of %roduction to the Comisin Federal de Electricidad and
Luz y Fuerza del Centro, b# means of a(reements bet*een them4
Fn the Pro;ect of 5ederation:s Bud(et, the financial resources and %ublic investment schemas
for co(eneration %ro;ects in PE!E@ *ill be discussed, anal#zed, and a%%roved b# the
De%ut# $hamber4 )he schemas of electric %o*er sales to $5E and 95$ *ill be also
discussed and a%%rovedL4
6.6 %3tur3l G3s Industry
Fn -./0, the former !e"ican President 9zaro $rdenas nationalized the h#drocarbons
industr#, thus, oil and natural (as %roduction *ere a res%onsibilit# of the 'tate, throu(hout the
D
'tate,o*ned com%an# Petrleos !e"icanos4 )his scheme of h#drocarbons %ro%ert# of the
state continues until these da#s4
Ho*ever, it *as until -.DG that the natural (as industr# emer(ed in !e"ico due to the
develo%ment of the %etrochemical industr#, *hich differentl# form other countries, *as based
on methane, and located *ithin a limited area in the northeast of the countr#, b# the Gulf of
!e"ico4 Before -.DG, natural (as *as not a relevant %roduct in the ener(# scene, and it could
be said that b# that time, natural (as *as considered a b#,%roduct of crude oil4
A fe* #ears latter, durin( the earl# si"ties, and still *ith an emer(in( infrastructure, a fe*
distribution and commercialization %ro;ects *ere held, es%eciall# in the north of the countr#4
Ho*ever, these %ro;ects *ere inci%ient to the ener(# mar+et and limited from the ver#
be(innin(4 Ft is *orth mentionin(, that one of these natural (as distribution %ro;ects *as
develo%ed b# $5E, the 'tate,o*ned com%an# in char(e of the electricit# business 75i(ure 184
Number of Customers
570,841
11
5,201
7,982
12,994
13,406
15,933
141,000
49,933
350
321,000
20
Total
Fracc. Ind. Norte
Ca. Gas cananea
Dst. Gas !altllo
"#ere$ Gas Co.
Ca. Nal. de Gas
%e&sol
D'ana(e) and D'a*ro +,e(e)-
Gas. Nat. de "#are$
Ca. .e). De Gas
CF/
GI.!0
)ource* 2E3, %&&4(
!5gure 6. %3tur3l G3s "5str52ut5on 5n )e95co: 199>
6ith the (ro*th of the %etrochemical industr#, the natural (as industr# develo%ed ra%idl# and
became an im%ortant %art of the ener(# industr# in the countr#4 Ho*ever, des%ite of its
im%ortance of the natural (as in the ener(# scene of the countr#, its develo%ment and its
re(ulation *as still directl# related to the crude oil industr# until the earl# nineties4
Ft *as not until -..D that the activities related to natural (as *ere differentiated from the
crude oil industr#4 Durin( that time, the !e"ican (overnment ado%ted an ener(# %olic# that
encoura(ed the use of natural (as, follo*in( environmental and (eo%olitical trends4 Fn
(eneral terms, the ener(# %olic# aim *as to %romote a chan(e in the %attern of use of
industrial fuels throu(h a reduction in the use of fuel oil, substitutin( it *ith natural (as4
3
Fn -..D, in order to co%e *ith the (ro*in( demand of natural (as and the limited resources of
the !e"ican (overnment, the natural (as sector *as reformed, allo*in( the %artici%ation of
ne* %la#ers into the business4 )he develo%ed reforms *ere built under three main factors?
)he !a# -..D amendment to the Ee(ulator# 9a* of $onstitutional Article 1G on
Petroleum, restrictin( PE!E@:s mono%ol# to natural (as e"%loration and %roduction,
(atherin( first,hand sales and basic %etrochemicals4
)he October -..D enactment of the Ee(ulatin( Ener(# $ommission 7$EE8 enablin(
le(islation *hich stren(thened the $EE and e"tended its remit to include natural (asA
and
)he &ovember -..D basic le(islation on natural (as re(ulation, under *hich the $EE
is assi(ned res%onsibilit# for im%lementation4
Previous to the amendments to the Ee(ulator# 9a* of $onstitutional Article 1G on Petroleum,
all the e"%loitation, %rocessin(, develo%ment and o%eration of natural (as %i%elines, includin(
natural (as stora(e and commercialization, *ere activities reserved to the 'tate4 )hus, the
ne* re(ulation %romoted the entrance of ne* %artici%ants in front end activities such as
stora(e, trans%ortation, distribution and commercialization 7)able 184
T32le 6. +5story o8 the %3tur3l G3s Regul3t5on 5n )e95co: 193;<Tod3y
'3w or Act "3tes E9plor3t5on:
product5on 3nd
process5ng 3ct5@5t5es
Stor3ge: tr3nsport3t5on
3nd commerc53l5A3t5on
3ct5@5t5es
"5str52ut5on
3ct5@5t5es
Ee(ulator# 9a* of
$onstitutional Article 1G on
Petroleum
-./0 'tate 'tate 'tate B Private
Fnvestment
Act of the &atural Gas
Fndustr# 9a*
-..D 'tate 'tate B Private Fnvestment 'tate B Private
Fnvestment
Act of Prices and )ariffs of
trans%ort, stora(e and
distribution on natural (as
-..3 'tate 'tate B Private Fnvestment 'tate B Private
Fnvestment
3. $h3nges 5n Regul3t5on 3nd Str3teg5es o8 the %3tur3l G3s 3nd Electr5c ,ower
Industry
3.1 Electr5c ,ower Industry
)he $5E and t*o forei(n %rivate com%anies e"%anded the electric %o*er su%%l# from -./G to
-.324 Cnder a more nationalistic vision, the $5E and 95$ su%%lied, as le(al mandate, the
risin( electric demand for more than /2 #ears the bet*een the 32:s and the earl# .2:s 7)able
/84 PE!E@ and other industrials 7iron and steel, su(ar, %a%er8 have successfull# %rovided the
electric %o*er to its o*n facilities *ith local %o*er %lants4 )he -.0/ chan(es in the la*
encoura(ed a more efficient su%%l# for the industrial sector4 &e* forei(n %rivate com%anies
entered into the (eneration mar+et since the -..1 reforms in order to com%lement the $5E
and 95$:s efforts for e"%andin( the service in the *hole countr#4 Because of the e"istence of
a sin(le bu#er mar+et in the (eneration se(ment and $5E and 95$:s mono%ol# in
G
transmission, distribution and mar+etin( activities, the com%etitive forces are not %la#in( into
the mar+et4
T32le 3. Regul3t5on: )35n ,l3yers 3nd 5ts Str3teg5es 5n the )e95c3n Electr5c Sector:
193B<600C.
,er5od $h3nges 5n
regul3t5on
Str3teg5es undert37en )35n pl3yers 5n
the gener3t5on
segment
$!E 3nd '!$ ,E)E.
-./G,-.32 -./G? $reation of the
$5E
-.32? &ationalization
of the electric %o*er
su%%l#
)o e"%and the
electric %o*er
service %rovided
b# the (rid
)o install ver# small
%o*er %lants for the
im%ossibilit# or
inconvenience of the
$5E (rid to %rovide
the service
)he $5E and t*o
forei(n %rivate
com%anies
-.32,-.0/ -.32? &ationalization
of the electric %o*er
su%%l#
-.0/? $han(es in the
Electrical Ener(#
Public 'ervice 9a*
)o e"%and the
electric %o*er
service %rovided
b# the (rid
)o install ver# small
%o*er %lants for the
im%ossibilit# or
inconvenience of the
$5E (rid to %rovide
the service
)he $5E and 95$
-.0/,-..1 -.0/ and -..1?
$han(es in the
Electrical Ener(#
Public 'ervice 9a*
)o e"%and the
electric %o*er
service %rovided
b# the (rid
)o install local %o*er
%lants to ensure the
reliable %o*er su%%l#
to ne* oil and (as
%rocessin( facilities
and to increase
ener(# efficienc# b#
means of
co(eneration %lants
li+e in refineries4
)he $5E, 95$,
PE!E@ and other
industrials
-..1,1223 -..1? $han(es in the
Electrical Ener(#
Public 'ervice 9a*
1223? $han(es in the
Petrleos !e"icanos
and 'ubsidiar#
Affiliates: Or(anic
9a*
)o e"%and the
electric %o*er
service %rovided
b# the (rid and to
construct onl#
nuclear, h#dro and
(eothermal %o*er
%lants4
)o install local %o*er
%lants to ensure the
reliable %o*er su%%l#
to ne* oil and (as
%rocessin( facilities
and to increase
ener(# efficienc# b#
means of
co(eneration %lants
li+e in refineries4
)he $5E, 95$,
Fnde%endent
Po*er Producers
7Fberdrola, Cnin
5enosa, Electricit<
de 5rance,
)ransalta, others8,
PE!E@ and other
industrials
3.6 %3tur3l G3s Industry
6ith the nationalization of the h#drocarbons industr# in -./0, the onl# %la#er in the mar+et
*as PE!E@ 7)able H84 Cntil -..D, the %rivate com%anies onl# %artici%ated in the distribution
0
chain, *ith the e"ce%tion of a fe* small com%anies 7includin( $5E8 *ho distributed (as,
es%eciall# in the north of the countr#4 After -..D, a (ro*in( number of %rivate com%anies
have been develo%in( trans%ortation and distribution %i%elines throu(hout the countr#4
5urthermore, a fe* %rivate com%anies have been develo%in( a fe* 9&G re(asification
terminals in the Gulf of !e"ico and in the Pacific Ocean4 Fn this sense, $5E has (iven the
first ste%s into the natural (as mar+et, b# buildin( ventures *ith some of the 9&G develo%ers4
T32le >. Regul3t5on: )35n ,l3yers 3nd the5rs Str3teg5es 5n the )e95c3n %3tur3l G3s
Industry: 193;<600C.
,er5od $h3nges 5n
regul3t5on
Str3teg5es undert37en )35n pl3yers
,E)E. $!E ,roduct5on Tr3nsport3t5on
3nd
commerc53l5A3t5on
"5str52ut5on
-./0,
-..D
-./0?
&ationalizatio
n of the
h#drocarbons
industr#
-..D? O%enin(
of do*nstream
(as activities
E"%lore,
%roduce, %rocess,
trans%ort,
commercialize
and distribute
natural (as
Distribute
natural (as in the
metro%olitan
zone of
!onterre#
PE!E@ PE!E@ PE!E@ and
ten 9ocal
Distribution
$om%anies
-..D,
toda#
-..D? O%enin(
of do*nstream
(as activities
E"%lore,
%roduce, %rocess,
trans%ort, and
commercialize
natural (as4
Abandon (as
distribution
business4
Abandon (as
distribution
business4
Enter the
commercializatio
n se(ment in
alliance *ith
9&G develo%ers4
PE!E@ PE!E@, $5E,
%rivate %i%elines
and 9&G
develo%ers4
!ore than 12
%rivate 9ocal
Distribution
$om%anies
>. Str3teg5es o8 "5@ers585c3t5on
As *e have seen, the recent re(ulator# chan(es have settled the bases for ne* strate(ies of
diversification in the ener(# scene in !e"ico, es%eciall# for the t*o state,o*ned com%anies,
PE!E@ and $5E4
On the one hand, $5E has decided to diversif# its %rocesses on the u%stream, throu(h the
incor%oration of ne* su%%liers on its %roduction chain, leavin( behind an inci%ient natural (as
distribution business4 )hus, $5E see+s to end u% *ith the total de%endenc# of PE!E@, and
been able to develo% ne* %o*er (eneration %ro;ects, based on ne* su%%lies of natural (as
75i(ure / and H84
On the other hand, PE!E@ has decided to diversif# its business, in order to reduce costs and
use more efficientl# the ener(# involved in its %roduction %rocesses 75i(ure / and H84
.
)herefore, both diversification strate(ies res%ond to t*o com%letel# different needs4
Ho*ever, the futures diversification strate(ies of both com%anies *ill remain de%endent in its
re(ulation frame*or+s, rather than on the actual business o%%ortunities4
Electric Power
Generation
Transmission and
distribution
Crude oil and natural gas
exploration, exploitation,
processing, storage,
transport and
commercialization
End Users
Natural gas
distribution
Electricity Self
supply and
cogeneration plants
Cr#de 1l
2et and assocated
nat#ral 'as
Nat#ral Gas
1l &rod#cts and &etroc3e(cals
/lectrct4
/lectrct4
1t3er &r(ar4
ener'es
Nat#ral Gas
F#el ol,
nat#ral 'as
C!E"s core business acti#ities
PE$E%"s core business acti#ities
&i#ersification strategies
Electric Power
Generation
Transmission and
distribution
Crude oil and natural gas
exploration, exploitation,
processing, storage,
transport and
commercialization
End Users
Natural gas
distribution
Electricity Self
supply and
cogeneration plants
Cr#de 1l
2et and assocated
nat#ral 'as
Nat#ral Gas
1l &rod#cts and &etroc3e(cals
/lectrct4
/lectrct4
1t3er &r(ar4
ener'es
Nat#ral Gas
F#el ol,
nat#ral 'as
C!E"s core business acti#ities
PE$E%"s core business acti#ities
&i#ersification strategies
!5gure 3. $!E 3nd ,E)E.=s str3teg5es o8 d5@ers585c3t5on 5n the p3st
-2
Electric Power
Generation
Transmission and
distribution
Crude oil and natural gas
exploration, exploitation,
processing, storage,
transport and
commercialization
End Users
Electricity Self
supply and
cogeneration plants
Cr#de 1l
2et and assocated
nat#ral 'as
Nat#ral Gas
1l &rod#cts and &etroc3e(cals
/lectrct4
/lectrct4
1t3er &r(ar4
ener'es
F#el ol,
nat#ral 'as
C!E"s core business acti#ities
PE$E%"s core business acti#ities
&i#ersification strategies
'NG
regasification
Nat#ral Gas
Natural gas
transport
Natural gas
commercial
ization
Electric Power
Generation
Transmission and
distribution
Crude oil and natural gas
exploration, exploitation,
processing, storage,
transport and
commercialization
End Users
Electricity Self
supply and
cogeneration plants
Cr#de 1l
2et and assocated
nat#ral 'as
Nat#ral Gas
1l &rod#cts and &etroc3e(cals
/lectrct4
/lectrct4
1t3er &r(ar4
ener'es
F#el ol,
nat#ral 'as
C!E"s core business acti#ities
PE$E%"s core business acti#ities
&i#ersification strategies
'NG
regasification
Nat#ral Gas
Natural gas
transport
Natural gas
commercial
ization
!5gure >. $!E 3nd ,E)E.=s str3teg5es o8 d5@ers585c3t5on 5n the present D600CE
>.1 ,E)E. 5n the electr5c power sector
Fn order to dra* a scenario for PE!E@:s %artici%ation in the electric %o*er sector, *e used a
)tren.t5ens, 6ea7nesses, 8pportunities and 95reats +'6O)8 matri"4
)he anal#sis of this matri" consists in identif#in( structurall# the main internal and e"ternal
elements that could affect the decisions in a (lobal s#stemA PE!E@ %artici%ation in the
electric %o*er sector4
As a first ste%, *e identified the internal elements of the s#stem? stren(ths and *ea+nesses4
After*ards, *e identified the e"ternal or environmental elements of the s#stem? o%%ortunities
and threats4
5inall#, *e formulated the strate(ies b# %lacin( all these factors into a '6O) matri"4 Fn this
*a#, the threats and o%%ortunities are com%ared s#stematicall# *ith the *ea+nesses and
stren(ths of our s#stem4 )hus, *e obtained a series of strate(ies, (enerall# classified into?
defensive, survival, ada%tative and offensive strate(ies4
)his anal#sis is based in the facts that an effective strate(# ma"imizes the stren(ths and
o%%ortunities and minimizes its *ea+nesses and threats4 )his basic %rinci%le has im%ortant
im%lications in the desi(n of a successful strate(#4
Strengthens
--
S1 E"%erience in the construction and o%eration of co(eneration facilities4
S6 )he %otential of co(eneration is estimated to be 1,.22 !64
S3 Hi(h availabilit# of fuels that can be used b# co(eneration %lants such as %et oil co+e,
vacuum residuals, natural (as or heav# fuel oil4
S> Fncreasin( electric %o*er demand in PE!E@ due to ne* oil and (as %rocessin(
%ro;ects4
S? E"%erience in the develo%ment of %ro;ects *ith %rivate com%anies4
SC PE!E@ is %ermitted b# the la* to construct co(eneration %lants4
Weaknesses
-1 At least 32M of e"istin( electric %o*er (eneration facilities o%erates *ith lo* ener(#
efficienc# 712,/2M8 and at the end of their lifetime4
-6 General com%an# vision focalized to oil and natural (as business4
-3 9ac+ of a culture in the com%an# to*ards the electrical ener(# administration4
-> &o coordinated o%eration of the %o*er %lants4
-? 'hort,si(hted vision to*ards a unified ener(# business4
-C Even if PE!E@ has e"ceeded %o*er (eneration ca%acit#, it bu#s electricit# to the (rid
at hi(h rates4
Opportunities
1 )he mar+et offers innovative financin( schemas for co(eneration %ro;ects such as
service contracts or clean develo%ment mechanisms4
6 &e* %o*er (eneration technolo(ies are consolidated into the mar+et as co(eneration
based on inte(rated (asification combined c#cle4
3 5orei(n %rivate com%anies are interested to %artici%ate *ith PE!E@ in the
develo%ment of co(eneration %ro;ects4
> Gro*in( electric %o*er demand in the countr#4
Threats
T1 )he !e"ican Administration continues to constraint PE!E@:s bud(et to develo% ne*
%ro;ects4
T6 Ee(ulator# frame*or+ remains in the current status4
-1
T3 9ac+ of a !e"ican Administration:s lon( run ener(# %olic#4
T> Hi(h and volatile oil and natural (as %rices4
T? $5E and 95$ continues to a%%l# hi(h rates to PE!E@:s electric %o*er sales
Havin( develo%ed the '6O) matri", the anal#sis su((ests considerin( the follo*in(
strate(ies?
In the short term
Str3tegy 1. )o eliminate $5E and 95$:s electric %o*er %urchases b# increasin( the usa(e of
e"istin( %o*er (enerators
6ith the a%%roval of the Decree on co(eneration, PE!E@ has at least the %ossibilit# of bein(
a self,sufficient com%an# in terms of electricit#4 Fn 1223, PE!E@ (enerated .2M of its total
demand of electricit#, *hich accounts for almost -,222 !6, bu#in( the remainin( -22 !6
to $5E4 Ho*ever, the !e"ican (overnment ta"es these sales -D2M above the re(ular industr#
rates, in order to enforce $5E:s %rovisions4 6ith the %ur%ose of reducin( these e"%enses,
PE!E@ is tr#in( to substitute them *ith self,(eneration b# means of sendin( and carr#in(
%o*er b# the $5E (rid to different PE!E@ facilities4 Fn 1223, out of the .22 !6 (enerated
b# Peme", onl# G2 !6 *ere sent to the (rid and su%%lied to others users4 Ee(ulator#
dis%osals constrained this *a# of carr#in( %o*er b# the (rid4
)he Decree of co(eneration eliminates these re(ulator# barriers and allo*s PE!E@ to carr#
%o*er from a (enerator *ith %ermits of co(eneration to an# PE!E@:s facilit#4 Fn this *a#,
PE!E@ is see+in( to eliminate in 122G,122. the su%%l# from $5E and 95$ b# increasin( the
usa(e of its o*n %o*er (enerators4
5or its %osition in the '6O) !atri", this strate(# is classified as Ada%tative 75i(ure D84
In the long term
Str3tegy 6. )o construct ne* co(eneration %lants in order to re%lace e"istin( facilities that are
currentl# at the end of their lifetime or to satisf# additional %o*er re=uirements associated to
ne* %ro;ects in the future4
)his strate(# see+s to ensure the PE!E@ electric %o*er sufficienc# in the lon( run4
Str3tegy 3. )o construct ne* co(eneration %lants in order to sell electric %o*er to the (rid,
once its o*n re=uirements has been satisfied4
)he aim of this strate(# is to contribute to the future %o*er su%%l# for %ublic service4

-/
0
Pemex in the electric power sector: SWOT Matrix
S( S) S* S+ S, S- .) .* .+ .,
/(
/)
/*
/+
T(
T)
T*
T+
Strengt0ens .ea1nesses
/
p
p
o
r
t
u
n
i
t
i
e
s
T
0
r
e
a
t
s
E(
E) and E*
5 E(2 To eliminate C!E and
'!C"s electric power
purc0ases by increasing
t0e usage of existing
power generators 2
5 E)2 To construct new
cogeneration plants in
order to replace existing
facilities t0at are currently
at t0e end of t0eir lifetime
or to satisfy additional
power re3uirements
associated to new
pro4ects in t0e future2
5 E*2 To construct new
cogeneration plants in
order to sell electric
power to t0e grid, once its
own re3uirements 0as
been satisfied2
Strategies
/ffensi#e Strategy 5daptati#e Strategy
Sur#i#or Strategy &efensi#e Strategy
.( .-
T,
!5gure ?. ,E)E. 5n the Electr5c ,ower Sector: S-T )3tr59
>.6 $!E 5n the n3tur3l g3s 5ndustry
Fn the same *a# as it *as done for PE!E@, *e dra* a lon( run scenario for $5E:s
%artici%ation in the natural (as business, a%%l#in( the )tren.t5ens, 6ea7nesses, 8pportunities
and 95reats +'6O)8 matri"4
As a first ste%, *e identified the main internal 7stren(ths and *ea+nesses8 and e"ternal or
environmental 7o%%ortunities and threats8 elements of the s#stem4 )hus, this internal and
e"ternal elements hel% to develo% the decisions in the (lobal s#stemA $5E ste%%in( into the
natural (as business4 As it *as done in the PE!E@ case, *e %laced all this elements into a
'6O) matri" and develo%ed the strate(ies4
Strengthens
S1 E"%erience in the commercialization of natural (as *ith PE!E@
S6 !ono%ol# in the transmission, commercialization, and distribution of electricit#4
S3 Pro%ert# of electric %o*er %lants *ith ensured demand of natural (as in the lon( term4
S> E"%erience in the develo%ment of %ro;ects *ith %rivate com%anies4
Weaknesses
-1 'hort,si(hted vision to*ards unified ener(# business4
-H
-6 9ac+ of e"%erience in the u%stream business of natural (as4
-3 De%endent on the e"%erience of a third com%an# in the 9&G business4
-> Cndefined attributions to %artici%ate in the 9&G chain4
Opportunities
1 &e* 9&G li=uefaction %ro;ects a%%eared in the !e"ican mar+et4
6 Fn the near future, PE!E@ *ill not %artici%ate in the 9&G business4
3 5orei(n %rivate com%anies are interested in %artici%atin( *ith $5E in the develo%ment
of 9&G %ro;ects in !e"ico and %i%elines associated4
> Eisin( natural (as demand in the industrial, commercial and residential sectors4
Threats
T1 )he !e"ican Administration continues to constraint $5E:s bud(et to develo% ne*
%ro;ects4
T6 Ee(ulator# frame*or+ remains unchan(ed des%ite the chan(in( mar+et conditions44
T3 9ac+ of a !e"ican Administration:s lon( run ener(# %olic#4
T> Hi(h and volatile oil and natural (as %rices in the mar+et4
T? PE!E@ are not able to satisf# the entire demand of $5E
Havin( develo%ed the '6O) matri", the anal#sis su((ests follo*in( the ne"t strate(ies?
In the short term
Str3tegy 1. )o %artici%ate more activel# in the commercialization of 9&G4
Str3tegy 6. )o %artici%ate in the trans%ort of natural (as and re(asification 9&G %lants in
!e"ico4
6ith the modifications in the re(ulations made at the be(innin( of the -..2Ns, *hich allo*s
%rivate investors to access the trans%ort and stora(e of natural (as business, $5E is able to, in
a first instance, be(in a diversification strate(# of its natural (as su%%l#, in order to ensure the
sustainabilit# of ne* %o*er (eneration %ro;ects *hich are based on natural (as4 5urthermore,
as $5E develo%s e"%ertise in re(asification %ro;ects 7includin( stora(e, trans%ortation and
distribution on natural (as8 b# startin( ;oint ventures *ith ma;or oil and (as com%anies, the
future strate(ies mi(ht consider to (et involved further bac+ into the natural (as chain4 Fn
other *ords, $5E could (et involved in the trans%ortation of even u%,stream %rocesses
7outside of the !e"ican territor# as those activities are onl# entitled to PE!E@8 of the
business4
-D
!oreover, based on o%tions theor#, $5E mi(ht even consider to commercialize sur%luses of
natural (as, de%endin( on the volatilit# and %rices, sellin( natural (as, instead of in;ectin( all
the (as to its %roduction %rocess4
Ho*ever, it is im%ortant to outline that, in order to develo% the above %ossibilitiesA there are a
series of le(al and o%erational dra*bac+s that *ould have to be ta+en care off4
&o*ada#s $5E (enerates -G2,222 G6h of electricit# 7$5E, 12238, from *hich more than
DHM comes from the usa(e of h#drocarbons, more s%ecificall#, 1DM comes from the usa(e of
natural (as4 Fn this sense, most of the (as used in this transformation %rocesses is %rovided
entirel# b# PE!E@4 Ho*ever, in recent #ears, due to the stron( demand of natural (as in the
electric industr# 7stron(l# %ushed b# a 'tate %olic# that su%%orts the usa(e of natural (as8 and
to the difficulties of PE!E@ to satisf# the (ro*in( demand, durin( the last fe* #ears,
PE!E@ had to im%ort (reat amounts of natural (as, via %i%eline, from the C'A 7in 122H (as
im%orts e"ceeded -,-22 million cubic feet %er da#84 !oreover, in recent #ears, %i%eline
im%orts to !e"ico have reached its ma"imum ca%acit#, leadin( to a difficult %osition for the
develo%ment of ne* electricit# (eneration %ro;ects of $5E4 )hus, and in order to facilitate
%ro;ect financin(, $5E has to brea+ do*n *ith the de%endenc# of a uni=ue natural (as
su%%lier4
9atel#, *ith the %ur%ose of ensure an alternative natural (as su%%l#, $5E has com%rised
resources to ensure 9&G shi%%in(s, o%enin( the %ossibilit# to %artici%ate activel# in the
natural (as industr#, as it is stated in the 122D Annual Ee%ort of $5E4

Long term diversification strategy
Str3tegy 3. )o %artici%ate abroad in the 9&G chain 7commercialization, trans%ort, and
(asification facilities8 or the natural (as e"%loration and %roduction activities4
-3
1
CFE in the natural gas industry: SWOT Matrix
S( S) S* S+
.) .* .+
/(
/)
/*
/+
T(
T)
T*
T+
Strengt0ens .ea1nesses
/
p
p
o
r
t
u
n
i
t
i
e
s
T
0
r
e
a
t
s
E(, E) and E*
5 E(2 To participate more
acti#ely in t0e
commercialization of
'NG2
5 E)2 To participate in t0e
transport of natural gas
and regasification 'NG
plants in $exico2
5 E*2 To participate abroad
in t0e 'NG c0ain
6commercialization,
transport, and
gasification facilities7 or
t0e natural gas
exploration and
production acti#ities2
Strategies
/ffensi#e Strategy 5daptati#e Strategy
Sur#i#or Strategy &efensi#e Strategy
.(
T,
!5gure C. $!E 5n the n3tur3l g3s 5ndustry: S-T )3tr59

>.3 ,E)E. F $!E: Energy Sector Str3teg5es
-G
Electric Power
Generation
Transmission and
distribution
Crude oil and natural gas
exploration, exploitation,
processing, storage,
transport and
commercialization
End Users
Natural gas
distribution
Selfsupply
cogeneration
Cr#de 1l
2et and assocated
nat#ral 'as
Nat#ral Gas
1l &rod#cts and &etroc3e(cals
/lectrct4
/lectrct4
1t3er &r(ar4
ener'es
F#el ol,
nat#ral 'as
C!E"s core business acti#ities
PE$E%"s core business acti#ities
&i#ersification strategies
Natural gas
transport
'NG
regasification
Nat#ral Gas
New
cogeneration
plants
Cogeneration
plants
/lectrct4
Natural gas
commercial
ization
'NG
commercialization
Electric Power
Generation
Transmission and
distribution
Crude oil and natural gas
exploration, exploitation,
processing, storage,
transport and
commercialization
End Users
Natural gas
distribution
Selfsupply
cogeneration
Cr#de 1l
2et and assocated
nat#ral 'as
Nat#ral Gas
1l &rod#cts and &etroc3e(cals
/lectrct4
/lectrct4
1t3er &r(ar4
ener'es
F#el ol,
nat#ral 'as
C!E"s core business acti#ities
PE$E%"s core business acti#ities
&i#ersification strategies
Natural gas
transport
'NG
regasification
Nat#ral Gas
New
cogeneration
plants
Cogeneration
plants
/lectrct4
Natural gas
commercial
ization
'NG
commercialization
!5gure B. !uture $!E 3nd ,E)E.=s str3teg5es o8 d5@ers585c3t5on
?. $onclus5ons
Historicall#, PE!E@ and $5E:strate(ies of diversification have de%ended on re(ulator#
frame*or+s chan(es4 )hese com%anies have thus reacted to chan(es in the re(ulator#
frame*or+, but this has not been modified under %ressure of these firms4
PE!E@ has %artici%ated in the electric %o*er sector since the H2:s %ursuin( different
ob;ectives, such as to su%%l# %o*er for its needs in the case of not havin( %o*er
availabilit# of the (rid, to increase the reliabilit# of the service, or to reduce its costs
b# %roducin( steam and %o*er ;ointl# 7increase of ener(# efficienc#84 Fnstead, $5E
%artici%ated for man# #ears in the distribution of natural (as and more recentl# in the
9&G %urchases4
6e anal#ze the future trends of these strate(ies b# usin( the '6O) !atri" anal#sis that
recommends follo*in( the ne"t ones?
5or PE!E@?
)o eliminate $5E and 95$:s electric %o*er %urchases b# increasin( the usa(e of e"istin(
%o*er (enerators 7survivor84
)o construct ne* co(eneration %lants in order to re%lace e"istin( facilities that are
currentl# at the end of their lifetime or to satisf# additional %o*er re=uirements associated
to ne* %ro;ects in the future 7offensive84
)o construct ne* co(eneration %lants in order to sell electric %o*er to the (rid, once its
o*n re=uirements has been satisfied 7offensive84
5or $5E?
)o %artici%ate more activel# in the commercialization of 9&G 7offensive8
-0
)o %artici%ate in the trans%ort of natural (as and re(asification 9&G %lants in !e"ico
7offensive84
)o %artici%ate abroad in the 9&G chain 7commercialization, trans%ort, and (asification
facilities8 or the natural (as e"%loration and %roduction activities 7offensive84
'ome chan(es into the re(ulator# frame*or+ needed to encoura(e these strate(ies include to
clarif# the %rices %aid b# $5E for the ener(# (iven b# PE!E@, and to define $5E:s
attributions to %artici%ate in the u%stream (as chain4
)he !e"ican 'tate, as a res%onsible of the national ener(# %olic#, should define if *ants to
encoura(e either com%etition bet*een its national mono%olies or collaboration bet*een them
*ith the ;ointl# construction of ener(# %ro;ects4 )hus, the 'tate should define if the firms *ill
abandon or follo* its offensive strate(ies, or to be focalized onl# to the survivor ones4 )he
strate(ies of diversification should thus be elaborated and im%lemented in a national level,
under a unified vision of the business and develo%in( ;ointl# o%%ortunities *ith stren(thens of
each one4
)he main ob;ective see+ b# these com%anies should be to ensure the ener(# su%%l# *ith hi(h
standards of =ualit# and efficienc#, and at affordable %rices4 )his *ould be reached under a
national ener(# %olic# *ith a clear and inte(ral vision of the sector4 Planif#in( the future of
t*o national ener(# com%anies that o%erate in domestic mar+ets *ith intersections, in an
interde%endent *orld, should be a continuous tas+ of the 'tate4
RE!ERE%$ES
$5E 7122384 JFnforme Annual 122DL, $omisin 5ederal de Electricidad, 12234
Bur(os E4 and Elizalde A4 7-..D84 J9a $ontribucin de la $o(eneracin a la Preservacin del !edio
AmbienteL4 ac5elor #e.ree 95esis in Electrical and Mec5anical En.ineerin., &ational Autonomous
Cniversit# of !e"ico, -..D4
Elizalde A4, GarcOa J4, !4 Bauer and Puintanilla J4 7-..G84 J$o(eneracin en !<"icoL4 Eevista de
Fn(enierOa, C&A!, tercer semester, %%4 H2,D-4
FEA 7-..084 JEeforms in the !e"ican &atural Gas 'ectorL, Fnternational Ener(# A(enc#, O$DE, -..04
-.