March 4, 2014 / 9:46 PM / 4 years ago

CERAWEEK-Mexico to be rival oil, gas supplier to US -Canada minister

* Mexico’s energy reforms a ‘bold move’ into US, global energy markets

* More competition furthers Canada’s push to reach more export markets

By Kristen Hays

HOUSTON, March 4 (Reuters) - Mexico’s energy reform initiative will spark competition with Canada in terms of supplying the United States with oil and natural gas, further fueling the major oil producer’s efforts to diversify export markets, Canada’s minister of natural resources said on Tuesday.

“There’s no question that Mexico has embarked on a bold move,” Joe Oliver, Canada’s natural resources minister, told reporters at the annual IHS CERAweek energy conference in Houston.

“They will emerge as another player. We’re focusing on diversifying our market, so that’s perhaps yet another reason to do that. Well, in fact it is,” he said.

Last December Mexican president Enrique Peña Nieto signed into law a sweeping energy reform that ends the 75-year monopoly state-owned oil company Pemex held on oil and gas production.

Nieto is making the case that Mexico is open for business, underscored by energy reform, the hallmark of his 14-month-old government.

Oil output has been rising in the United States and Canada, but in Mexico production has fallen 25 percent since 2004 despite increased investment.

The reforms, which will open Mexico’s energy industry to foreign companies, could solicit investment that leads to more oil and gas flowing to the United States, potentially displacing some Canadian imports.

In an interview with Reuters, Oliver called Mexico a good friend and trading partner to Canada.

“Friends sometimes compete commercially. We do with the United States,” he said.

He said if the reforms go forward as the Mexican administration expects, Mexico will emerge as a bigger factor in the global energy market.

“But we are looking to diversify,” he said. “There’s huge demand.”


Currently, the United States is Canada’s sole customer for oil and natural gas. Oliver said the U.S. is quickly moving toward self-sufficiency “and will soon be a competitor.”

Five U.S. liquefied natural gas projects have full approval to export from the United States, including to countries with which the U.S. does not have a free trade agreement. About 20 other projects await U.S. Energy Department approval.

On the oil side, Canadian crude shipments via rail to the U.S. are increasing, but the controversial northern leg of TransCanada’s Keystone XL pipeline awaits approval from the U.S. State Department after multiple reviews and environmental assessments.

Enbridge Inc’s Alberta Clipper pipeline also awaits U.S. regulatory approval of expansion plans and is gaining environmental opposition similar to that of Keystone.

But Canada has three potential new pipelines to move oil to its west and east coasts for export to other countries, Oliver said.

Those include Enbridge’s $7.1 billion, 550,000 barrels per day Northern Gateway pipeline from Alberta to the Pacific Coast.

Another one is Kinder Morgan Energy Partners’ $5.1 billion proposal to nearly triple its Trans Mountain crude oil pipeline to 890,000 bpd to ship more oil from Alberta to the western coastline.

The third is TransCanada’s proposed $10.8 billion 1.1 million bpd Energy East pipeline. TransCanada said Tuesday it had filed a preliminary description of the project, which would carry oil from Alberta to Quebec and New Brunswick, with regulators.

Steve Wuori, strategic advisor and former head of major projects at Enbridge, said at the conference that the company started working on the Gateway project a dozen years ago with a desire to gain access to the Asian market.

If the U.S. is the only market for Canadian crude, “then price is the victim,” he said, as Canadian crude trades at a discount to U.S. crude, which is cheaper than other global crudes in light of the U.S. oil production boom.

Oliver declined to discuss the specific projects, particularly the Northern Gateway, which is awaiting his final decision on approval.

But in general, such projects would help move Canadian crude to global markets, he said.

“It’s a strategic objective to diversify, which means we’ve got to get the resources to tidewater, which means we’ve got to build pipelines,” Oliver said.

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