Western Hemisphere 2021 Energy Landscape and Outlook

enterprise to retain the lion´s share of the national electric system.

In the hydrocarbons sector we could expect likewise the return of CENAGAS back to PEMEX, the reinstatement of regulation back to SENER on all activities regulated both by CRE and the National Hydrocarbons Commission (Comisión Nacional de Hidrocarburos or CNH), and the reversal of the possibility to carry exploration and extraction activities for the private sector as stated in the current text of the constitution.

In the hydrocarbons sector, PEMEX could start developing farm-outs most likely with up to 46% of participation from the private sector.

Scenario IV: Status Quo

Scenario III: Pragmatism

If AMLO does not win the elections but the economy recovers somewhat, then one could expect that the leadership of the existing institutions would continue to align with the vision stated in the energy sector program of the administration, with a de-facto counter-reform that hinders private investment and favors PEMEX and CFE. Only those areas where these two state-owned enterprises are not active will continue to be an opportunity for new private investments. In the power sector the most promising opportunities would continue to be in bilateral contracts between market participants and developing dedicated renewable energy projects for export of clean power to help meet the growing needs of industry and the targets set by several subnational governments in the United States.

If the economy continues to deteriorate, tax revenues fall, and MORENA and their allies lose the majority they currently have in the lower house, pragmatism could ensue for the rest of the administration. The level of pragmatism would depend on issues like the level of decrease in oil production, a deeper worsening of the financial situation of PEMEX, electric problems in the grid, and further deterioration of the credit rate of PEMEX, CFE and the government itself. Pragmatism would be the result of political calculations to win the 2024 elections. In this scenario, the power sector could witness a resumption of the electricity auctions where CFE would partner with the private sector retaining 54% of the majority of each of the projects and permitting would reopen adjusted to the conditions set by the state-productive

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