Mexico relies on oil and gas imports for two-thirds of its energy consumption, despite having abundant domestic fossil fuel resources. Instead of maximizing its production capacity, the country is largely dependent on its northern neighbor to meet its energy needs, putting it in a vulnerable position.
High Investment Needs
According to a recent assessment by the International Institute for Sustainable Development, addressing Mexico's energy insecurity does not involve increasing domestic oil and gas production and refining capacity. The report emphasizes that the country's limited resources would be better allocated to diversifying the energy sector through the expansion of renewable energy and supportive infrastructure.
Issues Arising from Low Energy Diversity
Mexico faces alarming levels of diversity in its energy mix, and the existing reserves in this area are also very concerning. Currently, the country has only 2.4 days of gas storage capacity, making it highly vulnerable to market fluctuations and supply shocks. The Mexican government has responded to these increasing insecurities and is attempting to significantly boost national energy production, especially oil and gas production and refining capacities.
However, the International Institute for Sustainable Development states that this strategy is misguided. According to the report, achieving domestic oil and gas production goals requires about $160 billion in investment, which includes nearly $110 billion from Pemex. At the same time, developing unexploitable fields could lead to a net loss of $17.4 billion over 15 years. Even with this level of expenditure, production targets may not be met on schedule.
Environmental and Economic Impacts
In addition to high economic costs, the development of Mexico's oil and gas sector could lead to serious environmental losses. Concerns have risen regarding the recent two-year collaboration between Brazil's state-owned Petrobras and Pemex in Mexico. This partnership, which began in June, aims to explore deep and mature oil fields in the Gulf of Mexico while posing serious risks, including an increased likelihood of oil spills and the displacement of coastal communities.
According to Luis Martinez, co-author of the IISD report, Mexico needs to reconsider its investments. Investing in renewable energy and improving energy infrastructure could lead to reduced imports, strengthened governance, and increased private investment. This assessment reflects a significant shift in global energy security, where the growth of renewable energy is moving towards energy independence.
