U.S. and Canadian midstream and downstream operators have significant growth potential right now in Mexico, thanks to that nation’s ongoing energy reforms.

Jesús Reyes-Heroles, former CEO of the government energy monopoly, Petróleos Mexicanos (Pemex), and former Mexican ambassador to the U.S., told the 2014 Deloitte Oil & Gas Conference that changes to the nation’s constitution and subsequent new laws and regulations “are truly a game changer” for both Mexico and private enterprise. He added that while the opening of Mexico’s upstream E&P to private producers has received the most publicity, all sectors of the hydrocarbon industry are opening. Rapid development of crude oil and natural gas reserves implies a corresponding buildout in Mexico’s limited midstream sector, he noted.

In parallel, Mexico’s underserved electric power business is opening up. Reyes-Heroles currently serves as executive president of StructurA, an organization of Mexican consulting firms based in Mexico City.

“The reforms are happening very, very quickly,” Reyes-Heroles said, noting the constitutional amendment allowing private firms to enter the oil and gas business alongside Pemex only passed the Mexican Congress in December 2013.

One danger of the rapid change is the potential for regulatory mistakes that could inhibit desired economic growth. “This has come to the surprise of all of us, perhaps it is too fast,” he said.

Reyes-Heroles listed 25 “top opportunities” for private firms, specific business categories in the oil and gas value chain, rating each by current openness to investment. Gas pipelines were at the top of the list and he added the first moves to open Mexico’s limited gas transmission system predate the constitutional reforms, dating from the late 1990s.

In second place are retail service stations since the reforms allow private firms to open marketing operations in competition with the nation’s 10,000 Pemex retail sites.

Third on his list are gas utilities and fourth are crude oil pipelines. Reyes-Heroles also discussed Mexico’s need for new refineries, noting that half of the nation’s gasoline and diesel fuel are now imported due to a lack of domestic refining capacity. Mexico also has a limited petrochemical industry despite its historic role as a major oil producer.

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