ThoughtStream: Opinion
Mexico is among the ten largest oil producers in the world. This country has made important structural changes to improve economic performance and strengthen its resilience to external shocks. It is a strong partner to the United States and to Canada.
Three key ingredients for any country’s success are: investment, innovation and imagination.
Investment is the obvious one. Shell invests more than $30 billion every year to meet the growing demand for energy.
The energy industry globally will spend untold trillions over the next four decades to find, develop and produce ever more challenging sources of energy – from traditional oil and gas, to shale gas, to liquids from shales, to advanced biofuels, hydrogen, wind and solar.
Mexico is jostling with countries around the world for a share of that capital. In this hemisphere, it faces fierce competition for capital with Brazil, Colombia, Uruguay, French Guiana, Argentina and others.
Of course, Mexico already has some competitive advantages through freetrade agreements, strategic location, competitive exchange rate, labor costs, and quality manufacturing.
But its advantage will only increase as it attracts more investment with stable and attractive fiscal and regulatory frameworks.
A recent World Bank study suggests Mexico needs the equivalent of five or six additional Pemexes over the next 10 to 15 years to leverage its potential deepwater resources.
The study says investment in deepwater delivers 1.6 times its value in terms of expansion of the supply base, labor development, and supporting services. For onshore investments – including unconventional, complex, capital intensive basins – the factor is around 1.4.
Analysis we’ve commissioned suggests attracting more capital into the energy sector could increase Mexico’s economic growth rate by as much as 5 or 6 percentage points.
And beyond economic growth, we have seen–in countries ranging from Norway to Malaysia–what else happens when countries earn investment in the energy sector: technology booms, an increase in specialized, high-paying jobs, transfer of knowledge into and across the economy, higher industrial safety standards, new levels of transparency, and trust in government.
The potential benefits for Mexico could extend even further, fueling Mexico’s continuing progress in the fight against poverty and inequality, its desire to protect its environment, its potential to become a regional manufacturing powerhouse.
But return on investment will go only so far without innovation.
The race is on to create new techniques to find, produce and commercialize more–and more difficult– sources of energy: energy locked in shale, in sand, under ice, in ultra-deep waters.
But it’s just as important to look at innovation in how companies, governments and societies work together.
As a global company, with partnerships in almost every corner of the world, Shell has the ability – I’d even say the obligation – to link imaginative ideas across boundaries–intellectual and political–as well as geographic boundaries.
I can see a Mexico that attracts international investment with a sophisticated domestic industry, a network of international partnerships, a talented, skilled and highly-developed workforce, and a commitment to a sustainable and efficient energy system.
It’s not hard, with a little imagination, to see a few broad actions, that all of us can take, to get us firmly on the road toward a more sustainable energy system. For example, we could take advantage of the world’s 250-year supply of natural gas resources to reduce coal consumption.
Natural gas should play a major role in fostering a cleaner and more sustainable energy system. It’s clean, it’s abundant, and it can be deployed for everything from electrical power to home use to transport. There is so much of it now available in North America that this continent could become a net exporter of energy in just a few decades.
Marvin Odum became Director of the Upstream Americas business for Royal Dutch Shell plc in 2009 and continues as President of Shell Oil Co. He earned a BS in mechanical engineering from the University of Texas at Austin and an MBA from the University of Houston. [excerpted from Odum’s address to Mexican Petroleum Congress, 7 June 2013, Cancun]
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