Minister decides, relatively autonomous. How big is the dividend going to be . Be government is still going to be relying on amex in the early years. In a put the money in the upstream rather than the downstream . This remains to be seen. The sixth is trusting the market. If it turns out the best economic proposition is to import gasoline, will that be ok . The seventh is local content. There is talk about the need for local content rules. What will they be . Will be like brazil . It is not intended to follow the brazilian model. I think there are for terminus opportunities for mexico were. First, it is to be best in class. This is a government and do structural reform and move quickly. Among the other countries, it implemented well. This will move mexico to the class not just in energy, but a country to invest in. The second is prosperity. Obviously if this work, you positive traits for manufacturing, job creation, and in terms of Energy Investment if this model works away it is designed, mexico will be in pole position in the hemisphere. If your choice is brazil, colombia is extremely competitive. Where do you want to be . I think mexico as the chance to be the most competitive. The third his stature. The ability to implant these reforms will give it stature from transparency, from the agility, from the market competitiveness. That has credit on the international stage. To be a strategic supplier by 2025. Mexican production will begin. 2023, 20 24, 2025, that is when it peaks. Mexico could take that place. These reforms, as impressive as they are, are necessary but not a sufficient condition to create these reforms. You have to have the legislation and regulation. You have to have some speed. We also call it mexico rising because there is no question that while the road to implement this will be bumpy, there is no turning back. The government has made this commitment. It is a remarkable a couple and i can only say that mr. Ambassador and mr. Secretary, we wish you well in completing it. Thank you. [applause] thank you. Theyre going to put extra chairs appear and i would like to invite the panelists to come back up. [inaudible] great. Please. Why dont i take the furthest away and mr. Secretary . David, jorge, duncan . Thank you. Thank you so much. Again, i am peter schechter, the director of the adrian latin america center. Thank you for the presentations. Last week i was reprimanded in an interview by a journalist for being too enthusiastic about what mexico has done. To my panelists, that is a warning because im going to try and redeem myself and be overly severe. I am going to try to center my questions on three principal areas, which is the mechanics of the reform, the business implications of the reform, and then, what are the implications for mexico and mexicos future . I am not an energy expert. I am a commonly found washington policy civilian. Let me start with duncan and asking for his comments. I would love you if you could place those comments within the context of what is is going to mean for a new north american revival, in particularly the energy industry, but now that nafta is coming on to his 20th year, what is nafta 2. 0 and what is the reform in that . Thank you for inviting me today. I would ask of the sentiment that it is a paradigm shift. I fell into it almost by accident back in 2005. It actually emerged at a meeting in mexico city. We were talking about the future of north america. The one question that kept coming up is what we do with energy . The situation was very different back in 20052006. The big concern in United States is energy security. Where we going to find the energy, oil, and gas to power our economy . Fastforward eight years and we are in a very different situation. The United States is now a situation where it is looking at regional energy, or north American Energy independence and autonomy. It is looking at a situation where it is going through a shale revolution and feels more secure about itself. It is a very important dimensional understanding, the way in which this reform in mexico is being received in the United States. If you talk to people in houston you see enormous excitement about the business opportunities. You speak to people in washington they say, that is great, we are happy for you guys. That is different from 2005 or 2008 when the last attempt to Energy Reform was put on the table and ultimately failed. North america at this point in time is in a much, much better situation than it has been in the past. Mexicos reform is kind of like the icing on the cake. It means that we are going to see potentially another Million Barrels of Oil Production per day added by 2025. I would publicly put it a little bit later than that. We are going to see, rising levels of natural gas production. We are going to see the possibility and i think this is the key point more than just production figures and reserves, we see the potential now for real Energy Market integration in north america. It touches on things that enrique already pointed to. We need to guarantee not to supply but stability of supply of energy for the producers of north america. We need to keep energy costs low in the United States and canada and we need to lower them significantly in mexico. Partially, that is for competitiveness and partially it is because people needed. People in mexico spend up to 1 3 of their income on electricity per month. The Energy Reform we saw go through congress right now is something that really offers that are stability. I think it is a that possibility. I think it is a game changer. In the first 120 days of next year, we are going to see that. Enrique, i know you graduated in 1997. I was there. I dont know if he gave the same speech that he always did at the graduation ceremony. I had here at like 34 times as a director of row graham. That program. Eloi says he always says [speaking spanish] it is moving forward. It is moving onto the next stage of life. There is so much to do and that is why this own port and we keep our focus on the oil and gas sector. Thank you. It is a great segue for my question for jorge. While he comes from austin with a very academic hat on now, it is certainly not where he spends most of his life or it you are the only one in panel who actually was an oil executive. And in mexico. Talk to us a little bit about what is going through an Energy Executives mind right now and how does it seemed to him as a game changer . How does a spanish, french, or u. S. Energy executive choose between mexico or angola or trinidad . What goes through an executives head. Thank you for the council. Thank you for being here. Just like in your example, in business sometimes the easiest thing is to set up a strategic plan. The tough part is the plan to implement that strategic mission. That is the toughest part. All of us have fought to the challenges we are facing. I hate to say it, but maybe this was the easiest part of the whole Energy Reform part. Because of all these Great Expectations i think there is a tough road ahead. I dont represent the industry, but after working in the ag sector and oil sector for 35 years, five of those in mexico city, i want to basically focus my comments on three areas and that way we can get some conversation from the audience. I want to talk about pamex. They are not going away. They are not going to be privatized. I dont like the word privatization. I preferred the word recapitalization. Pamex will hopefully become a place for private capital can participate in the growth of a extremely Important Company like them. Hopefully what we will see in the future is the recapitalization of pamex. We have to make sure they are able to compete in this new world. They cannot play an Important Role if they have one hand tied behind their back. 10 , if not for, of the fun that is going to go to science, that is extremely important. That is one of the areas we know that is very interested in. Pamex is going to what i consider a brain drain let me assure you that a lot of the geologists are going to come from there. A lot of these companies are going to hire folks from pamex. In the next five years, they are facing a lot of retirement threats from Petroleum Engineers and geologists are going to retire in the next 35 years. There is a huge Knowledge Base challenge that they are going to face. The most important things for pamex to change is the culture of entrepreneurship and a culture that the company learns and oil business when they become international. They have joined in the u. S. Gulf of mexico would shell. Theyre hoping doing that because they hope they will make money would shell what it is learning how to develop its deep Water Resources. It is very important that the reengineering of pamex also becomes a very important piece of this Energy Reform. My other comment that we will be looking at from the oil companys point of view is the sector. Pamex has about a 2 million barrel demand a day. They have boilerplate, refinery capacity, but there is 1. 2 of the capacity. There is a huge gap of over 600,000 barrels a day. It is a value of over 20 billion a year deficit. It is an issue that also has to be addressed. The refinery, about a 10 billion, 12 billion project has been stable, but i think that sector is going to be extremely important in mexico. Were going to see if pamex 10 joint ventures with u. S. Refineries. It takes anywhere from 37 years to build a refinery system. There is an adventurous possibility in the u. S. Gulf of mexico. Last, and i think this is very important, is offshore safety. We were having a meeting in tampa talking about offshore safety in the gulf of mexico. We were very pleased to see that was there. They had a very important presence in that meeting because as mexico begins to drill, we have the pegasus, we have submersibles that are the drilling about 30 million 30 miles south of u. S. Maritime border. What happens on how we are going to manage the catastrophic event like deepwater horizon in mexican waters. We do have an agreement. It is a good basic agreement between u. S. And mexico on how to handle from a technical point of view a major transboundary event like this. Those who went to the deepwater horizon incident know how difficult it is to manage such an event. I think that offshore safety is something that not only the industry, but the United States government and others should be very concerned with. Thank you. Let me ask and retake, who i know and rick a enrique, who i know had getting this done, but limit look towards the future enemy ask you about managing expectations in mexico. This reform promises a lot. A lot will not come so quickly. Polls are saying that the reform is not that popular. The economy has not taken off in a definitive way. Out of the president how does the president to going in these political parts . As you fix the policy there was an interesting question, but first let me take on the fact this was very easy. [laughter] im looking forward to the difficult part. Lets see how that plays out. It is truly in achievement of the country. For Political Parties improve the reform four Political Parties approved the reform. I think it shows the president possibly to ship. With the polls, it really depends, as in mexico many important issues what type of questions you ask. If you ask the majority of people, theyre in favor of having a lower cost of electricity or gas. You want to privatize pamex, you have a high response of no. This reform is not doing that, but aim to decrease the cost of electricity. I believe this reform as it evolves will show benefits to the mexican people. We have been very careful polling the instruction of the president not to establish a timeline that it is not going to be achievable. We believe, as davids study ascribes accurately, that it will take time. The reform establishes a timeline and we are going to follow it. We pamex we deal with pamex and that we migrate from those two new contracts. Pending on secondary legislation that will be put to congress in the next. Once they approve that, we are looking at a one year. Of time for pamex to transition to contract. Might be around 2015, 2016. Many of the people with us today know that englands ancient in brazil andcolombia took time. Shell gas and shell oil in the northern parts of the country or Shallow Water or round fields bown fields would show a reduction earlier than big water in mexico. We are estimating our Oil Production will increase from the 2. 5 Million Barrels per day that we have now to around 3 Million Barrels per day by 2018 and to 3. 5 i 2025. We think that is a fair estimate. We need it in increasing we need an increasing amount of natural gas to around 8000 cubic feet per day and 10,400 by 2025. It will decrease the costs of gas electricity and electricity. Believe the numbers are there. If you go to numbers of Foreign Direct Investment, we have seen many of the companies that made those estimates show that about 10 billion by the end of 2018 of Foreign Direct Investment in the sector. That is an increase by 50 of what Foreign Investment is in mexico today. That is a huge job if we achieve that number by 2018. Those are estimates from private sector think thanks. Think tanks. On jobs, we believe there will be over 2. 5 million jobs by 2025. Those of the estimates that we have put forward to the mexican people and we believe that is obviously something we will achieve in the midrange and longrange. We dont think we will have something immediately. In order to get it right, we have to do it one step at a time. We are permitted to do it that way. Let me ask you, because it outlines where we are and where we are going to be. Fill in for us for the civilian like me how to i measure progress along those roads . What are the milestones that we should be looking for that this is on time deck of if youd to that, who has done this really well and what example should we compare mexico to as the best Case Scenario . I have for bellwethers that i would watch in the next few months. The first is legislation. They party drafted legislation, but we need to see what those frameworks look like. What we know about the terms . Legislation is the first benchmark. The second is going to be what it. If the cnh is a significant budget allocation, if we see the agencies are funded so they can hire outside help to be able to stand up to safety rules or the environment roles or even a licensing requirement, then we are going to see that we can predict the regulators will be in a position to move swiftly when the time comes. The third is outsourcing and in the power sector, you will need a lot of or information about the nature of distribution, whether there is metering at the houses. What are the size of the load centers . That information is going to have to be organized and presented for investors in a way they can understand. I be watching their budget and if there is no help on their. Fourth would be leadership. Would we see shadow leaders of these processes . We should start to see shadow leaders for the safety effort for the environmental effort probably if there is a tossing up the leadership. Those of the for bellwethers for me. Resulted a right the first time but then their second reform has taken it back. I would say the opening to the upstream, norway, brazil, following that model, the transparency. I think the u. S. And norway have done it but algeria did it, iraq did it, libya did it. The system of open criteria. You open the envelope and see who wins. The independence of the regulators, i think it remains to be seen whether they are safety case or performance standards are what kind of regulators they are going to be. Colombia has a terrific regulator. I think it is only norway that has done this with the kind of political and fiscal independence that mexico has got. Can i come in here . I think it is worth spending a moment to talk about the regulators. That is the key element right now. The question a lot of us have is, we have a very small, underfunded National Commissioner at this time and in a relatively short. Of time we are expecting them to either find the Human Capital in mexico or bring them in from outside. I think that is a real danger here. David said very well is the commission going to be allowed to recruit international . Would have the resources to do it . Will be attractive enough . If it is not a strong, autonomous regulator then it will be a real problem for both companies wanting to invest in mexico and for the benefits that would be distributed to the mexican people. Jorge, what role can institutions like yours play in cooperating in some of the Technical Assistance . I think there are a lot of universities in the United States that had a long relationship with mexico and pamex. We have numbers at we are working now on shell gas development. Were talking about Water Resources along the border and what impact Shell Development could have to Water Resources. Certainly our universities by the way, partnerships with we have with the National Science foundation the resources are there for us on our side of the business. Again, the academic and Research Side of business to add value to this process. Remember, there is a heavy involvement in research and process partnerships in the american universities with the private sector. There is no question that a u. S. Institution and incorporation with partnership with Mexican Institution can play a key role. This is a very important issue.