tv Key Capitol Hill Hearings CSPAN December 20, 2013 1:00am-3:01am EST
insurgents started happening after the iraq war and you have a lot of sunni individuals who came to kuwait at the time that were displaced in the conflict that happened. and i think that they have a lot of influence actually and as he said, kuwait has open politics and there has been some situations. and they actually broke down in the middle of these issues and what escalation was part of sm and also in lebanon as well. and this includes the parliamentarians in their support for them as well which i think tells you something about how the sectarian policies of the region are becoming much
more prominent and syria takes that too much higher level. and everyone actually has their own players and a lot of the fears that were built up from these other things than that includes what it means and they have their own actors and it will now be a part of another foreign setting. it's just as we talked about. and i think the problem in kuwait is that the politics are much more open. at the same time it allows the space with a sectarian rhetoric.
>> tom, turning to you now. and that points this out. it became attractive as a hub for this kind of situation. and could you put kuwait in kuwait's laws in the context of the golf in the region? and are they particularly lax? >> i think to answer that question, we need to go back to 1989 and at that time, it was set up initially set up to counter money laundering from latin america.
one of the things that is overlooked is the first part of the global war on terror. and i basically put in place the sanction of organizations and at the same time they were told that you need to come up with an addition to your money laundering regulations and guidelines. and they were monitored and this implementation in the most
recent valuation is done in 2010. in the context of this, it is fair to say that kuwait did not -- they were not doing a good job. and it was very frustrated by the lack of progress in the report at that time highlighted what they called many shortcomings in this includes finance and a poor level of preventative measures. and from this constant perspective, many of them are beauties on and they fall into four categories and 47 of the 49 categories rated noncompliant or partially compliant.
>> how does that compare with the other countries? >> during this period, other gulf countries made in the thick make up the ground and if you look at the noncompliance and high-risk jurisdiction which was published in october this year, kuwait is noticeable for still being on the list and it probably wouldn't want to be in the same places like that. now in 2012, kuwait made an effort to try to make up for these deficiencies. and there then there is now the law that is referred to in this is all stuff that other countries did many years ago. and i think there is some frustration that these issues haven't been addressed and even if laws are put into place and
it is known that things will happen, concludes the rules and the laws to deal with illicit finance and because what is being conducted -- it is actually terrorist finance. and we have also talked about the way in which the politics works that they may not favor implementing and enforcing information. >> yes, it seems to me that a lot of the fund-raising the best talks about in her paper, i mean, you can probably consider it as financing for terrorist organizations because a lot of the groups and syria have not been designated an most of it's not going the strong, for example. and so what tools does the international community and kuwait have for curbing some of
this funding if they feel that it needs to be curbed in one way or another. and that is focused on terrorist organizations. and the hard weight is clearly if one can prove that money is going to the organizations that are designated including yesterday by the u.s. treasury, by designating this with those who were providing this as well. there is an alternative way. and that is that financial institutions are very concerned about the reputation untainted by anything that would damage their reputation. so while he may not be able to
directly be a part of this, you can let it be known that these individuals are perhaps not doing what would like to be done. and it will start to be withdrawn. and that will potentially inject a fear factor, which may make you think twice before continuing to do what they are doing. >> and if you look at the paradox to 9/11, and very effectively curtailed the donations that were going on. and then something might happen, which turns over to sympathy or puts forward this to donate
money so you saw the situation where the documents were found in saying that we are having a little bit of trouble with money, could you send us 100 grand. because he was very effective raising money at that time. so i think it is possible to curtail donors. but it will require the kuwaitis to perhaps be more aggressive than they might want to be with these individuals. >> okay, thank you so much. we'll we will open it up for questions, and i think that we have microphones around the room. if you could raise your hand and wait for the microphone to come view, that would be wonderful. and we have one kind of over the air. [inaudible conversations] >> thank you. good afternoon. hello, i'm with the european council on foreign relations and
i thank you. i think it's interesting and i'm curious as to whether you or any of the individuals have looked at the creation of the islamic front and the attempt to bring these groups together and they basically don't work. but do you think that this is going to in some way be a part of this? because obviously there is a kind of open question as to the behavior and how it may come back to bite them. and i'm wondering what your thoughts are on that. it's not a core focus of your research, but is there any reflection on how this kind of proliferation of arms and militias in this country ultimately affect what happens in the long-term? we have seen -- we have seen what an impact has and is there any consideration that this can do more harm than good?
because there is no clear way of understanding where the money flows going. and the most destructive groups certainly are getting tons of money and they can still do a lot of damage. this curious if you can reflect on this point. >> yes, absolutely. i was looking at this over the last few days and a lot of the backers have come out in support of the islamic front and i suspect that what we will see is that everyone is equal but some are more equal than others in this situation. so i think that although they are under the same umbrella, i think that many of them will continue to receive better funding through some of these individuals and other brigades. so i would not expect and i don't know -- but i wouldn't expect these donors to change their financing in any way and i
would expect them to continue in a network that they have already established and work with this and they will continue to work together. >> how they reacted to the formation of islam? >> yes, they have. one of the most prominent donors, has come out and support the islamic front. and we have seen these alliances in the past. it seems that it has a bit more coherent. but there's no evidence that he was involved in brokering an arrangement between himself and other individual groups at different points in time. so the big question is whether this alliance is different from other alliances as it has this kind of pattern. but i would not expect the pattern to change. in terms of regret of what this could do in the future, i think
this is one of the main reasons that the broadscale funding has sort of dropped off and it's the hard-core elements that remain. so for example, if you look at those that have this, there's a quote on the first page from someone who raises money for moderate brigades and he was basically lamenting the fact that basically his and others' support has gone in so many different directions that it's really just sort of destroyed the opposition by making them totally incoherent and unable to work together. >> the question in the back? >> hello, i just recently came back from the hamas area and i know what you're talking about, a lot of the funding here. because i have seen the kuwaiti
and saudi things and there is nothing about the weapons which threw my experience have been a part of this and are really from the syrian army. most of the sophisticated ones, they have been captured and really you cannot talk about, you know, favoring this group or that group. because one example, the headquarters, we knew that they suddenly overtook the headquarters and i am saying that they refused to give them, even a weapon, but not saudi arabia and positively not wait. and i know that we have so much propaganda from the other side.
but it's all nice, you know? most of this is from the syrian army. >> i really appreciate you making this point and i would emphasize again just how much humanitarian aid the kuwaitis are doing and how much work they are doing in these charities are doing this and it's really that they are the unsung heroes of this crisis and they are the only, you know, they are the ones in every case for humanitarian work and there is an effort of this as well, that where do you draw the line on this? and if you are supporting a hospital that is run by a particular brigade, does it have a legal component? it is a very sort of -- it is a
spectrum. it is not black-and-white. and he raised the questions that make this so complicated. a lot of this does go to things that are very much needed on the ground and these rebel brigades understand that if they are controlling an area, that also means that it's part of the hospital and providing for people and no one else is doing that, quite simply. because these groups are the only ones that have access to these areas and i really appreciate your point. >> i would also like to add that the paper was not about data systems, but private individuals and a lot of the assistance comes in the form of money so the groups can buy the weapons they need, whether they do deals with these in the syrian army or they do this, the money to buy this as well. >> yes, i am in touch with a guy
who has this kind of fund-raising and people giving money and specific towards weapons. one case in kuwait, he had attended where he aimed to raise money for his money as possible and they raised enough money and there was a certain amount of this going on amongst the home high-profile individuals who attended this event and that kind of constitutes as part of it. and so i think that money is given specifically for purchasing weapons. >> ma'am, you had a question here? >> hello, i have two quick questions. there was a report this week
about 10 kuwaiti shiites were killed and i was wondering if you could elaborate more without the help and what kind of funding and fighting with the syrian regime is about. and isn't there a part of this? when you concentrate on this, between the legitimate organizations that are healthy and the ones that are raising money for weapons. there is a fear that the government of kuwait will crack down and then the syrian people on the ground are going to suffer as well. >> thank you.
>> i don't know much more than i havarti said. and especially in determining the amounts of money. but i believe that there is a long-standing historical tie between support for hezbollah and i have seen lots of reports going there to fight. and i don't have anything confirm that i can tell you. >> i don't have any specifics on what is happening now. but it isn't just is coming kind of parallels a and it was a real center for a and especially across the gulf coast and we
have prominent activists that settled in kuwait and had influenced in some of them and syria as well and those who parlayed into the business contacts on the other side. so there are activist communities and the higher-level businessmen as well and during the time we were looking to invest abroad and those were established and can be instruments allies. >> on the second question, can you talk to me about what they have attempted to do and they have also attempted to get on
the other side of this. can you talk about that a little bit? >> yes, i can. when it comes to the bowl, stir in crisis is really striking a chord with people. it is such a terrible conflict humanitarian wise and eventual conflict. and that was a very close personal conflict. and i think that every country's government has been deeply motivated and it has taken an interesting strategy to channel that energy into one public campaign. and they had this gigantic telethon with a couple of religious the establishment of it all in the tv networks and just everybody was getting into this one pot. and i think this was their way
of channeling the emotional responses and the very sincere desire into one way that they could've been used for humanitarian purposes that was a bit more controlled. and anyone who's trying to do fund-raising outside of that was apt to join this into an inclusive way and i believe it would be moved into the humanitarian way. many citizens know they want to help and they have taken these strategies is sort of a way to be a part of this. and it's very important, you know, to turn that around and do the best that we can. and this is very important.
>> okay, can you make a recommendation that indicates that the ngos are going to be a vulnerability with the effort? and i would really like to discuss where the monies are going, not just where they are going, but where they have been received from, which is something that the global finance committee look that closely at their unintended consequences of that the monitor charitable donations and where they are going and trying to control this, making it go through safe corridors, it is something that are incentivized if they want to get a clean bill of health. >> have a question here.
>> okay. >> thank you very much. i thank you for the informative manner that you are presenting. and one question that may be part of personal experience, i was part of the uprising in iraq and our problem was more support and there is more to supporting an insurgency than giving the weapons back and it is captured, as we did from the army, but there is more to supporting it as well and this money can go to the nonlethal supports of the
insurgencies. and my question is it's very hard to draw the line in countries like the gulf states between what is private and public as you already alluded to the fact that some parliamentarians would support this work and etc. those who either went to syria and my question to the panel is about the attitude of the kuwaiti government that is less sanguine and public and the countries who are talking daily about things. but what is happening, is it a structure of problems and this is the federal government that implements it is a marginal freedom and no structure has been put in place to comply. or is it that there is
simplicity by looking the other way rather than just on structural things? i would be interested to hear the panel's view on as. >> thank you very much. >> let's start with that. >> okay. i do think the kuwaiti government is aware that this is going on. they may not know the extent of it and i don't know how deeply. but they certainly know that it's going on. and i can say that with near certainty. so i will give you an example of one of the ways that it has been difficult for kuwait to do anything about it. one complication is that a lot of the people involved are part of this in one particular individual that you actually mentioned is a former parliamentarian. on twitter he said let's get people to the streets.
and that sort of person when you are dealing with those is particularly difficult. and there's one example that i thought was very telling, given a great story of two different fund-raising events that were held. and one was held with the presence of one of these individuals who supports the syrian opposition and one was held without this and they were both in public. and the one with bnp was not touched. and then we came and they said oh, too complicated. so they didn't break it up. so the weight of the donors have started to look at this as sort of as a political cover to give them more space to operate. so even if they are not raising a ton of money, they are providing space for others to raise money and creating a huge
headache for the kuwaiti government. john: this was a time in 2012 abroad oppositional activity in kuwait who had the ability to take the majority of the parliaments in one election and really threatening to be able to constrain the ruling in new ways and there were actually some people crawling for this as well. and they had just basically talked about this and i don't think it was a completely empty threat at the time. a lot of these are now former individuals serving because many of them are out and lost the game against the government. but in 2012 there was a vulnerability for the government and pushing against his opposition that was very resurgent at the time.
things were going that this was going to be imported but the sectarian rhetoric was getting too hot the message that the government was applying national unity was resonance it may give space for the kuwaiti government to do more with the issues. >> obviously it is not just for the donors who raise the money but the establishment. i don't know anything about kuwait i would imagine going against those it is extremely difficult for the authorities said that is a question and that comes up regularly how can they be controlled or distributed? >> more questions?
>> thank you very much. i write the mitchell report. i want to go back to your title that was not a casual decision. playing with fire why financing risks sectarian diplomacy which is a two-part question. what is the real danger? is it simply about syria and what is going space in to wait for something larger have perhaps identifies about the role of big money
and big conflict? as i have listened to the conversation today i have went back and forth this is the way i should -- should be then they come back to the title playing with fire to ignite a sectarian conflict and maybe i am not hearing something that i should i would love to get clarification it also reminds me of the links to that we express here at home with the electoral politics if you could expand would be helpful. >> the thing that scares me most and the impact it will have talking about kuwait and the gulf as a geographical reference but i fear what happens with the
donor community now is just beginning of the new network that will not disappear easily or willingly. of these networks probably existed in the past i know they have expanded because there are new actors that are known to be new in the donor community they're not just in kuwait but extent far into saudi arabia bahrain, cover, groups that have access to one another instantaneous and easy to access way of social media, you name if they can talk to each other. these cannot networks that will be squashed easily. the law under which the syrian conflict continues a
bigger and frankly more extreme day get because watching the conflict does not does not privileged the ideologies but those that take the extreme interpretation of the events that are happening because the events are so graphic. that is my biggest fear. when i map says social the works of the donors thanks to social media we can instantaneously do i can show you how old the communities in kuwait are connected to the communities in tatter in a kuwaiti donor in serious together having raised money through kuwait and these are networks that will not disappear. >> from the syrian support group think q.
my question is about the story that you told there was a very public fight on twitter. as we now know they started to consolidate their game of culminate start to set up a command structure in stone and the head of the political wing is there the end to that story now those groups under the same command structure, what happened there? >> i don't know if there was the meeting and they should kayhan said everything was better but they did come under flak for that fight so i imagine that is why they backed off but at the end of
the data is the opportunistic alliances and i am not sure, hopefully it has more staying power to give more culture to the question who is the syrian opposition? up until now we have not been able to answer that question in a coherent way so maybe it is a positive thing but i hesitate to think that alliance at the moment is anything more than the opportunistic group of record -- brigades have decided to work together. >> i have a hypothetical question and a lot of people have become more pessimistic
to see a more likely scenario that controls different areas so what do you think this impact would have? weather it would increase the division? >> honestly i don't know what i can add but all the donors i am aware of have stressed the need for the structural integrity fed is something the gulf countries themselves have emphasized don't imagine there would take kindly to that zero or that they would stop fighting. >>. >> the queue for this. with the role of turkey and
the financial movement that i am aware of in terms of cash it is the turkish border in the northern tier so the cash money moved then literally walked over the border that is the involvement i am aware of cut i personally do not report on turkey so i don't know specifics but i do know the border is the wild wild west with shops set up with military fatigues the and you have a good story here? >> yes. there is the anecdote for the ngo that said he goes to in stempel to buy suitcases
to carry cash pat going back to turkey it is an interesting position because it is another country that would have compliance with that regime in turkey demonstrates how much power och the recommendations have because they referred that had turkey not cleared its name they may have downgraded the credit rating because it would have created more difficult so it is quite closely linked together so what happened will be interesting to watch that they would facilitate.
>> in paris in october they refuse to tell turkey as far as i know. was a part of that decision? >> i have no idea how fatf makes their decisions. >> there are 11 countries including yemen or kuwait and, etc. but turkey will not release that and other members objected to the request was it not a factor? >> i don't know. >> we're getting near the
end i'd like to ask the last question but christmas you have the opinion? i am sure those on the panel though that the general mood is this is not a conflict we should be involved nothing to affect the course. want to talk about that with reference to the foreign funding issue people will hear what you are saying and say the united states could have done all it wanted to to provide assistance in these people in kuwait still would have raised the same amount of money and even if we wanted to do something about it there is nothing
you can do although i do understand there is a change now but what can you do? we don't have the leverage to do anything. can you address that? >> i will give you the european perspective. [laughter] there is a significant concern in europe for about to blow back of the conflict of syria. as a as people do more research for those who choose to use travel from european countries to syria is quite considerable. money is involved who pays for them to travel to new syria who finances them once they get there constantly
think money is at the center and trying to address the financing i think it is important because the numbers are increasing dramatically looking at a small country like belgium and into syria there is a big problem with the u.k. commenting by the security service there. it is difficult to get your arms around it but without money perhaps there would be less willingness to travel from the european perspective is the most interesting part of the discussion. >> i would go back to a conversation i had at the end of 2012 a conference in joe hoffman to to unify the very fractious opposition i
remember vividly talking to one of the local military guys that was brought into the conference and he made the case please the fighters on the ground are living hand to mouth any flow will sway them this way or that way but there was something to that but hundreds of millions of dollars that would be very easily outweighed by one major donation difficult decided to get their act together in a clear way decide to help the opposition rather than individual parts. there was some moments
perhaps when unified support could have brought that together but i think the moment has passed and i am not convinced any more western support could unify the opposition that given how factious said has become that leaves us in a position that i don't know what can undo the damage up to this point with creating a syrian opposition deducing getting those countries on board to unify the opposition would be positive in the gulf countries are extremely important to get any successful geneva discussion moving forward. we say what about the regime with geneva? what about saudi arabia? because that seems the
equally important questions where we could have more influence. i think united states missed its moment. >> ask yourself the question where would the money come from if they did it come from where it was? in africa and they would be kidnapped for ransom so even if it slows the money may be reopened in a separate can of worms. >> i pave think we are too involved in the region but i definitely a understand the desire to pull back there is an much appetite that the same time it is easy to read their report to see that as indictment of u.s. policy. i think if u.s. played a
strong girl leadership role this is what we get from the u.s. not being strongly present to organize and take a leadership role. taking that or not i am not completely sure yet but i hope they are thinking about it that u.s. will be less for word in the gulf states have shown they will be more proactive in the region even in kuwaitis is not even a state that private actors who have this effect. regard this the policy of syria this is a good case study to sink about how the u.s. will play this role from not doing much of anything how can we start to
>> as a moderate in the privacy world i have come to a troubling conclusion the brokerage industry as it is today does not have constraints it does not have a shame. it will sell any informations about any person regardless of sensitivity at 7.$0.9 per name that is the list of the names of rape sufferers that was recently sold. they are victims of domestic violence, a police officer's home addresses, people who suffer from genetic illnesses complete with names, home address address, ethnicity, gender
>> good morning. ipo the deputy director i would like to welcome you to the council to this mexican congress passed last tuesday declared constitutional just yesterday after being approved of the majority of state legislatures are like to recognize how lucky we are the ambassadors here with us today we're lucky to have the ambassador here in washington as the of the antic council is a friend to the ambassador. thank you for coming. undersecretary of hydrocarbons traveled to washington for this event can did so and minimal sleep after working to get the reforms through congress
over the last few weeks it also like to welcome the other guest letter here from the international trade commission and friends of the atlantic council as well as those fetter here for the first event especially those joining us remotely through the web cast in those two inebriating in from c-span as well. wellcome. also many members of the mexican press we have arranged a special post event a briefing for them and other members so i asked that they hold their questions then and this is reserved for the non members of the press. arousal like to thank those to help to make the launch of the reports a success and the energy environment program in the atlantic council is fabulous extra of relations team.
the center began operations in october we're off to a running start. starting with the generous support of business leader adrian arch is specifically what we do today awareness of the transformation across latin america to change the nature of the discussion of the region with the potential highlighted as strategic and economic partner for europe and the united states and beyond. we could not think of a better first report than what we've released today. energy reform in mexico is precisely the transformation that shows the dynamism and reflects the changes seen across latin america. "the washington post" says it opens the door for a mexican economic takeoff. our report reflects the
philosophy of the center to be dynamic and vigorous. this morning the undersecretary will speak for about 50 minutes and graciously has agreed to take a few questions that will be managed and after that's the council's new report is launched today of a comprehensive energy reform then will give the overview of his findings and it is now made life on the web site as of 830 this morning. then we will have a conversation moderated by peter. don't worry there is a lot of time for an audience questions even for the web cast in those tuning into
element is that up to 10% of the initial dollar will go to the pension system. mexico is debiting in congress separation of a universal pension system. this will fund that pension system. the next 10% going to science and technology and renewable energy projects. the next goes to oil and gas investmen investments in norway where you have ministry of energy where you can put a financial take in some projects that seem to be promising. 10% goes to scholarships and regional development. so the idea of this is that the money that comes through the mexican oil reform goes mostly to long-term projects. so we establish a base for the budget that will allow us not to
have any hiccups. we are betting on the future of the country. next please. transparency is one of the most important elements of this reform. i haven't found a mexican that has been satisfied with the way it's worked so far in the oil industry in our country. so we need to have a new mechanism to do it better. the constitutional amendment goes to that in articles 9 and 21 so first, we're going to make the grounds and guidelines will be made public. so anybody can see it. second, transparency clauses will be included in oil and gas contrac contracts. so that the citizens of mexico and of the world can ask for those information. there will be full disclosure.
the money goes to the font and the font base for the costs. those transactions should be made public as well. and fourth, external audits. it's very important the funding. so we believe that we are establishing at the constitutional level we are establishing four almosts of best practices for. there's an article that allows congress to establish special legislation against corruption. and that is something also we need to tackle first. next please. this has been the main elements of the energy reform. i'm sure you have many questions to which i will learn a lot. i'm looking for that opportunity. as you also know the articles establish the guidelines looking forward. it's 120 days for implementing
legislation, which we believe will go through in the next congress. many of those elements will be fixed by congress and i just hope that you will invite me again in april so we can have another conversation once that legislation is approved. thank you very much. [ applause ] >> give us 15 minutes for questions. again, my welcome to everybody. i'm going to do something which my colleagues know i rarely do which is to stay silent. i would like to open up for 15 minutes to a couple questions from the floor for the under secretary. sir? >> bob wright, u.s. department of energy. it's been my experience that they have held their geological
data very close to vest. so my question is, will that be disclosed in general for all of mexico or will you have it remain for when you open up a particular area that it will be available and how will it be available? >> thank you. these are very important question. the constitutional reform establishes that that information being able to collect through the years goes to the national hydrocarbons commission. and the objective of that is to be able to make it public once the areas have been selected by the ministry of energy. so once we are opening up an area for bidding, the national commission will make public the information that we have for that area. in addition to that, we're giving the hydrocarbons commission the responsibility to contract private sector or
others to do studies for them. for most of the areas in mexico we only have two dimension studies. so we need to increase the quality of the studies that we have of our sub soil due to technological advances and that is behind on that. so first we collect the data into the international hydrocarbons commission. we open that up to be able to establish more information and once we decide an area will become available for competition, then we show that information. >> let me take some from here, sir. >> christian gomez. cure yos about the referendum being proposed in 2015. is there a real igsic chance this could stop the reform? >> thank you, christian. i don't think so, but this is something that will be still debated in mexico. as you know, there is still
secondary legislation to be approved by congress in order to regulate what we call -- a different technological effects than a referendum. and the process has not been started yet. so it will continue with the guideline that our constitutional reform has established secondary legislation in congress. >> how will this ge resolved in the end? >> we'll wait and see what happens with the legislation of that because right now it's not there yet. >> sir? >> will there be an emphasis or is it still too early on the onshore or offshore which have
tremendous potential? >> thank you. they have said he's very interested on keeping the on shore and the shallow waters that we call offshore with a small distance. so we will see first what happens here what will be the requests in the first 90 days. and. once that is approved. they can go into the process of changing those entitlements into contracts. he has been public about the idea of looking for help in some of what we call mature fields or brown fields and we will also be very open to see how it transits in shallow waters. it it seems to be the case that areas of deep water and deep waters off mexico or the shell
gas in the northern part that borders with texas, these are the states in the northern part seems to be more promising for participation. >> please. >> georgetown university. the united states and germany have embarked on a very ambitious plan for clean and renewable energy as part of the energy transportation process. could you talk a lil bit about your plan for energy efficiency and industry standards in that regard? thanks. >> this has been a very important topic of discussion in congress. two of the articles in the constitutional reform establish the responsibility of the mexican state to come up with a plan, a transition plan. that plan is going to be the
responsibility of the ministry of energy. what we see is that natural gas is a very important fuel because right now we have this big irony in the country that we have strong natural gas of what we're consuming. that also means that we would like to burn more natural gas to produce electricity in mexico. because we do not have a strong supply of natural gas right now, we are burning diesel, which is more polluting, but more importantly, it it costs us over four times or up to six times more than if we would be burning natural gas. so for environmental reasons and economic reasons, it's about policy that we're not producing enough to produce enough
electricity. more importantly if we produce more electricity with natural gas, we would be able to reduce the costs of electricity in mexico, which are very high. on average we are over 25% -- we pay 25% more in electricity in mexico than you guys pay in the u.s. and that's very bad for our business sector. so there's many reasons why we have to move to natural gas. a strong part of the the money that's being collected will go to renewable energy. and the constitutional amendment establishes a particular responsibility for congress. in next 120 days once a reform is published, it will cause specific legislation to push for renewables in the country. specific low has to be enacted because we have a strong potential to have more production of electricity and we need because right now we have 26 that have to do with that process and there's not a very
clear process how to get there. so you have to deal with different institutions and every time you go to one step, it it seems that you have left an institution behind. so it's just not right. we have now the responsibility through the constitutional reform to do it better. >> one more question. you sir. wait for the mic please. >> i'm david johansson with the trade commission. it's been 20 years since nafta was implemented and there's been much discussion on this anniversary both in the united states and mexico. did the implementation of nafta lead to what is occurring in mexico the opening of the energy sector to foreign investment? thank you. >> thank you. i was very young when nafta was -- i will say that obviously we're looking two elements that go in the same direction.
in the near term as i show ed i the slides, we have had a decreasing production of oil, of gas, and of petrochemicals. that created the need of the mexican government since he was a candidate. the responsibility to change the framework that we had. secondly, of course, we're interested in having a better economic integration in a way that allows us to compete on a fair basis. if our costs of gas and electricity are higher than those that are in the united states, we do not benefit the region. so we need to establish mechanisms to make the whole area competitive and i think that this reform accomplishes bothiv bothiv both objectives. >> thank you. >> i wish i could take more questions. >> you will.
>> i'll be around if there's other questions. >> we will come back in a if few minutes with a larger panel. i'd like to ask david goldwin to talk about his report and frame the discussion that we'll have in the panel. thank you very much. why done we sit down. [ applause ] >> mr. ambassador, mr. sec tarks let me say thank you for the privilege of being able to be part of this report. i want to thank three members of my team that ra indispensable who made immeasurable contributions. the first finding that we make in this report is you have to appreciate what a remarkable feat of political state craft and statesmanship this reform is. here in washington we pat ourselves on the back if we get bipartisan agreement to keep the government over for another few
months. but mexico has with the agreement of three parties that don't agree with each other much have done education reform, fiscal reform and now two of the three major parties energy reform so it's a formidable accomplishment. it's breath taking in the scale of its ambition. it will move mexico from a major to a strategic supplier of oil and revive its economy and be positive for the hemisphere. i think you have to understand that these changes are permissive and directive in nature. the constitution permits private informsment into the upstreet, midstream and downstream and directs legislature to create legislation and then regulators to create regulations. now the hard work begins. it's all about implementation and execution. but i think for me there are five more accomplishments that are worth pointing out. the most obvious is the introduction of private
investment. the second is that mexico has separated energy policy from industry supervision. this is classic best practice. so you have the energy administration setting policy and five new regulators in safety and environment managing the pipeline system that have to be stood up. but they will do the monitoring. that's quite best practice. third is this new and very transparent petroleum fund which has independent supervision, caps how much money will come out of the industry to the federal budget and directs all these other purposes. fourth is transparency. if implement theed the mexico system will be among the transparent. and transparent that contracts will have a degree of public accessibility. costs paid by the industry are directed to be transparent as well as the fund itself. it's quite remarkable. fifth is this commitment to stainability. it's directed as secretary said in two of the transitory articles that in the electricity system and the hydrocarbon
system there are supposed to be stainability goals. my sense is that there are three major categories here. the first will involve pemex on what it calls its bitten apples. more or less abandoned as it it it moved on to the next high pressure field. so with some basic enhanced oil recovery and a good deal of capital, mexican can increase a day much as we have seen iraq do through conventional oil field services. pemex believe it is will keep kmz for itself, but you never know what kind of offers they may get. the transitory articles in the constitution indicate that reserves will be bookable and they have taken every pain short of saying book reserves to say that the system is designed to allow companies to account for the future benefits of the contracts they are entering
into. so i think these joint ventures are the first area of opportunity first on these bitten apples, second on the existing deep water fields where they have exploration, which will be part of their obligations where they can bring the joint venture. the second will be the seismic area where there will be a need for 3-d seismic for companies. third will be after the round zero, probably a year after legislation the new deep water. that's where you will see the greatest influx of companies or partnerships with pemex. we see zen significant challenges for mexico to overcome in accomplishing this reform. the first is managing expectations because as people who know this industry know well, the rampup ask kind of slow and will take years to get it. there will be a rise in investment and managing expectations from the public will be important. like wise in the power sector, you're going to need to develop gas and transport gas to
substitute gas for fuel order so it's going to be awhile before you see the results. this is what's statesmanship about this. this government is uncertain whether in the next five years they will see the share of these benefits but they did it any way. the second challenge will be delivering competitive oil and gas exploration terms. there are a lot of hands in that pot. there's the finance ministry on the terms. they have to move quick and they have to be competitive where we could be dealing in a world of $80 oil. it's not clear how it will work, but for each of the terms and also we need to find out when we'll figure out which scheme will apply to which form of acreage. will it be a concession? will it be production sharing? that's a challenge. the third is building these effective regulators. five fantastic regulators but you're going to need people. you're going to need rules. and you need to move fast. i think the bell weathers are whether mexico outsources and
brings in external help, external expertise to bridge the gap to where they train their own regulators. the fourth is the value proposition for the power sector. that's where there's not as much detail in the power sector. but who will be able to invest, will they be able to sell directly o customers and at what price. price is a big issue. and gasoline prices are subsidized. subsidy reform dropped out of the reform. how that takes place, how subsidies are dealt with will affect the power sector. fifth is cutting the cord which the framework says five government director, the minister decides. it's a new commercial public enterprise. it has more ability to plan on its own. how big is the dif depend going? the government is going to be relying on pemex in the early
years. the sixth is trusting the market. if it turns out that the sbes to import gasoline and natural gas, will that be okay? or will measures be taken to direct where investment goes? and the seven is local content. there's talk about the need for local content rules. will it be less ownerous. but that remains to be seen. so in terms of the opportunity, i think there are four tremendous opportunities for mexico here. first, in terms of bricks, it's to be best in class. this is the government that can do structural reform. this is the government that can move quickly. so among all the other countries out there, if implemented well, this will move mexico to the head of the class not just in energy but in other areas where it it will look like the country to invest in. the second is prosperity.
if this works, you have positives for investment, manufacturing, job creation, cheaper energy and i think in terms of energy investment if this model works the way it's designed, mexico will be in poll position in the hemisphere. if your choice is brazil, colombia is extremely competitive. if you have offshore, where do you want to be? mexico has the chance to be the most competitive. i think the third is stature. mexico's ability to implement these reforms will give it it stature from the transparency, from the agility, from the market competitiveness, that has credit on the international stage. finally to be a strategic supplier by 2025 as production peaks mexican production if all goes well will begin. to come on board. all these deep water fields will take ten years.
that's when opec peaks. so mexico can take that place and be very strategy ping so we call this report energy reform at last because 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 the terms to see what you can book, how competitive they are and some speed. but we also call it it mexico rising because there's no question that while the road here to implement this will be bumpy, there's no turning back now. the government has made this commitment. so it's a remarkable accomplishment. i can only say that mr. ambassador and mr. secretary, we wish you well in completing it. thank you. [ applause ] >> thank you. they are going to put some extra chairs up here. i'd like to invite the panelists to come back up.
>> again, i'm the director. i'd like to thank all the panelists for coming. thanks for the fascinating 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's a warning wauz because i'm going to try to redeem myself. i'm going to try to center my questions on three principle areas, which is the mechanics of the reform, the business implications of the reform, and then what are the implications for mexico and mexico's future? and i'm not an energy expert. i'm just the locally commonly
found washington policy civilian. so let me start with duncan and ask him for his comments. but i'd love if you could place those comments within the context of what is this going to mean for a new north american revival in particularly in the energy industry, but given as we heard that nafta is now just coming on to its 20 years, what is nafta 2.0 and how does this energy reform fit in that? >> thanks. and thanks for inviting me today. first of all, i would echo the sentiments that have been expressed already. this is a paradigm shift. for those who have been engaged in mexican energy policy work for a number of years, i fell into it almost by accident in 2005. it emerged at a meeting at mexico city. we were talking about the future of north america. the question was what do we do
with energy? the situation was very dirvelt back in 2005, 2006. the big concern in the united states was energy security. the big concern was where are we going to find the energy, the oil and gas that we need to really power our economy? fast forward eight years, and we're in a very, very different situation. the united states is now in a situation where it's look at regional energy or north american energy independence or atonmy. it's been through and going through the shale revolution. and feels much more secure about itself. i think this is a very, very important dimension in understanding the way in which this reform in mexico has been received in the united states. there's a big difference. if. you talk to people in houston, you see enormous excitement about the business opportunities there. that's great, we're happy for you guys. which is very different to how it was in 2005. or even in 2008 when the last
attempt to bring 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. and mexico's reform is kind of like the icing on the cake. it means that we're now going to see potentially another million barrels of oil production per day being added by 2025. i would actually put it a little later than that. we're going to see, hopefully, rising levels of natural gas production. and we're 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 it touches on many things that enrique pointed to. which is that we need to guarantee not just 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 in
canada, and we need to lower them significantly in mexico. partially that's for competitiveness and partially because people need it. some people in mexico spend up to one-third of their income on their electricity bill every month. in the north of the country, we need to lower those electricity costs for social purposes as well. the energy reform that we're seeing go through the congress right now is something that really offers that possibility. so i think it's a game changer. as david has said, there's still a lot of work to go to happen. in the first 120 days of next year, we're going to see that. enrique, i know you graduated from 1997, something like that. i was there then. if the same speech he always gives at the graduation ceremony, i had to hear it like 34 times in my time that i was there as director of program. he always said this.
[ speaking in spanish ] . this moment is like that. we're celebrating a graduation. it's moving on to the next stage of life. the real exams are going to begin now. there's so much work to do. and that's why i think it's so important that we keep our focus on the oil and gas sector and many of the questions that david brought up earlier on. >> that's a great segue for a question for horge. while he comes with academic, it's not where he spent most of his life because you're the only one on this panel who was an oil executi executive. so talk to us a little bit about what is going through an energy executive's mind right now and how is this seen to him as a game changer and how does a spanish, french or u.s. energy executive choose between now
mexico or trinidad? what goes through an executive's head. >> first of all, thank you for the atlantic council. thank you for being here. just like in business, sometimes the easiest thing to set up is the strategic plan. the tough part is the business plan to implement the the strategic. that's the toughest part. so i think all of us have talked through the challenges that we are facing. i hate to say it, but maybe this was the easiest part of the whole energy reform part and still because of all the raised expectations, there's a tough road ahead. i certainly don't represent the industry, but after working in the energy sector and oil sector for 34 years, 5 of those in mexico city, i want to basically focus my comments on three areas
and then that way we can get some conversation from the audience. i want to talk about pemex. pemex is not going away. pemex is also not going to be privatized. i don't like the word privatization. i prefer recapitalization. hopefully some day will welcome private capital can participate in the growth of what is going to be an extremely important company such as pemex. so forget about the privatization of pemex. hopefully we'll see the recapitalization of pemex. but we have to be sure that pemex is able to compete in this new word. pemex cannot take and play an important role in this whole process if it has one hand tied behind its back. i am extremely pleased that about 10% of the fund that's going to go to technology and
science that is extremely important. that's one of the areas the secretary said we know is very interested in. pemex is going to go through what i consider a very important brain drain. all of these new companies come into mexico to operate, let me assure you that a lot of the geologist, a lot of the petroleum engineers are going to come from pemex. pemex in the next five years faces a retirement vacuum. many of them from austin are about to retire in the next three to five years. so there's a huge technical knowledge based challenge that pe medical examiner is going to face. the most important thing to change is the culture of the company.
it's the culture that a company learns when we become international. today, for example, has joined ventures in the gulf of mexico with shell. they are doing that and hoping to make money in the gulf of mexico but because it's learning along with shell how to develop these deep water resources like colombia is going to begin doing in the deep waters of the caribbean. it's very important that the reengineering of pemex also becomes a very important piece of this energy reform. my other comment that we're going to be looking at from, i think, the oil company's point of view is the downstream sector. pemex shown here there's about 2 million barrels a day of demand. there's about 1.6 million barrels a day of what we call boilerplate refinery capacity. there's only about 1.2 of that
capacity that's operable. therefore, that huge gap of over 600,000 barrel a day of import not only of gas of refined products, but also of natural gas. at a value of over $20 billion a year deficit is what the imports of refined products and gas. that's an issue that also has to be addressed. the refinery has been tabled. but i think that refining sector is going to be extremely important in mexico. we're going to see if pemex can do joint ventures in the u.s. with u.s. refineries. it takes anywhere between three to seven years to build a whole refinery system. so maybe there's some joint venture possibility in the u.s. gulf of mexico. last, and i think it's very important, is offshore safety. we were recently in a meeting in tampa talking about offshore safety in the gulf of mexico.
we were very pleased to see that was there. had a very important presence in that meeting because as mexico now begins to drill, we already have at least that are drilling about 30 miles south of the u.s. maritime border on the area. what happens and how we're going to manage a catastrophic event like deep water horizon. we have an agreement between the united states and mexico and how to handle from a technical point of view a major transboundary event like this. but those of us that went through the deep water horizon incident know how difficult it is to manage such an event. so i think that offshore safety is something also, peter, that
not only the industry, but alsos the united states government and others should be very concerned with. >> jorge, thank you. let me ask who may have some issues with the statement that it was so easy to get this done over the last couple. but let me look towards the future and ask you a little bit about managing expectations in mexico. this reform promises a lot. but a lot won't come so quickly. and so now polls are saying that the reform is not that popular. the economy is yet to take off in a very definitive way. how do you keep going in this political part? because as you try to fix the policy, you need to keep the politics right. >> that's a very interesting and fair question. but first, let me take on the
fact that this was very easy. >> i had a feeling you wanted to comment on that. >> i'm looking forward to see how that plays out. it's really an achievement of the country because four important political parties have proved their reform. it has over 20 state legislatures. i think that shows leadership. now with the polls, it really depends, as in many important issues in public policy, what type of questions you ask. if you describe the benefits of reform of this type, the majority of the feel that are in favor of paying lower costs in electricity or gas. if you want to privatize pemex, you have a high response of no. but this reform is not pemex.
it's natural gas in mexico and that will decrease the costs of electricity through the process that we have discussed before. so i believe that this reform as it evolves it will show the benefits to the mexican people. we have also been very careful following the instruction of the president not to establish a timeline that it's not going to be achievable. we believe that as david describes accurately that it's going to take time. and the constitutional reform establishes already a timeline. we are going to follow it. we can migrate from those contracts from those to new contracts. pending of secondary legislation that shall be put into discussion in the next period. once congress approves legislation, we're looking for a one-year period of time for pemex to get its transition to
contracts. we will see up to two years for the first bidding round. as you said around 2016, we might be around that time in 2015, 2016. as many of the specialists that are here with us today know, implementation of such reforms in brazil and colombia took time. we're fully aware of that now. we also believe that there are some fields that will benefit from this type of new contract sooner than others. shell gas and shell oil in the northern part of the country or shallow water or brown fields in pemex will show an increasing production earlier than deep water in the gulf of mexico. so we will see some benefits coming in. we are estimating that our oil production will increase from the 2.5 million barrels a day that we have now to around 3 million barrels a day to 2018 into 3.5 by 2025. we believe that's a fair estimate.
we also believe that an increasing production of natural gas from the 5,700 cubic feet that we produce today to around 8,000 by the end of this administration in 2018 and 10,400 around 2025, which will allow us to reduce our imports substantially from u.s. and decrease the costs of gas and electricity. we believe that those numbers are there. if you go to numbers of investment, we have seen many of the companies that have made those estimates show that around $10 billion by the end of 2018 of foreign direct investment we believe that that's fair. that's an increase by 50% of what the foreign investment in mexico is today. so that is a huge jump if we achieve that number by 2018. but those are estimates from private sector think tanks.
now on jobs, we believe that we will increase by half a million new jobs by 2018 over 2.5 million jobs by 2025. so those are the estimates that we have put forward to the mexican people. we believe this is obviously something that we will achieve in the middle range and long range. we don't think we are going to have something immediate. we think in order to get it right, we need to do it one step at a time. we're committed to do it that way. >> let me ask you. outline where we are and where we are going to be. fill in for us for the civilian like me how do i measure progress along that road? what are the milestones that we should all be looking for that this is going in the right direction, that this is on time, that we're -- and as you do that, who has done this really well and what example should we compare mexico to as a best case
scenario. >> i have four bell weathers that i guess i would watch in the the next six months. the first is legislation. the mexican government has already prepared drafts of legislation for implementation. we'll see what do these frameworks look like, how predictable will it be. so legislation is the first benchmark. the second is going to be budget. because if they get a significant budget allocation to buy seismic, if we see the agencies are funded to stand up to safety rules or the environmental rules or even the licensing requirements, then we're going to see that we can predict, i guess, if the regulators are going to move swiftly. the third is outsourcing. you're going to need a lot more information about the nature of distribution about whether there's metering at the houses. what do we know about the quality of transmission.
that information has to be organized and presented for investors. i would be watching. is there budget. and fourth would be leadership. are we going to see shadow leaders of these efforts? president obama brought in mike and this is the guy who is going to fix this. so we should start to see shadow leaders for the environmental effort. probably if there's maybe a leadership. so i think those are the four bell weathers for me. brazil did it it right the first time. then their second reform has taken it back. so i would say the opening to the upstream, norway, brazil have followed that model. i think the u.s. and norway have done it, but algeria did it. iraq did it. the system of open criteria, you open the envelope and see who wins. the independ
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