Publication: Regulatory Reform in Mexico's Natural Gas Industry : Liberalization in the Context of a Dominant Upstream Incumbent
Loading...
Published
2001-01
ISSN
Date
2014-08-26
Author(s)
Editor(s)
Abstract
The natural gas industry combines activities with natural monopoly characterisitics with those that are potentially competitive. Pipeline transport and distribution, which have natural monopoly characterisitcs, require regulation of price and non-price behavior. Production is a contestable activity, but in a few countries (including Mexico) it remains a state monopoly. Gas marketing is also contestable, but the presence of a dominant, upstream, vertically integrated incumbent may pose significant barriers to entry. Market architecture decisions--such as horizontal structure, regional development, and the degree of vertical integration--are also crucial. The authors report that Mexico has undertaken structural reform in the energy sector more slowly than many other countries, but it has introduced changes to attract private investment in natural gas transport and distribution. These changes were a response to the rapid growth in demand for natural gas (about 10 percent a year) in Mexico, which was in turn a response to economic development and the enforcement of environmental regulations. The new regulatory framework provides incentives for firms to invest and operate efficiently and to bear much much of the risk associated with new projects. It also protects captive consumers and improves general economic welfare. The continued vertical integration of the state-owned company Pemex and its statutory monopoly in domestic production posed a challenge to regulators. Their response in liberalizing trade, setting first-hand sales prices, and regulating natural gas distribution makes the Mexican case an interesting example of regulatory design. As the first phase of investment mobilization and competition for the market in Mexican distribution project concludes, remaining challenges include consistently and transparently enforcing regulations, coordinating tasks among government agencies, and ensuring expansion of gas transport services and domestic production. A key challenge in the near term will be fostering competition in the market. In strengthening the role of market forces, one issue is Pemex's discretionary discounts on domestic gas and access to transport services, made possible by its monopoly in domestic production and marketing activities and its overwhelming dominance in transport. The main instrument available to the regulator is proscribing Pemex contract pricing, but more durable and tractable instruments should be considered.
Link to Data Set
Citation
“Rosellon, Juan; Halpern, Jonathan. 2001. Regulatory Reform in Mexico's Natural Gas Industry : Liberalization in the Context of a Dominant Upstream Incumbent. Policy Research Working Paper;No. 2537. © http://hdl.handle.net/10986/19726 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication The Economic Value of Weather Forecasts: A Quantitative Systematic Literature Review(Washington, DC: World Bank, 2025-09-10)This study systematically reviews the literature that quantifies the economic benefits of weather observations and forecasts in four weather-dependent economic sectors: agriculture, energy, transport, and disaster-risk management. The review covers 175 peer-reviewed journal articles and 15 policy reports. Findings show that the literature is concentrated in high-income countries and most studies use theoretical models, followed by observational and then experimental research designs. Forecast horizons studied, meteorological variables and services, and monetization techniques vary markedly by sector. Estimated benefits even within specific subsectors span several orders of magnitude and broad uncertainty ranges. An econometric meta-analysis suggests that theoretical studies and studies in richer countries tend to report significantly larger values. Barriers that hinder value realization are identified on both the provider and user sides, with inadequate relevance, weak dissemination, and limited ability to act recurring across sectors. Policy reports rely heavily on back-of-the-envelope or recursive benefit-transfer estimates, rather than on the methods and results of the peer-reviewed literature, revealing a science-to-policy gap. These findings suggest substantial socioeconomic potential of hydrometeorological services around the world, but also knowledge gaps that require more valuation studies focusing on low- and middle-income countries, addressing provider- and user-side barriers and employing rigorous empirical valuation methods to complement and validate theoretical models.Publication It’s Not (Just) the Tariffs: Rethinking Non-Tariff Measures in a Fragmented Global Economy(Washington, DC: World Bank, 2025-10-22)As tariffs have declined, non-tariff measures (NTMs) have become central to trade policy, especially in high-income countries and regulated sectors like food and green technologies. Although NTMs may serve legitimate goals, they could also sort countries and firms into or out of markets based on compliance capacity and differences in product mix. Documenting recent advances in the estimation of ad valorem equivalents (AVEs), this paper uncovers new patterns of use and exposure of NTMs. High-income countries rely more heavily on NTMs relative to tariffs, while low- and middle-income countries face steeper AVEs on their exports. Firm-level evidence shows that NTMs disproportionately affect smaller firms, leading to market exit and concentration. Poorly designed NTMs can harm productivity and welfare, while coordinated, capacity-aware use can deliver inclusive outcomes. Policy design, transparency, and diagnostics must evolve to reflect the growing role—and risks—of NTMs in a fragmented global trade landscape.Publication Monitoring Global Aid Flows: A Novel Approach Using Large Language Models(Washington, DC: World Bank, 2025-11-04)Effective monitoring of development aid is the foundation for assessing the alignment of flows with their intended development objectives. Existing reporting systems, such as the Organisation for Economic Co-operation and Development’s Creditor Reporting System, provide standardized classification of aid activities but have limitations when it comes to capturing new areas like climate change, digitalization, and other cross-cutting themes. This paper proposes a bottom-up, unsupervised machine learning framework that leverages textual descriptions of aid projects to generate highly granular activity clusters. Using the 2021 Creditor Reporting System data set of nearly 400,000 records, the model produces 841 clusters, which are then grouped into 80 subsectors. These clusters reveal 36 emerging aid areas not tracked in the current Creditor Reporting System taxonomy, allow unpacking of “multi-sectoral” and “sector not specified” classifications, and enable estimation of flows to new themes, including World Bank Global Challenge Programs, International Development Association–20 Special Themes, and Cross-Cutting Issues. Validation against both Creditor Reporting System benchmarks and International Development Association commitment data demonstrates robustness. This approach illustrates how machine learning and the new advances in large language models can enhance the monitoring of global aid flows and inform future improvements in aid classification and reporting. It offers a useful tool that can support more responsive and evidence-based decision-making, helping to better align resources with evolving development priorities.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication The State of Global Services Trade Policies: Evidence from Recent Data(Washington, DC: World Bank, 2025-10-28)The economic environment for services trade has changed dramatically over the past 15 years, driven by rapid technological progress that has expanded the possibilities for exchanging services. How has trade policy responded to these changes? How do policy stances in a wide range of service sectors compare across economies? With its unprecedented global coverage, the Services Trade Policy Database and the associated Services Trade Restrictions Index, developed jointly by the World Bank and the World Trade Organization, help address these questions. This paper makes three principal contributions. First, it offers an in-depth discussion of the current state of services trade policies and their differences across 134 economies and 34 services subsectors. Second, the paper reveals how recent (2016–22) changes in policy stances have seen progressive liberalization by lower-income economies but stabilization or even slight policy reversals in high-income economies. This dynamic differs fundamentally from the trend that unfolded after the Great Recession over 2008–16. Third, the paper shows the implications of policy changes over the past six years on services trade costs, and it showcases how the Services Trade Policy Database’s regulatory information can inform trade negotiations, regulatory analysis, and policy making. Alongside these contributions, the paper documents updates to the Services Trade Policy Database’s economy and sector coverage and explains the latest methodological improvements made to the World Bank–World Trade Organization Services Trade Restrictions Index.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Exploring the Potential for Electricity Trade and Interconnection among Yemen and GCC Countries(Washington, DC, 2009-10-01)This report has been prepared by Economic Consulting Associates (ECA) under contract to the World Bank to explore the potential for interconnection and electricity trade among Yemen and the countries of the Gulf Cooperation Council (GCC). The primary objective for this study is to identify the efficient scenarios to utilize gas and electricity resources through cross-border integration among Yemen and the GCC countries. The analysis includes an assessment of gas resources available for the electricity systems and identification of the potential for cross-border interconnections and integration among the respective countries to identify efficient, ways to utilize the gas resources and generation capacities from national and regional perspectives. The key findings of the study are as follows: a) reform of natural gas pricing policies in the GCC countries would encourage the development of gas resources and discourage the use of gas for energy intensive export industries, petrochemicals, aluminum, etc. This will release natural gas for power generation and could release some gas for export either to GCC neighbors or to the rest of the world; and b) there are no benefits to interconnecting Yemen and Saudi Arabia's networks for trade in bulk electricity. Yemen's power system is too unreliable at present to be considered for reserve sharing as a member of the GCC interconnection scheme. Investigation of the Yemen-Saudi interconnection should therefore be postponed.Publication Natural Oil Companies and Value Creation : Volume 2. Case Studies(World Bank, Washington, DC, 2011-03)Approximately two billion dollars a day of petroleum are traded worldwide, which makes petroleum the largest single item in the balance of payments and exchanges between nations. Petroleum represents the larger share in total energy use for most net exporters and net importers. While petroleum taxes are a major source of income for more than 90 countries in the world, poor countries net importers are more vulnerable to price increases than most industrialized economies. This paper has five chapters. Chapter one describes the key features of upstream, midstream, and downstream petroleum operations and how these may impact value creation and policy options. Chapter two draws on ample literature and discusses how changes in the geopolitical and global economic environment and in the host governments' political and economic priorities have affected the rationale for and behavior of National Oil Companies' (NOCs). Rather than providing an in-depth analysis of the philosophical reasons for creating aNOC, this chapter seeks to highlight the special nature of NOCs and how it may affect their existence, objectives, regulation, and behavior. Chapter three proposes a value creation index to measure the contribution of NOCs to social value creation. A conceptual model is also proposed to identify the factors that affect value creation. Chapter four presents the result of an exploratory statistical analysis aimed to determine the relative importance of the drivers of value creation. In addition, the experience of a selected sample of NOCs is analyzed in detail, and lessons of general applicability are derived. Finally, Chapter five summarizes the conclusions.Publication Energy Policies and the Mexican Economy(Washington, DC, 2004-01)The report looks at energy policies in Mexico (both a major energy producer, and consumer) within its economic context, how the energy sector is managed, and how it performs, and at the implications for economic growth and public finances, and by extension, for broader social policies which depend heavily on federal funding. The energy sector finds itself in a vicious circle - reduced budget and borrowing capacity are leading to insufficient sector investment - resulting in declines in future production, hence government revenue. Breaking this vicious circle is a major challenge, given that attracting finance for energy sector investment on a major scale, without government support, lies at the heart of the problem. The report reviews the choices to increase efficiency, and electricity subsidies, as well as those for efficiently expanding oil and gas output. Three key areas for reform are discussed: a) achieving permanent gains in operational efficiency of the power and hydrocarbons sectors, to lower costs and improve service quality; b) restructuring electricity subsidies, targeting the poorest households; and, c) opening the hydrocarbons sectors to new players, attracting funds and skills, needed to undertake exploration, and development of the country's oil and gas resources. A policy simulation outlines the potential dynamic, general equilibrium model, assessing the economic impact of alternative energy policies. The analysis indicates that whereby an overoptimistic picture of the economic performance results from weak employment and wage estimates, conversely, the importance of increasing oil production will be undervalued, if the wage constraint is ignored, since this may be the single most important variable for ensuring that the real wage constraint does not bite.Publication Vietnam : Framework for Thermal BOT Tenders and Strategy for Gas Coordination and Harmonization with Market Roadmap, Volume 1(Washington, DC, 2009-06-20)The purpose of this Volume 1 report is to explore how development of the gas andelectricity sectors can be better coordinated within this dynamic environment. In particular,this report aims to: Briefly outline the gas resources and developments in Vietnam, and describe the current institutional arrangements for the gas sector and how they relate to overall gas and electricity planning; Identify key gas sector issues as they relate to gas and electricity sector planning in general and BOT electricity generation project development, and in particular identify the development and operating risks for a BOT electricity generation project developer and suggest mitigation measures for these risks ;Suggest mechanisms to improve gas and electricity planning coordination. Present a case study that illustrates some of the gas and electricity planning issues and how these would be addressed if the suggested planning changes were implemented. This assignment has been undertaken during a period of unprecedented change in Vietnam. The electricity sector is part way through the complex process of introducing a market. In global world energy markets, oil prices have risen to USD140/bbl and then dropped to below USD50/bbl in less than a year. In global financial markets, the world isfacing the deepest recession in decades, the banking sector is in turmoil, and theavailability of credit has shrunk dramatically. It is difficult for any planning process to cope with these massive worldwide shifts and fully capture the expected economic impact on a rapidly growing economy such as Vietnam. As a result of these events, some data such as electricity load forecasts and the least-cost ranking of generating plant would likely differ if they were updated. Nonetheless, the fundamental observations and recommendations of this report remain relevant despite (or perhaps because of) the volatility of international markets. And while recent economic volatility complicates planning, it makes it all the more necessary.Publication Peru's Downstream Natural Gas Sector : A Preliminary Assessment(World Bank, Washington, DC, 2011-02)This study assesses the natural gas market in Peru. In the process of evaluating the downstream market, the study identifies opportunities for meeting the Government s aspirational goals with respect to energy and natural gas development, including the efficient use of natural gas in the power and other sectors, strengthening and coordinating national energy planning for the gas sector, infrastructure development and prospects for decentralization of the natural gas market in Peru, and the potential of natural gas pricing reforms for the promotion of hydroelectricity and other renewable energy sources. This report is divided into five chapters. Chapter I describes the context in which this study was prepared. Chapter II presents a history of the natural gas sector and the Government of Peru s policy objectives to increase the use of natural gas in the domestic economy. Chapter III presents potential new markets for natural gas within the present context of the natural gas industry and the Peruvian economy. Chapter IV describes findings, issues, and options for improving Peru s downstream natural gas sector, including a discussion of the consistency between the Government s objectives and its policies for the sector. Chapter V sets out the conclusions of the study.
Users also downloaded
Showing related downloaded files
Publication Revising the Roads Investment Strategy in Rural Areas : An Application for Uganda(2009-09-01)Based on extensive data collection in Uganda, this paper demonstrates that the rural access index, as defined today, should not be a government objective because the benefit of such investment is minimal, whereas achieving rural accessibility at less than 2 kilometers would require massive investments that are not sustainable. Taking into account the fact that plot size is limited on average to less than 1 hectare, a farmer s transport requirement is usually minimal and does not necessarily involve massive investments in infrastructure. This is because most farmers cannot fully load a truck or pay for this service and, even if productivity were to increase significantly, the production threshold would not be reached by most individual farmers. Therefore, in terms of public policy, maintenance of the existing rural roads rather than opening new roads should be given priority; the district feeder road allocation maintenance formula should be revised to take into account economic potential and, finally, policy makers should devote their attention to innovative marketing models from other countries where smallholder loads are consolidated through private-based consolidators.Publication Drawing a Roadmap for Oil Pricing Reform(World Bank, Washington, DC, 2013-05)In 2011, the median oil imports rose to 5 percent of gross domestic product for net importers. In the past several years, many governments have not passed through the world oil price increases to consumers fully. As a sign of divergent pricing policies, the retail prices of gasoline, diesel, and cooking gas in January 2013 varied by a factor of 190, 250, and 70, respectively, across developing countries. Policies to keep oil product prices low to benefit the economy and protect the poor have had a number of unintended negative consequences, including flourishing corruption in the oil sector and entrenchment of monopoly operators or inefficient firms through which subsidies are channeled, stifling competition and raising costs. The path to market-based pricing depends on the starting conditions: the gap between current and market-based price levels, the level of public awareness about the extent of departure from market prices, the degree of market concentration and competition in downstream oil, the subsidy delivery mechanism where subsidies are provided, the robustness of social service delivery, and the perceived credibility of the government. The evidence presented in this paper suggests that pricing reform often does not have a clear end and should instead be viewed as a continuous process of adjustment and search for mechanisms that take into account the country's institutions and political system, and the oil sector's market structure, infrastructure, and history.Publication Participatory Forest Management and REDD+ in Tanzania(World Bank, Washington, DC, 2011)Tanzania's land, local government and forest laws mean that rural communities have well defined rights to own, manage and benefit from forest and woodland resources within their local areas through the establishment of village forests. This approach, known by practitioners as Community Based Forest Management (CBFM) results in the legal establishment of village land forest reserves, community forest reserves or private forests. By 2008, 1,460 villages on mainland Tanzania1 were involved in establishing or managing village forests covering a total of over 2.345 million hectares. A further 863 villages are currently involved in Joint Forest Management (JFM) approaches within government forest reserves, in which management responsibilities are shared between government and local communities. 1.78 million hectares of forest reserve under central or local government jurisdiction are now under JFM arrangements. Since 2008, the Tanzanian government has been making preparations for the establishment of systems and structures for REDD Plus (Reduced Emissions from Deforestation and Forest Degradation). Tanzania is being supported in its preparations by the World Bank's Forest Carbon Partnership Facility (FCPF), UN-REDD plus and the Norwegian Forests and Climate Initiative as well as a number of local and international Non Government Organizations (NGOs). This report has been prepared to provide inputs to the development of policy processes currently evolving in Tanzania regarding REDD plus. This review draws on almost two decades of experience within Tanzania on the development and establishment of Participatory forest management (PFM) an approach which (like REDD plus), aims to achieve the combined objectives of sustainable forest management with secure rights, improved local forest governance and secure livelihoods for forest-dependent communities.Publication Mozambique - Analysis of Public Expenditure in Agriculture : Core Analysis(World Bank, 2011-02-19)The objective of this Agriculture Public Expenditure Review (AgPER) is to provide an assessment of the present situation and to offer recommendations to improve the effectiveness and efficiency of public spending in agriculture in Mozambique. The report provides a sectorwide picture of the magnitude and structure of public spending for agriculture in Mozambique over the past six years, and an overall assessment of the budget process in agriculture. It is intended that this analysis will inform future decisions over priority public expenditures for agriculture and the shifts in expenditure allocations and other measures that are necessary to make the most effective and efficient use of government budgetary resources and donors' contributions in the agriculture sector. The information is also meant to inform the New Partnership for Africa's Development (NEPAD) secretariat about the level and structure of spending in agriculture in Mozambique, and help the Ministry of Agriculture; since 2005 (MINAG) to report suitable figures to NEPAD. The report discusses the budget process in agriculture (budget planning, execution, and reporting) and the linkages between agricultural sector policies and strategy and public expenditures. It suggests possible ways to raise the effectiveness and efficiency of current public spending in agriculture, with a view to enhancing its contribution to Mozambique's economic growth and poverty reduction objectives. An analysis of the spatial pattern of expenditure is also provided. Some emphasis is placed on the adequacy of data sources and planning and on the budgeting procedures necessary in order to continuously align expenditure to objectives, and to maximize their impact. The report also draws some broad conclusions with regard to key options of agricultural policy on the basis of the data collected and available information on the relationship between costs and effects of selected activity strata.Publication Namibia: Country Brief(World Bank, 2009)Namibia is a large country in Southern Africa that borders the South Atlantic Ocean, between Angola to the north and South Africa to the south. With a surface area of 824,290 square kilometers, it is similar in size to Mozambique and about half the size of the U.S. state of Alaska. Namibia has a small population of approximately 2.1 million people. It is also one of the least densely populated countries in Sub-Saharan Africa, with an average density of approximately 2.5 people per square kilometer, compared to 34 people per square kilometer for the region as a whole. Namibia was the last colonized country in Sub-Saharan Africa to become independent. After nearly 70 years of South African rule, Namibia gained its independence on March 21, 1990. Until 1990, Namibia's official languages were German, Afrikaans, and English. Following independence, English became the official language, although it is the first language of only a very small percentage of Namibians. Oshiwambo dialects are the mother tongue of approximately half of the population. Namibia, a lower-middle-income country, has one of the highest levels of per capita income in Sub-Saharan Africa. Namibia is one of very few countries in Sub-Saharan Africa that maintains a social safety net for the elderly, the disabled, orphans and vulnerable children, and war veterans. It also has a social security act that provides for maternity leave, sick leave, and medical benefits. Namibia has one of the most productive fishing grounds in the world. The fishing industry is an important source of foreign exchange and a significant employer. The tourism industry in Namibia is similar in size to that in Botswana and is the country's third-largest foreign exchange earner. Namibia is one of the largest producers of gem quality diamonds in the world. It is estimated that 98 percent of its mined diamonds are gem quality. In 2006, almost half of total production was recovered from offshore sources. Namibia is the driest country in Sub-Saharan Africa, with deserts occupying much of the country. It has no perennial rivers or any other permanent water bodies. Due to the low and erratic rainfall and scarce ground and surface water, less than five percent of the country is arable, including through irrigation. Namibia was the first country in the world to incorporate environmental protection into its constitution. Nearly six percent of its land is nationally protected, including large portions of coastal areas within the Namib Desert.