ATB Financial is involved in funding several gas and oil projects. What is their area of interest outside of Alberta?

Given ATB’s mandate to support Alberta-based businesses, our exposure to international gas and oil projects is directly tied to our clients and their activities outside of the Alberta and Canadian markets. Our international activity in the gas and oil sector began in the United States, but we have experience working with clients who have projects in Mexico and other parts of the world.

Can you provide more details about ATB’s relationships with companies that have operations in Mexico?

Some of our clients with operations in Mexico still have teams in the country and are investigating the opportunities that may arise from the new bidding rounds. Although the teams are not being fully utilized at the moment, these companies are eagerly anticipating the reforms and growth potential of the Mexican market.

The actual activity of the reforms will not begin for another 12-18 months because the Mexican government is still in the process of deciding contractual terms and negotiating the fiscal regime. In addition, Pemex still needs to make decisions about the fields that the national company will develop.

How is the investor community in Alberta following the reforms?

Certainly, there are people who are closely following the ongoing reforms in Mexico, but for many, it is still too early to say what these reforms may represent in terms of investment. In the last 75 years, there have been several attempts to reform the Mexican gas and oil market, but none have prospered. However, there is an understanding that, given the current economic conditions in Mexico, caused in part by the decline in energy production, these reforms are necessary to attract foreign investment. Foreign investment will be crucial for Mexico to properly expand the development of its gas and oil industry. Technological developments in the United States and Canada will provide some of the expertise necessary for Mexico to bring its high-level reserves to market. Overall, the North American business community is confident that this round of reforms will be sustainable. However, companies will proceed cautiously as they move forward with this new regime.

Human risk and political risk are two factors that those who want to enter new markets must consider. How does ATB value these concerns in Mexico?

Personal welfare is certainly a consideration when evaluating Mexico’s opportunities, but people are quite uncertain about how this will develop. Regarding political risk, once the equipment leaves Canada, a company is unlikely to recover that equipment if things do not go well on the financial front or with nationalization, as has happened in the past. For this reason, ATB values how equipment and revenue are secured against certain political risks. We look for clients with solid balances that have well-managed companies, whose entry into Mexico represents only a fraction of the company’s total operations.

Many opportunities for foreign investors will come in the form of long-term performances in mature fields. In terms of the timeframe and required return rates, what expectations do investors have for their projects in Mexico?

Since there is a 12-18 month time window for the start of any activity, the total investment duration tolerance will be between three and five years. In the bidding rounds, it is not yet known for certain how companies will be paid. To attract investment, the Mexican market will have to be competitive in terms of international return rates.

Finally, do you have any comments you would like to make to our readers regarding ATB and emerging opportunities in Mexico?

As clients study new opportunities in Mexico’s gas and oil market, ATB will try to understand the risks and stand by them. We will support our client base and move through the market with them. The Canadian market is known worldwide for its technological advances, and Canadian technology has many potential applications in Mexico.