HOUSTON—As energy reform in Mexico forges ahead the critical hurdle remains finding investors to help overhaul the lagging infrastructure in Mexico.

With U.S. oil and gas companies getting set to move in after 80 years of Pemex’s monopoly, it’s clear that midstream infrastructure must be improved, and in some cases installed, to get the lucrative export business moving in Mexico. Experts at King & Spalding law firm’s Mexico Energy Forum in Houston on April 12 warned that political uncertainty on top of other challenges are making the beginning of the reforms challenging, but the return on investment will be substantial for the early investors.

“There are all of these risks involved but that’s just because of the emerging development,” said King & Spalding partner Vera de Gyarfas, whose firm handles a lot infrastructure projects. “Project development is hard but if you are coming in first you are going to have a much bigger profit than when the market is stable.”

There is definitely the opportunity for big gains, but there are major risks especially with the political uncertainty ahead in Mexico. Current Mexico president Enrique Pena Nieto was instrumental in opening up the energy sector as part of his economic agenda during the 2013-2014 legislative overhaul.

But leftist Andres Manuel Lopez Obrador, who is the frontrunner for the July 1 presidential election, has threatened to undo the reforms once in office.

While the experts at King & Spalding’s event said the legislative reform can’t be stopped by the new president alone, there has been some hesitation from outsiders to invest because the new president can put up some road blocks.

“The regulators in Mexico, the upstream regulator, the midstream and downstream regulator (Energy Regulatory Commission) will transcend in case of a political change,” said Mexico attorney Diana Maria Pineda Esteban, whose firm Gonzalez Calvillo put on the energy forum with King & Spalding. “The regulators with a total of seven for each commission are selected for a seven-year term. So they will continue on their regulatory commissions after the election even if the government changes.

“Moreover, the energy reform was passed at a constitutional level and these needed two-thirds of the chamber both Deputies Chamber and the Senate,” she continued. “The favorable majority of the state’s congress.

“So to reverse or rewind the energy reform you would need all of these consent of all of the people in Mexico, the Deputies in the Senate, and Congress.”

But the incoming president can slow down progress in hopes of pushing his agenda. That would mean delays.

“I think everybody understands and assumes there will be a delay because with any change of government with a different party there is going to be a delay just because it’s part of how the government works and the agencies work,” Gyarfas said. “And with Lopez Obrador, he is talking about reviewing contracts, etc., so I think there is going to be some sort of delays.”

Currently, Gyarfas says some projects are as much as eight months behind. The biggest delays have been in pipeline development.

King & Spalding partner Kenneth Culotta says there are already 25 permitted pipelines by the Mexican government while some have been constructed and others are being constructed.

But sooner rather than later, all 25 pipelines will be up and running to export oil and natural gas from Mexico to the United States.

“It would take getting rid of the Free Trade Agreement for that gas not to flow,” Culotta said. “While there are new pipeline projects in the pipeline there is enough there to supply Mexico handily.”

In the meantime, there is a big need for investors to ramp up Mexico’s lagging infrastructure that will need to be in place to deal with the volume of exports. Mexico is expecting the U.S. to invest $350 billion to revitalize domestic oil production that has been in decline due to lack of investments and technology.

But in order to maximize the potential in Mexico, midstream infrastructure must be vastly improved. Currently, Mexico’s facilities are lacking, transportation is limited and the country’s storage business has been found to be fragmented and unsophisticated.

Pemex’s current transportation network includes just 3,000 miles of pipeline that runs mainly across the southern part of the country. The U.S. has about 57,000 miles of crude oil pipeline as a comparison.

For natural gas, Mexico has just 5,000 miles of pipeline. In Texas, there are 58,000 miles of natural gas pipelines running, according to the U.S. Energy Information Administration.

Getting the infrastructure up to date for E&P purposes is critical for Mexico’s economy. Culotta said for the last 75 years Mexico has lived on oil exports with 35%of the Mexican budget coming from payments Pemex. Those dollars have been declining because production has been declining in recent years.

“The energy reform is a strategic interest of the Mexican government and regardless of all of these issues there is the commitment of the Mexican government to implement these projects,” Gyarfas said.

Terrance Harris can be reached at tharris@hartenergy.com.