New Mexican government may suspend oil auctions indefinitely: Reuters

oil auction
According to a report by Reuters, the newly elected government in Mexico is considering suspending natural gas and oil auctions and building closer ties with OPEC. Reuters photo.

According to a report by Reuters, the newly elected government in Mexico is considering suspending natural gas and oil auctions and building closer ties with OPEC.  Reuters photo.

Oil auctions opened up by outgoing President Enrique Pena Nieto

According to a Reuters report, the newly elected president of Mexico is considering taking the country’s energy industry in a different direction by suspending oil auctions, forging closer ties with OPEC and withdrawing from the International Energy Agency.

President-elect Andres Manual Lopez Obrado may also give the country’s state-run oil company, Pemex, authority to choose its joint-venture partners instead of holding competitive tenders, according to policy guidelines seen by Reuters.

Lopez Obrador assumes office in December. If adopted, these guidelines drafted by energy advisors to the president-elect could usher in sweeping changes to outgoing President Enrique Pena Nieto’s 2013 constitutional overhaul which opened up Mexican oil production and exploration to private oil companies.

Pena Nieto’s government forecast hundreds of billions of dollars in investment from over 100 new contracts that were awarded to mainly foreign and privately-owned oil companies.

The Lopez Obrado guidelines would shift responsibility for the energy sector back to the government and give it more say over oil trading, focussing on “supporting domestic supply”.

“The terms for formalizing partnerships or associations will be established by Pemex’s board of directors, according to the law,” states the 33-page document, according to Reuters. These new guidelines call for “an indefinite suspension of international exploration and production auctions”.

The Lopez Obrador government also intends to review the process for awarding contracts.

According to Reuters, the president-elect is opposed to the reform, however, his broad coalition is divided over the issue.

Some aides favour greater private investment in the oil and gas industry while some of Lopez Obrador’s nationalist allies are opposed.  The designated energy minister, Rocio Nahle is a critic of the current policy, but the incoming chief-of-staff Alfonso Romo stands in support of opening the oil and gas sector to private industry.

Despite Pemex’s output being on the decline since 2005, Lopez Obrador is hoping to increase Mexico’s oil output to 2.5 million barrels per day, up from its current 1.84 million b/d.  He also is looking to build at least one new refinery.

During the recent election in Mexico, Lopez Obrador called for the suspension of two oil auctions set for this fall, including tenders for new equity partners for Pemex.  The auctions were then set for February, and under the possible policy changes, may not occur at all.

Also uncertain is what will happen to Pemex’s joint ventures which have successfully attracted investment.  According to Reuters, the guidelines call for Pemex’s exploration and production tie-ups are to be postponed “until the scheme is modified and (partnerships) are registered in a long-term strategic plan”.

The state-run company has so far secured partnerships for the $11-billion deepwater Trion project as well as in the onshore fields in the southern Gulf coast state of Tabasco.

Finally, the Lopez Obrador government-elect is considering dropping out of the International Energy Agency and possibly forging “a closer approach and better coordination” with OPEC.


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