Mexico reaffirms its nationalist policies by canceling 2020 oil and gas auctions

12/01/2020
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14:27
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Reuters
Mexico reaffirms its nationalist policies by canceling 2020 oil and gas auctions
While Peña Nieto opened the energy sector to private companies, López Obrador aims to rescue Pemex, Mexico’s state owned oil company - Photo: Henry Romero/REUTERS

Mexico reaffirms its nationalist policies by canceling 2020 oil and gas auctions

12/01/2020
14:27
Reuters
Mexico City
Anthony Esposito
-A +A
According to the President, private companies are not fulfilling their contracts

On January 8, President Andrés Manuel López Obrador said his government was not considering reopening oil and gas auctions in 2020, crushing hopes for his administration to boost private investment in the energy sector.

“It’s not contemplated,” López Obrador said at his daily press conference when asked if his government was considering offering auctions for oil and gas blocks in 2020.

He said oil companies were awarded 110 contracts through auctions under the previous government and need to show results through investment and production.

Mexico hedges Pemex 2020 oil output to protect from low crude prices

“Of the 1.735 million barrels that were extracted yesterday only 10,000 were extracted by the companies that received the contracts,” he said.

Mexico’s Association of Hydrocarbon Companies (Amexhi), which includes international oil companies, issued a statement saying the private sector had invested more than USD $11 billion.

López Obrador, who has been in office for a year, has moved away from some of the business-friendly policies implemented by former President Enrique Peña Nieto, who opened the energy market to private companies in 2013.

While López Obrador has said he would not seek to constitutionally halt those reforms, he has canceled competitive oil and power auctions since he took office.

His comments suggest the nationalist wing of his administration is winning the argument over energy policy and is instead betting on a state-led revival of oil production which has been declining for years. However, more business-friendly members of his government, analysts, and executives at oil companies believe the private investment is key to boosting output.

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Asked if state-run electricity company CFE was considering canceling contracts with private renewable energy firms, López Obrador said the contracts would not be eliminated. Instead, they will be reviewed because of subsidies the companies were receiving.

“People were deceived for a long time. They were told the subsidies for electric power was for the consumer and not that the biggest subsidy was for private companies,” he said.

His government has suggested it will dramatically expand CFEs power generation business if private power companies do not boost their investments in the sector.

President López Obrador also said he expects foreign investment to increase in Mexico once the U.S. Senate approves the United States-Mexico-Canada Agreement (USMCA) trade deal.

Finance Minister Arturo Herrera said that while the ratification of the USMCA would put Mexico’s economy in an advantageous position, the trade deal alone was not enough to attract investment.

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