The United States and Canada are frustrated with Mexico’s approach to energy. The country’s energy policy has fluctuated over the last decade as different presidents have taken wildly different approaches to transform the sector. The previous Mexican President, Enrique Peña Nieto, made a seismic shift when he opened up the long-nationalized sector to international investors. For nearly 80 years, the state-owned and -operated oil and gas company Petroleos Mexicanos (Pemex) was the only company allowed to explore for gas in Mexican territory. When London’s Premier Oil Plc, Houston’s Talos Energy LLC and Mexico’s Sierra Oil & Gas began offshore drilling in May of 2017, it made history as the first private exploration in Mexican waters since the country first nationalized its oil industry in 1938. To Mexico’s foreign allies, it was a cause for celebration.
But now, five years and a regime change later, current leftist and populist President Andrés Manuel López Obrador (commonly referred to as AMLO) has made moves to re-nationalize the Mexican energy sector and once again push out foreign interests in a politicized bid to make Pemex great again. AMLO has been open about his disdain for Peña Nieto’s 2014 energy reform bill opening Mexican oil to foreign interests and based much of his platform on his nationalistic and protectionist beliefs that Mexican resources should create profits for Mexican workers, Mexican companies, and the Mexican government – and no one else.
“Foreign energy companies that began flocking to Mexico six years ago after the government opened energy markets and ended a nearly century-old state-run monopoly are finding themselves increasingly unwelcome,” the Houston Chronicle reported back in 2020. While the Mexican government did not explicitly reinstate any ban on foreign interests, international companies found themselves faced with petty citations and bureaucratic runarounds which have been accelerating and generally making life unnecessarily difficult for Pemex’s competition.
Understandably, this has not gone over well with the United States and Canada, who share deep economic ties with Mexico. Not only is Mexico’s anti-trade approach bad for business, it’s also bad for climate goals. As Mexico’s renewable energy sector is run by private companies, it too stands to suffer from the nationalistic goals of the Mexican energy sector. The United States has held numerous talks with Mexican officials to push dramatic cuts in Pemex’s gas flaring and methane emissions, as well as to discuss renewable energy.
Despite these talks, AMLO has remained convinced that a revitalization of the Mexican economy will go hand in hand with continued reliance on fossil fuels. “We ignored the sirens’ song, the voices that predicted, in good faith, perhaps, the end of the oil age and the massive arrival of electric cars and renewable energies,” López Obrador told a roaring crowd in Tabasco at the opening of a new oil refinery this summer.
After a few years of tension, however, the U.S. and Mexico are making headway in talks to enhance cooperation on energy security. The most recent step forward has been the ratification of a bilateral agreement for peaceful nuclear cooperation between the two countries – the first of its kind. “Known as 123 agreements, such accords pave the way for delicate issues such as the peaceful transfer of nuclear material, equipment and information from the United States in adherence with nonproliferation requirements,” Reuters reports.
Not only does the agreement mark a transition in Mexican energy policy, it also reflects a recent shift in the United State’s energy approach. After decades of letting its nuclear industry fall to the wayside, the United States has shown increasing interest in nuclear energy under the Biden administration as a part of the drive to tackle decarbonization goals. Not only is the United States constructing the first new nuclear plant on American soil in decades in Georgia, it also recently inked a deal with Poland to build that country’s first nuclear reactor. The Mexican state power utility, Comisión Federal de Electricidad, has just one operating nuclear power plant with two nuclear reactors, but the new agreement with the United States could be the start of the new nuclear era for both countries.
By Haley Zaremba for Oilprice.com
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