• 3 minutes Don't sneeze. Coronavirus is a threat to oil markets and global economies
  • 5 minutes Boris Johnson taken decision about 5G Huawei ban by delay (fait accompli method)
  • 9 minutes This Battery Uses Up CO2 to Create Energy
  • 12 minutes Shale Oil Fiasco
  • 28 mins Historian Slams Greta. I Don't See Her in Beijing or Delhi.
  • 1 day We're freezing! Isn't it great? The carbon tax must be working!
  • 2 days US (provocations and tech containment) and Chinese ( restraint and long game) strategies in hegemony conflict
  • 5 hours Let’s take a Historical walk around the Rig
  • 14 hours Trump has changed into a World Leader
  • 15 hours Beijing Must Face Reality That Taiwan is Independent
  • 14 hours Tesla Will ‘Disappear’ Or ‘Lose 80%’ Of Its Value
  • 14 hours Yesterday POLEXIT started (Poles do not want to leave EU, but Poland made the decisive step towards becoming dictatorship, in breach of accession treaty)
  • 2 days Might be Time for NG Producers to Find New Career
  • 2 days Indonesia Stands Up to China. Will Japan Help?
  • 2 days Environmentalists demand oil and gas companies *IN THE USA AND CANADA* reduce emissions to address climate change
  • 3 days Anti-Macron Protesters Cut Power Lines, Oil Refineries Already Joined Transport Workers as France Anti-Macron Strikes Hit France Hard
Alt Text

China Sees Jump In Gasoline, Jet Fuel Exports

A 99-percent utilization rate of…

Alt Text

Germany Looks To Renew Scrapped Bolivian Lithium Deal

A lithium deal between Germany…

Alt Text

How Low Will The Coronavirus Send Oil Prices?

In today’s oil market it…

Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

More Info

Premium Content

Mexico's Next President Will Pour Billions Into Oil

Mexico’s national oil company is about to receive an injection of cash.

Incoming President-elect Andres Manuel Lopez Obrador, or AMLO, has promised to invest around 175 billion pesos ($9.4 billion) into the state-owned energy companies. One of the goals is to reverse the decade and a half of declining oil production.

“Fourteen years ago, oil production was 3.4 million barrels a day. Now it’s 1.9 million barrels a day,” AMLO said at a news conference. “In 14 years, we’ve lost 1.5 million barrels a day in production, a downward trend because the oil industry was abandoned.”

The plan is a shaky one, perhaps because when it comes to the specifics, AMLO has only articulated a muddled notion of what he wants to do.

Outgoing President Enrique Pena Nieto ended more than seven decades of state-run monopoly over Mexico’s energy sector, opening up the country to private control and investment from international companies. The bid to partially-privatize the energy sector has led to a series of auctions, dozens of awarded licenses and tens of billions of dollars in commitments from some of the largest oil companies in the world.

AMLO staged fierce opposition to those reforms several years ago as they were implemented. His opposition softened during the presidential campaign, although he still threatened to revisit awarded contracts and/or suspend further auctions, at a minimum.

He has vowed to reverse declining oil production but he has not articulated how that can be achieved. Presumably, he wants that done through state-controlled Pemex, long considered a pillar of national pride.

AMLO’s promise to inject more than $9 billion into state-owned energy companies is likely a signal that that’s the course he wants to take. He also confirmed that he would appoint Rocio Nahle as energy minister, who was his top energy adviser during the campaign. She has favored a nationalist approach to energy policy – she tweeted a message of support for stiff local content rules for energy projects a few months ago.

Related: Houthis Prepared To Halt Oil Tanker Attacks

To run Pemex, AMLO has tapped Octavio Romero Oropeza, an agronomist. Critics point out that he has no experience in energy. During the campaign, AMLO signaled a willingness to work with the private sector and not try to roll back the energy reforms. On the other hand, his personnel choices on energy skew towards the nationalist types. “The team on energy is projecting a different message than the economic and financial team,” Duncan Wood, director of the Mexico Institute at the Wilson Center, told the Washington Post. “The economic and financial teams are projecting openness and saying that Mexico will continue with orthodox policies.”

Yet, it is unlikely that he will try to aggressively roll back the energy reforms enacted during the Pena Nieto administration, not least because they would require a constitutional change. AMLO did shock the country with a resounding victory in the presidential election, plus sweeping wins for his party in both houses of the Congress. The wins exceeded expectations, granting his party, Morena, majorities in both the Senate and the Chamber of Deputies (including coalition support from two other parties). But making changes to the constitution is likely too much of an uphill climb, even after taking into account his impressive victory.

More to the point, because AMLO wants to restore lost oil production, he probably recognizes that the quickest and cheapest way to do that is to allow international companies to do the heavy lifting. The likes of ExxonMobil, Royal Dutch Shell, Eni, Chevron and others are pouring money into offshore Gulf of Mexico. They can probably do more than Pemex can – especially given Pemex’s track record – and at much less expense to public coffers.

Nevertheless, AMLO still has nationalist goals for the energy sector. Only, he has signaled an intent to spend heavily on the downstream sector in an effort to halt the slide in domestic gasoline production. The plan calls for around $2.6 billion to rehabilitate Pemex’s six aging refineries, while also breaking ground on a new refinery in Tabasco that would cost $8.6 billion over three years.

Related: Kuwait Oil Production Hits 18-Month High

That could mean he leaves the upstream sector alone, or mostly alone, at least. He has still promised to review more than 100 contracts awarded to ensure they are up to snuff. But his camp has sent signals that they wouldn’t do much to interfere with these. “The auctions are going to continue if everything we find is alright,” Alfonso Romo, a business tycoon and top economic adviser to AMLO said in June, according to Reuters. He emphasized that AMLO had personally taken that message to investors. “He said it in New York. Andres Manuel, not Alfonso Romo.”

As a result, the injection of some $4 billion or so into Pemex is aimed at helping the state-owned company revive output. This strategy would seem to work in parallel to the already-awarded contracts to international companies. There is still a lot of uncertainty over what to expect when AMLO takes office later this year, but for now his plan seems to be injecting public money into the energy sector alongside what private industry is already trying to do. But, time will tell.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage




Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play