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Incoming Mexican Govt Mulls Suspending Oil Auctions Indefinitely

Offshore rig

In what could be a U-turn in Mexican energy policies over the past five years, the incoming administration is thinking of indefinitely halting competitive tenders for oil and gas in Mexico, Reuters reports, citing a draft energy policy document that it has seen.

Outgoing Mexican President Enrique Peña Nieto opened up the energy sector to foreign investment in 2013, ending 70 years of state monopoly, and Mexico has held several successful auctions attracting oil majors to its oil and gas exploration industry.  

However, incoming president Andrés Manuel López Obrador, who takes office in December, has been critical of the energy reform and has vowed to review the contracts that foreign firms have already signed with Mexico.

According to the 33-page-long draft of its new energy policy guidelines that Reuters has seen, apart from suspending auctions indefinitely, Mexico’s new government is also considering giving state-held oil firm Pemex the power to pick its own partners for joint ventures without holding tenders, boosting ties and cooperation with OPEC, and leaving the International Energy Agency (IEA), which represents the interests of oil-consuming countries.

The draft policy proposes “an indefinite suspension of international exploration and production auctions,” according to the document. Yet, it is not clear which proposals and to what extent the new energy policy guidelines would be adopted and implemented as formal policies of the new government.

While López Obrador has been critical of the energy reform and promised to review existing contracts for possible irregularities, senior-level advisors and minister picks in his team remain divided on how Mexico should handle its energy policies from now on.

For example, incoming chief-of-staff Alfonso Romo told Bloomberg in an interview shortly after López Obrador was elected president last month that there wouldn’t be major changes, and “If anything happens, it would be done without hurting private investment.”

But López Obrador’s pick for energy minister Rocio Nahle is critical of the outgoing government’s energy reform and policy.

Last week, The Wall Street Journal reported, quoting two people with knowledge of the matter, that López Obrador would suspend new oil blocks auctions for at least two years.

Last month, the Mexican energy regulator postponed two oil auctions set for September and October to February 2019, for after López Obrador takes office this December.

By Tsvetana Paraskova for Oilprice.com

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