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Mexican President: Pipeline Contracts Are ‘Abusive And Unfair’  

Mexico’s President Andrés Manuel López Obrador—who criticizes his predecessor’s energy reforms—said on Thursday that the natural gas pipeline contracts that the previous administration had signed were ‘abusive’ and ‘unfair’ to the Mexican state, raising additional concerns whether the new administration will respect previously signed energy deals.  

Six months into office, the populist left-wing President López Obrador blasted earlier this month the energy reform as “a failure” and vowed not to call new bidding rounds for foreign oil companies for oil exploration and production in Mexico unless those companies show results, because currently they are not investing and not producing.

Earlier this week, Mexico’s state utility CFE sought arbitration in a dispute over a natural gas pipeline that TC Energy, formerly TransCanada, and Mexican company IEnova, a unit of U.S. Sempra Energy, are building from Texas to Tuxpan on the Mexican Gulf coast.

The companies announced earlier this month that the pipeline they are building had achieved mechanical completion, but the state utility CFE also has to issue verification that the pipeline had been completed.

In the request for arbitration, CFE seeks “fairer” terms for a number of pipeline projects signed by the previous Mexican administration.

According to analysts, the arbitration could not only delay the in-service date of pipelines, but it could also hurt investor sentiment about whether Mexico intends to respect already signed contracts.  

Canada’s Ambassador to Mexico, Pierre Alarie, said on Wednesday that he was “deeply concerned” about CFE’s move and the signal it sends that Mexico, despite López Obrador’s pledges, appears “not to wish to respect the gas pipeline contracts.”

Asked about the gas pipeline dispute, López Obrador said at his regular weekly press conference, as carried by Reuters: “Here it was stated that those contracts were abusive. I called them unfair contracts because they were handed over with all the benefits for the companies.”    

By Tsvetana Paraskova or Oilprice.com

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