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The Only Hope For Oil Markets

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While WTI was trending higher…

Mexican President Slams Predecessor’s Energy Reform

AMLO Mexico

Mexico’s President Andres Manuel Lopez Obrador has slammed the energy sector reform that his predecessor, Enrique Pena-Nieto, enacted when he took office, saying that it failed to result in any increase in oil production but has instead benefited foreign companies.

“If there’s no production from the (energy reform’s) contracts that were given away, we can’t say we’re going to continue giving away concessions,” Lopez Obrador said, as quoted by Reuters, during a regular morning news conference.

The Pena-Nieto administration awarded more than 100 exploration and production contracts to foreign private companies and to the local state major Pemex between 2015 and 2018. The administration, like the current one, sought to reverse a steady decline in oil production resulting from natural depletion and lack of new exploration.

As of July, the combined output from the fields covered by the licenses awarded by the Pena-Nieto government averaged 85,000 bpd of which just 10,000 bpd came from fields operated by foreign private companies. While not a particularly large amount, it is a start in the right direction for a country with energy demand on the rise.

The Obrador administration is currently reviewing the contracts awarded during the previous government’s term, and oil block auctions have been suspended until the review concludes. Yet Lopez Obrador has bet on Pemex to turn things around and has pledged that by the end of his term, Mexico would be producing 2.6 million bpd, from an expected 1.78 million bpd this year.

To this end, the government is pouring money into Pemex, which has replaced Brazil’s Petrobras as the world’s most indebted company. Earlier this year, the government announced a $3.6-billion aid package for the state giant including debt refinancing and tax relief.

“What we’re showing is that if a state-owned company is managed honestly and efficiently, it performs and the profits go to the nation,” Lopez Obrador said at the news conference.

By Irina Slav for Oilprice.com

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