Mexican President Wants To Cancel Energy Deal With Brazil’s Odebrecht

Mexico’s President Andres Manuel Lopez Obrador wants to cancel an energy deal with a consortium backed by Brazilian conglomerate Odebrecht, Reuters has reported, citing a news conference.

“That contract has to be canceled in my opinion because it’s unfair,” the president said. “It has to be reviewed.”

The contract in question was signed by the Felipe Calderon administration, which was in power until 2012. It is for the supply of ethane, a petrochemical that is used as feedstock for the production of ethylene, from which plastics are made.

The signatories to the deal were Mexico’s Pemex and a consortium between Mexican Grupo Idesa and Braskem, a subsidiary of Odebrecht, which gained notoriety as one of the companies involved in the complex corruption scheme uncovered by Operation Car Wash in Brazil, which shook the country’s political and business worlds.

Pemex was the supplier of ethane to the consortium, Braskem Idesa, and it was supplying it at below current market prices, Reuters notes. The consortium, however, told the news agency it had done nothing wrong and noted it had conducted its own investigation finding no evidence of any involvement in corruption in Mexico.

It noted the prices Pemex charged for its product under the terms of the contract were normal for long-term raw material supply deals and in line with the prices the Mexican company had charged since the start of the contract.

Lopez Obrador came into power with the pledge to right the wrong done by the previous administration and one of these, according to him and his administration was the energy reform implemented by the Pena Nieto government. One of Obrador’s first orders of business was to suspend all oil and gas auctions and start a review of all contracts signed by the previous government with foreign oil and gas companies for evidence of corruption.

Despite the suspension of auctions, Obrador also has plans to boost Mexico’s oil production and local refining capabilities to reduce the country’s reliance on imports.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

• OPEC+ Complied 95% With Oil Production Cuts In July
  
• Is This The Next Major Market For Russian LNG?
  
• UFO, YOLO, TAN: Catchy Tickers Attract Robinhood Traders