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Mexico Can’t Quit Oil Until It Kickstarts Its Lithium Industry

Mexico cannot give up oil until it kickstarts its lithium production, President Andres Manuel Lopez Obrador told media this week, referring to planned reforms that include the nationalization of lithium production.

"The reform establishes that the nation take advantage of its lithium [reserves] as a strategic mineral for the country's development," Lopez Obrador said as quoted by BNAmericas. "It will not be possible to replace oil if there is no development of lithium [to support] alternative energy generation." 

The lithium concession proposal is part of a wider push for returning government control to the Mexican energy industry. The plan has prompted worry among private energy businesses and even in Washington.

The new energy bill that the Lopez Obrador government is pushing could see as much as $22 billion worth of wind and solar power projects shelved as the bill prioritizes the development of gas generation, hydropower, and nuclear. Many of the renewable energy projects involve U.S. companies and large international energy majors such as Spain-based Iberdrola.

"We see a great opportunity to work together on clean energy, to work together towards decarbonization as a North American block," U.S. Energy Secretary Jennifer Granholm said, as quoted by Argus, during a visit in Mexico to discuss energy matters earlier this year. "But we also expect questions around the electricity reform to be resolved."

The proposal to develop lithium resources could point to a concession to renewable energy on the part of Lopez Obrador's government, although nationalization plans will hardly be welcomed by the mining industry.

The energy bill also includes canceling all private power purchase agreements and other reforms aimed at strengthening the dominant role of state utility CFE. The ruling party is currently trying to generate enough support for the bill to secure the two-thirds majority of legislators that it needs to turn it into law.

By Charles Kennedy for Oilprice.com

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