Mexico’s Obrador Reiterates Plan To Review Oil Contracts

Just a day after the most successful offshore oil and gas tender in Mexico since the 2013 energy industry reform, the frontrunner for the July presidential elections reiterated his intention to review oil and gas contracts if he wins.

Calling the Wednesday tender “just a show, pure demagoguery,” Andres Manuel Lopez Obrador said. “The contracts that were signed are, more than anything else, for financial speculation, not for production, not to extract oil, not to develop the oil industry.”

For the government, however, the tender was a success, with officials estimating the deals could bring in US$93 billion investment over the lifetime of the projects. Shell was the biggest winner, getting the exploration rights to 9 of the 29 blocks put up for tender. For four of the blocks, Shell bid jointly with Qatar Petroleum and for the fifth one, it acted in partnership with Pemex.

Mexico has two more oil and gas auctions lined up for this year—one in June and one towards the end of the year—but the chances of all blocks finding suitors are mixed. If Obrador wins the election, there will certainly be a change in tack in the government’s attitude to local oil and gas.

Although Shell’s emergence as a top bidder in the latest tender could be seen as a conviction that things in Mexico won’t change all that much even if the leftist MORENA party’s candidate becomes the next president, worry remains. The party currently in power, PRI, is struggling with declining popularity resulting from the nature of some reforms that Enrique Pena-Nieto’s government initiated.

For PRI, the results of the tender could be a much-needed popularity boost, which would explain why Obrador was quick to speak against it. Observers of Mexico’s political life had noted earlier that the presidential frontrunner had softened his anti-government rhetoric recently.

By Irina Slav for Oilprice.com

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