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An auction to pick foreign partners for Mexican state energy giant Pemex scheduled for October has been canceled by the country’s energy regulator, Reuters reported, noting the official information confirmed what two unnamed sources has said earlier.
The auction was planned to provide Pemex with partners for the development of seven onshore oil and gas blocks and was already postponed twice since 2018 amid a change of government that pledged to reverse many of the energy policies of the previous administration.
One of these, the open tender of oil and gas prospects to international oil companies, has already been suspended until the government completes a review of all existing contracts with foreign oil and gas E&Ps for evidence of corruption.
Pemex, meanwhile, has been struggling to reverse a steady decline in production, which was the main reason why the previous administration opened up Mexico’s oil and gas industry to international companies. This administration, too, has ambitions in this respect despite the different approach: the Obrador government has prioritized an increase in local oil and gas output and has been generous with Pemex to help it turn things around.
President Andres Manuel Lopez Obrador has promised that by the end of his term in office, Mexico will produce almost 2.5 million bpd of crude – a level close to the 2013 average of 2.522 million bpd.
Related: Analysts: 2019 Oil Demand Growth Could Be Lowest In Years
As part of the production decline reversal plan, Pemex also increased its spending plans for this year. In December, the company said it had budgeted US$23 billion for 2019, up by 15 percent on 2018. Half of the total will be directed towards exploration and production, with some onshore deposits also benefitting from the investment alongside shallow-water blocks.
While the exact reason for the cancelation of the tender was not divulged, the move is the latest sign of the current government’s departure from the previous one’s approach to energy reform. The Obrador government has expressed preference for service contracts between Pemex and other companies rather than the farm-outs preferred by the Pena-Nieto administration. Still, even those seem to be hard to come by right now.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.