World News

Mexico’s president doubles down on nationalist line: no oil auctions

By Anthony Esposito

MEXICO CITY (Reuters) – Mexico’s President Andres Manuel Lopez Obrador said on Wednesday his government was not contemplating reopening oil and gas auctions this year, ending hopes his left-leaning government will soon spur private investment in the energy sector.

“It’s not contemplated,” Lopez Obrador said at his daily press conference when asked if his government was considering offering auctions for oil and gas blocks in 2020.

He said oil majors had been awarded 110 contracts through auctions under the previous Mexican government and needed to show results through investment and production.

“Of the 1.735 million barrels that were extracted yesterday only 10,000 were extracted by the companies that received the contracts,” he said.

Mexico’s Association of Hydrocarbon Companies (Amexhi), which includes international oil majors, later issued a statement saying the private sector had invested more than $11 billion.

Lopez Obrador, who has been in office for a year, has shifted sharply away from some of the business-friendly policies of his predecessor, centrist President Enrique Pena Nieto, who enacted a sweeping energy market liberalization in 2013.

While Lopez Obrador has said he would not seek to constitutionally reverse those reforms, he has canceled competitive oil and power auctions since he took office.

His new comments suggest the nationalist wing of his government is winning the argument over energy policy – betting on a state-led revival of oil production which has been declining for years. More business-friendly members of his government, analysts and executives at oil companies believe private investment is key to boosting output.

Asked if state-run electricity company CFE was considering canceling contracts with private renewable energy firms, Lopez Obrador said the contracts would not be eliminated. Instead he said they would be reviewed because of subsidies the companies were receiving.

“People were deceived for a long time. They were told the subsidies for electric power was for the consumer and not that the biggest subsidy was for private companies,” he said.

His government has suggested it will dramatically expand CFE’s power generation business if private power companies do not boost their investments in the sector.

Lopez Obrador said he expected foreign investment to increase in Mexico once the U.S. Senate approves the United States-Mexico-Canada Agreement (USMCA) trade deal.

Finance Minister Arturo Herrera said on Wednesday that while the ratification of the USMCA would put Mexico’s economy in an advantageous position, the trade deal alone was not enough to attract investment.

(Reporting by Anthony Esposito; Additional reporting by Lizbeth Diaz and Sharay Angulo; Editing by Bernadette Baum, Lisa Shumaker, Richard Pullin)