Time to ‘hurry up and stop the decline’ in oil production
Friday, September 28, 2018
President-elect López Obrador yesterday assured private energy executives that their contracts will not be cancelled if they meet existing terms, the head of Mexico’s largest oil producers’ association said.
López Obrador, who has been a vocal critic of private investment in the oil sector, met with gas and oil executives in a closed-door meeting in Mexico City and reportedly struck a diplomatic tone.
“The president-elect told us on various occasions that they will respect contracts so long as we obviously comply with all of the contracts’ commitments,” said Alberto de la Fuente, president of the AMEXHI producers’ group.
“We left feeling at ease that our contracts will be honored,” added de la Fuente, who is also the CEO of Royal Dutch Shell in Mexico.
The president-elect, who will take office on December 1, has said previously that all contracts awarded to private and foreign companies will be reviewed for corruption although incoming finance secretary Carlos Urzúa said in July that if no irregularities are detected, the contracts will be honored.
López Obrador didn’t offer comments to reporters after the meeting but prospective energy secretary Rocio Nahle confirmed that the incoming government will honor contracts already signed.
“We will respect the rule of law and the agreements that have been made with the outgoing government,” she said, adding that the incoming administration would also help companies deal with regulatory delays.
“We made a commitment that we will talk to the regulators or more to the point that we will review the regulators because there is a constant complaint that they take too much time,” Nahle said.
Later yesterday, López Obrador told a press conference that he didn’t use the meeting as a platform to criticize the 2014 energy reform that allowed private and foreign companies to enter the oil sector formerly monopolized by the state, nor did he blame it for declining levels of oil production.
“It’s not about blaming anybody or saying what a failure the energy reform is. We’re not going to generate that controversy, that debate. It’s about looking forward and rescuing, strengthening the petroleum industry . . .” he said.
López Obrador did, however, present the executives with documents showing that oil production has declined by 44.8% since 2004.
“I’ll give you a fact: when the energy reform was about to be approved they said that for that year they were going to be producing 3 million barrels a day and that prediction failed because 1.8 million barrels a day are being extracted,” he told reporters outside his transition headquarters.
“In other words, 1.2 million [barrels] less than what was estimated, that’s why we have to hurry up and stop the decline, invest in exploration and drilling of wells in order to have enough production of crude and to be able to carry out the refining program to produce gasoline in Mexico and not buy it abroad . . .” López Obrador added.
“That issue was brought up with the business people and a call was made for all of us to work together to strengthen the energy sector.”
Nahle added that the incoming government still plans to review all contracts before any further oil auctions go ahead.
The president of the National Hydrocarbons Commission said earlier this month that there are no plans to suspend oil auctions scheduled for February, providing an early sign that López Obrador is retreating from plans to wind back the 2014 energy reform.
Source: Reuters (en), El Financiero (sp)