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Mexico's election next year poses no risk for oil contracts -regulator
September 29, 2017 / 9:09 PM / 3 months ago

Mexico's election next year poses no risk for oil contracts -regulator

MEXICO CITY, Sept 29 (Reuters) - Presidential elections in Mexico next year pose no risk to already-signed oil contracts, the sector’s top regulator said on Friday, despite the current frontrunner’s pledge to review them.

To date, some 70 exploration and production contracts have been inked with several dozen foreign and private oil companies, fruit of a 2013 opening of the sector that ended state-owned oil company Pemex’s decades-long monopoly.

“These are completely solid contracts,” Juan Carlos Zepeda, head of Mexico’s National Hydrocarbons Commission (CNH), said in an interview, adding that there is “no risk” that Mexico’s next government could revoke them.

Presidential elections are schedule for next July, and the early leader in public opinion polls is leftist Andres Manuel Lopez Obrador, a former Mexico City mayor who has been sharply critical of the energy reform.

A two-time runner-up, Lopez Obrador has proposed a nationwide referendum on the energy reform and he has also said he would review the contracts.

“The entire energy framework is in the constitution and that provides it with durability and makes it very difficult to repeal,” said CNH’s Zepeda, noting that constitutional changes require a two-thirds majority in Congress which no party is likely to gain in next year’s vote.

The regulator has run seven oil auctions so far, and plans another deepwater round in January which is expected to draw interest from top global oil majors.

Next week, the regulatory body will auction the rights to partner with Pemex on three projects, one in shallow waters and the other two onshore.

The reform permits Pemex, formally known as Petroleos Mexicanos, to enter into its first joint ventures with equity partners in a bid to help the cash-strapped firm develop projects that it has been unable to fund on its own.

But the reform prohibits Pemex from picking its own partners.

Future oil auctions should offer more and bigger blocks, Zepeda said, similar to bid rounds held by regional competitors in the United States and Brazil.

“Everything indicates that we have to go faster. The industry has told us they can accelerate the process of investment in Mexico,” he said.

Earlier this week, bid terms were announced for a March shallow water auction featuring 35 contractual areas up for grabs, the most offered in one tender so far.

Mexico’s energy ministry estimates that oil contracts awarded to date will attract $59 billion in new investments over the lifetime of the contracts. (Reporting by David Alire Garcia and Ana Isabel Martinez; editing by Grant McCool)

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