June 13, 2019 / 7:37 PM / 5 months ago

Mexico to cancel October auctions for Pemex joint ventures - sources

FILE PHOTO: The Pemex logo is pictured during the 80th anniversary of the expropriation of Mexico's oil industry in Mexico City, Mexico March 16, 2018. REUTERS/Edgard Garrido

MEXICO CITY (Reuters) - Mexico’s oil regulator plans to announce the cancellation of auctions scheduled for October to pick joint venture partners for state-run energy company Pemex in seven onshore areas, two sources close to the decision told Reuters on Thursday.

The auctions have already been postponed twice since last year and are expected to be formally cancelled later on Thursday, the sources said. Other oil auctions to offer exploration and production rights were previously cancelled by Mexican President Andres Manuel Lopez Obrador.

Pemex could not be immediately reached for comment.

The decision on whether the projects would go forward has been eagerly awaited by the industry given Lopez Obrador’s pledge to revive Pemex, the world’s most indebted oil company.

Formally known as Petroleos Mexicanos, Pemex has seen its crude production fall for almost 15 years. The joint ventures have been seen as a way to help reverse the slide by luring significant outside investment from private partners.

But Lopez Obrador’s strategy for the oil industry has prioritised other areas of investment, especially in the downstream sector, including a plan to build a $8 billion refinery. He has also promoted different business models from those implemented as part of former President Enrique Pena Nieto’s flagship energy reform.

Instead of joint ventures with Pemex, called “farmouts,” used mainly for producing natural gas, Lopez Obrador’s administration aims to continue encouraging service contracts to boost crude and gas production, one of the sources said.

Rating agencies that have downgraded the state-run company or changed its outlook have pointed to Pemex’s business plan focusing less on exploration and production and not doing enough to reverse the accumulated production decline.

Fitch last week became the first major ratings agency to downgrade Pemex’s bonds to “junk” status. Central Bank Governor Alejandro Diaz earlier this week said Mexico should reinforce Pemex’s creditworthiness.

Reporting by Adriana Barrera; Writing by David Alire Garcia and Marianna Parraga; Editing by Leslie Adler and Lisa Shumaker

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