AMLO Calls for Mexican Energy Independence

(Bloomberg) -- If President Andres Manuel Lopez Obrador was looking for ammunition in his quest to cut Mexico’s reliance on foreign energy, it would be hard to top the electricity blackouts affecting the north of the country.

Mexico reported 4.77 million homes and businesses losing power Monday after imports of natural gas from the U.S. were curbed, knocking power stations offline.

The disruption is a spillover of the worst electricity crisis in recent history in the U.S., where freakishly cold weather cut oil and gas output. Mexico has restored 80% of electricity in northern states and expects power to fully return Wednesday or Thursday, Lopez Obrador said at a press briefing Tuesday. But he didn’t miss the opportunity to make a political point.

The blackout is a reminder that Mexico should become energy independent, as prices for imported gas that Mexico uses to generate power spiked 5,000% amid the crisis, Lopez Obrador said.

“What is the lesson in all of this? We must produce,” he said, referring to gas, but also to gasoline and diesel. “We are seeing that we must seek to be self-sufficient.”

AMLO, as the president is widely known, wants to strengthen CFE’s grip on Mexico’s power system and is seeking to pass a bill in congress that would give the utility priority over private companies in providing electricity. In his morning press conference on Monday, he said the bill didn’t contravene Mexico’s USMCA trade deal with the U.S. and Canada, a response to recent criticism from the business community on both sides of the border. Mexico’s antitrust watchdog has said the bill will hurt competition.

AMLO initially said Monday that 400,000 users in Mexico were affected by blackouts. A representative from CFE said the president’s information may have been preliminary or incomplete.

CFE issued a tender early Monday morning seeking a shipment of liquefied natural gas for delivery later this week to replace the drop in pipeline flows from the U.S., according to people with knowledge of the matter, who requested anonymity to discuss private details.

An importer seeking such a prompt delivery cargo is abnormal in the LNG industry, and illustrates the scope of the shortage facing Mexico.

--With assistance from Stephen Stapczynski and Maya Averbuch.

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