Mexico Front-Runner Sees 'No Drastic Change' in Oil Opening Plan



(Bloomberg) -- Key advisers for Mexico’s presidential front-runner Andres Manuel Lopez Obrador are united in their message to the country’s energy industry: don’t worry.

AMLO, as Lopez Obrador is known, spooked the energy industry last year by stating he would review the oil contracts won in the current administration if elected president, generating fear within Mexico’s fastest growing industry. The country’s oil sector only re-opened to private competition in 2013, after state-owned Petroleos Mexicanos held a monopoly over crude production since 1938.

Now his main advisers are out to calm industry fears.

“It would be an error for the next administration to cancel all that has been accomplished in this one," Abel Hibert, chief economic adviser for Lopez Obrador’s administration, said in an interview in Mexico City. “We are changing the perception that we are closing the door on the energy reform and all the economic benefits it has provided."

Hibert, a 57-year old economist with background in telecommunications, echoes the comments of Lopez Obrador’s top business adviser, Alfonso Romo, and his choice for finance minister, Carlos Urzua, who have both said the oil contracts would be respected. Hibert, who coordinated the drafting of Lopez Obrador’s 2018-2024 governance plan, assured there would be "no drastic change" to the industry opening and the crude auctions held since 2015 have been "very transparent" and beneficial to the country’s energy and economic future.

“The oil contracts would be reviewed as they would be for any auction," Hibert said. “This is part of the process for any incoming administration to review what was done in the previous one."

In eight private crude auctions since 2015, Mexico has awarded 91 exploration and development contracts, which are forecast to net billions in investment from international oil giants such as Royal Dutch Shell PLC, Chevron Corp and Exxon Mobil Corp. If elected, Lopez Obrador’s administration might initially look to "reduce the speed" of the auctions as the new government settles in, Hibert said.

New Refineries

A primary objective of the Lopez Obrador administration will be to increase Mexican gasoline production and reduce dependence on the U.S. to for fuel imports. To do so, the administration would attempt to construct two new refineries in the oil producing states of Tabasco and Campeche, Hibert said.

"The objective is to reduce dependency on foreign gasoline imports," Hibert said. "Gasoline production can be improved and consumption can be lowered."

Mexico’s six refineries, which have capacity to process 1.64 million daily crude barrels, averaged only 767,000 per day last year, requiring the highest import levels from the U.S. since at least 1990, when the Energy Ministry began publishing data.

According to Lopez Obrador’s development plan, the new refineries would be built using public funding, though sources for the extensive financing required are yet to be defined, Hibert said, mentioning the the possibility of private partnerships as an option. Pemex, which has sought partners at its ailing refineries since at least 2016, hopes to seal a $2.6 billion alliance with Mitsui & Co. at its Tula refinery, Carlos Murrieta, head of the company’s industrial transformation unit, said in an interview this month.

With assistance from Amy Stillman and Nacha Cattan. To contact the reporter on this story: Adam Williams in Mexico City at awilliams111@bloomberg.net. To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net Vivianne Rodrigues.



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