Recently, Mexico announced it might change its plans and call on the private sector once again. It is to bolster oil and gas production.
Mexican President Andrés Manuel López Obrador has tested to slow down the country’s historic shift towards privatization that began under his regime.
Meanwhile, Former President Enrique Peña Nieto pushed through a privatization plan that ended seven decades of state regulation over the oil sector.
Pemex continued in state hands, but oil, gas exploration, and production were introduced to international companies.
Pemex collaborated with many of them, but private companies got permission to take the lead.
After his election last year, AMLO tried to change course. He gestured an unspecified end to oil auctions. This is by mentioning unacceptable results from private companies.
He also shifted back and forth on the principle of prior auctions. At times, he concludes that the actions were corrupt.
The Revival of Pemex After Steep Decline
At the same time, AMLO tried to revive Pemex. He proposed a massive billion-dollar capital booster into the state-owned company.
In addition, he pushed for Pemex to reappear to its historic place as the leading entity in the energy sector.
The dilemma for Pemex is that it has become the most indebted oil company in the world. The company has an estimated $100 billion in debt.
It supervises the aging oil fields that have been in production for decades. The output of the field is suffering from a sharp decline that began in the mid-2000s.
In July, Mexico produced 1.67 million barrels per day. It is roughly half the total from a peak in 2004.
Dropping production and rising debt are a toxic mix. This is in particular since the encouraging of output will need increasing up spending.
Over the last few years, lower oil prices have only increased and magnified the financial problems at the company.
Mexico Set to Allow State Group to Resume Private Oil Ventures
Elsewhere, Mexico’s President Andrés Manuel López Obrador is set to let the struggling state oil company begin again the joint ventures with private sector next year.
The data was stated by a senior government official. In addition, he said this is what would be a setback of his previous violent obstruction to the country’s energy reform.
The liberal president, who has put Pemex at the heart of his energy policy, is also set to resuscitate the private company in the vulnerable search of the Gulf of Mexico.
The reinforcement is to jump-start investment and production with the unwanted threat of a credit rating markdown for the oil company.
As they take actions, the biggest potential policy U-turn by a President, Andrés Manuel López Obrador who prides himself on his stubbornness, would be welcomed by investors.
The government has yet to decide if it will account an annual hedging program that typically costs about 1 billion dollars.
Possible Plans of Annual Hedging Program
Moreover, it will be used to shield public finances from oil price fluctuations, said the official with direct knowledge of the policy plans.
In the second quarter, economic growth decreased to zero after a 0.2 percent shrinkage that happened from January to March.
Business investments are also on hold, which is making Mr. López Obrador under pressure to satisfy investors.
After eight decades of state control, an aggressive critic of the historic 2013 energy reform opened Mexico’s oil sector to private investment.
The closing has resulted in making the president stop joint ventures with Pemex. It had also put oil block auctions on hold when he took power last year.
The president claimed that private companies had not met expectations.