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The grand plan to counter López Obrador's Pemex, in its labyrinth, The environmental impact becomes a stone in the shoe of López Obrador

The oil platform Xikin had a guest of honor shortly before christmas. Sheathed in a yellow uniform, the president of mexico, Andrés Manuel López Obrador rose to the position of control of this maritime infrastructure, located 30 kilometers from the coast of Tabasco, and began to talk about one of his favorite topics: the “rescue” of Pemex, the state oil company, to support the "energy sovereignty". “[Before] didn't get oil, what mattered was the delivery of the contracts,” he said. A dart to the reform of the previous Administration that opened the sector to private participation. While the Government has ruled out bidding for more oil fields in 2020, companies and analysts warn of the negative impact it may have on the goals of production.

The success or failure of this Government will be measured in barrels, if it conforms to the importance that the president gives to the industry in their speeches. The Administration has proposed to achieve the goal of 2.4 million barrels per day at the end of the six-year period in 2024, a substantial increase over the 1.7 million today. To achieve this, you want to strengthen Pemex, the oil company most indebted in the world, with more investment and ambitious exploration plans. In 2019, for example, the Government invested a 41% increase in the parastatal that in the last year of the exmandatario Enrique Peña Nieto, according to the department of Energy.

Despite these efforts, the experts consulted doubt that is sufficient to meet production goals without the help of the private sector. Of the 28 wells scheduled for 2019, the oil companies could only drill three, and of the 2.018 million dollars available in 2019, only invested 441 million, according to data from the National Hydrocarbons Commission (CNH), the autonomous agency in charge of regulating the sector. In addition, in December, Pemex cut its target by 55,000 barrels respect to what was envisaged a few months before.

The commissioner of the CNH Sergio Pimentel sees "virtually impossible" to reach the goal. "Pemex can't do it all alone," he says. "He has not been able to invest what is at stake in the appropriations and also has not been able to carry out the drilling to which he was committed". The consultant Severo Lopez Mestre match in the limited capacity of investment. "To increase production you have to put all the toys at once,” he explains.

One of those toys began to tremble after a few days of taking office the new Administration in December of 2018. The Government announced the cancellation of the rounds with oil, the system for which bids have been made on 111 projects from exploration and drilling to mexican companies and international from 2015. In addition, slowed down the tendering of seven farmouts, as is known to the associations between Pemex and private to operate an oil field. Although the entrepreneurs had the hope to return to the road in 2020, the last week, López Obrador ruled this out conclusively: “How are we going to hold new rounds! It makes No sense. This is not a political issue, ideological, it is practical judgment. What they want to contracts if you do not invest?”. The Government has insisted that it will respect what has already been signed, and that the energy reform of his predecessor is not going to cancel. However, when stopping the rounds is that oil has been emptied of content.

To justify the continuance of the veto, the president maintained that the private investment is low and that the production goals have not been achieved. “They are not complying with the conditions of the contracts,” he warned. The figures, for now, are marginal if compared with those of the state-owned oil company. Only 29 of the 111 contracts are occurring; the rest are in exploration phase. From 2015, the private initiative has invested 2,700 billion dollars in petroleum activities according to the Mexican Association of oil and gas Firms (Amexhi), and have reached 47,000 barrels per day by the end of 2019, a volume of modest, but higher than the 10,000 that were allocated recently by López Obrador. The sector cites data from the NHC that cover contracts operated both entirely by private as well as in collaboration with Pemex, in the case of farmouts.

Evolution of oil production by the private sector. THE COUNTRY (Source: Amexhi, CNH)

in Face of the arguments of the Government, private initiative, says that the slow start is justified by the complexity of the sector and the intention is to reach 280,000 barrels per day in 2024, a goal still distant. “It is a long-term industry. The maturation of the wells can take between five and 10 years, but there are enough contracts to see numbers very interesting,” said the consultant Severo Lopez Mestre. Until now, the companies or have complied with the minimum established by contract or are within the time limits for doing so, according to the NHC. The exception is the consortium led by Canamex Dutch. The Dutch company-mexican resigned in 2017 to the field that we had been awarded because the reward which had been offered to the State at the time of the submission of the bids - a 86%- made it unfeasible investment. Had to pay a fine of nearly two million dollars.

Despite compliance with the majority, there are differences of opinion about whether the private sector is limited to do the minimum to avoid termination of the contract. The director-general of the Amexhi, Merlin Cochran, ensures that businesses are looking to make the most of the fields awarded. In contrast, the consultant David Shields, director of the Energy Debate, says companies “are not going fast, going to be the minimum” to the climate of "hostility". The darts most frequent of the president are aimed at foreign companies winning tenders, which include industry giants such as Shell or BP, and represent half of the total awarded.

beyond the barrels produced, the industry emphasizes its contribution to the coffers of the State and of a state-owned oil company in a financial situation very delicate. From 2015, have been transferred to 1,900 million dollars to Fund Mexican Petroleum, a sovereign wealth fund that handles oil revenues, and 1.671 million to Pemex for participating in the farmouts, according to Amexhi. The NHC estimates that the State will be left with an average of 74% of the potential benefits of the projects, a percentage that is within the international parameters.

Zama: a reservoir, two owners

The huge reservoir of Zama is another example of the younsión latent between Government and private. Discovered by the american Talos Energy after winning one of the contracts of the first round oil is considered as one of the fields most juicy of the history of the country. It is situated at a low depth and has a potential of more than 1,000 million barrels. As the site extends to an area assigned to Pemex, both parties are negotiating the unification of the areas, and who of the two will be the operator. For that, the state oil company still has to evaluate the stocks that are in your section of the site, something that Talos has already done.

In this context, Pemex recently reported to the CNH of which was to give priority to another well, not when you have pending to drill in Zama, so that the unification of the deposit may be delayed. The regulatory body asked this Tuesday to hear the oil on the change of strategy. "We called the attention. It is a well that is much further away. Why are you drilling there?" is question, commissioner Sergio Pimentel. According to the consultant David Shields is a sign that Pemex does not want to cooperate. “Did not give priority to a project where you have to share with a private,” he says.

The tension is also lived within the enclosure. There coexist two souls; a statist, as represented by the secretary of Energy, Dew Nahle, and another that is more favorable to the private interests, embodied by the chief of the Office of the Presidency, Alfonso Romo. The entrepreneur, considered the power in the shadow of the Administration declared last march that in six months the Government would review the cancellation of the rounds and gave hope to the sector. However, until now the first side has taken the baton with the blessing of the president. Waiting for the wind to change direction, Merlin Cochran, of Amexhi, bridges and asks for patience. “We want to rounds,” he says, “but in the meantime we have to work for the projects to come to fruition”.

Date Of Update: 20 January 2020, 01:00