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Foreign Investment Can Support Sovereignty

Antonio Juárez - AMESPAC
Director General

STORY INLINE POST

Tue, 01/21/2020 - 12:20

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Q: To what degree would you say the AMLO administration’s goals are aligned with AMESPAC’s agenda?

A: Under the last government, the Energy Reform’s legal regime was focused on facilitating the entry of new companies into the Mexican market. Now, while the participation of these companies has not been dismissed, the focus is on PEMEX leading the change through the financing of its own exploration activities, the reactivation of its fields and the beginning of new shallow-water developments.

We interpret this not from any business plan or official statement but from the contracts that have already been handed out. This sought-after increase in production also corresponds to the other focus of this administration, which is the regeneration of the country’s capacity to use and process nationally produced crude oil through large investments into the country’s refining system. All of this is done to achieve what the administration calls “sovereignty” or energy self-reliance, which is undoubtedly a great goal that we can agree with and align ourselves with. A focus on PEMEX is something we can easily adapt to and support. It is the way our member companies worked in Mexico for decades without the Energy Reform.

We did struggle to align ourselves with the administration at the beginning because the change in personnel was quite drastic and we simply did not know anybody. However, as they have settled into their roles, we have been fortunate enough to build a great relationship with them. I believe they are closely listening to our concerns. We do consider ourselves to be aligned with this new administration as we are more than capable of supporting it and working under the contracting models that it wants us to follow. However, we do believe the administration should reconsider its position on promoting further foreign investment as a tool to achieve the sovereignty it seeks.

Q: What degree of reactivation of economic activity have you and your member companies already experienced?

A: We have already witnessed a significant increase in enthusiasm from all the relevant players in the industry’s large hubs of Tabasco and Campeche, especially after all the announcements regarding investments in PEMEX. However, this enthusiasm is going to take some time to concretely turn into material resources being invested in resuscitating these regional economies, given the significant ways in which they were affected by the past couple of difficult years, which saw the end of many companies. We have also seen a rise of activity in terms of drilling rigs in operation. We had 17 two years ago and now we are somewhere between 40 and 45. There has also been a visible increase in PEMEX’s contracting activity, along with a clear decrease in Tabasco and Campeche's unemployment numbers and a stabilization of the production decline.

We reiterate that to provide continuity to all of these positive metrics, some sort of structure to facilitate foreign investment, such as new bidding rounds, must be at least discussed and planned for as soon as possible, given the long development cycles that these structures and processes tend to have. Regardless, we do expect this reactivation to continue incrementally over the next couple of years.

Q: What would you consider an essential part of the contracting process between PEMEX and your member companies?

A: The most essential part is that the financial resources that will cover the cost of each and every contract are already assigned and put aside or otherwise guaranteed before awarding a contract. A transparent sourcing of assets for each of the new contracts would go a long way toward addressing and assuaging this uncertainty. A larger percentage of private investment can also help this process.

 

Mexican Association of Oilfield Service Providers (AMESPAC) creates consensus and develops proposals for its associates to improve the performance of the Mexican oil and gas sector. It has 50 national and five regional associates.

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