Is Mexico Still Attractive for Operators?
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Is Mexico Still Attractive for Operators?

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Perla Velasco By Perla Velasco | Journalist & Industry Analyst - Mon, 10/23/2023 - 13:41

The oil and gas sector has lost its appeal among operators, says Presidential candidate Xóchitl Gálvez. The Mexican Association of Hydrocarbon Companies (AMEXHI), however, argues that investors are still interested in the market, reports Bloomberg Línea.

According to Gálvez, there is no more interest in oil rounds in Mexico. Furthermore, the country is no longer attractive for international oil companies, she highlighted last week at the Joint Energy Associations Congress XIII. According to Bloomberg Línea, in light of Gálvez’s statement, Merlín Cochran, General Director, AMEXHI, reiterated that operators are still interested in continuing exploration and production activities in Mexico, and reaffirmed their commitment to the country.

With the changes implemented by the current administration, the 2024 elections are drawing significant attention and will influence investors' future decisions. The continuation of MORENA's policy, with PEMEX at the center, versus a more investor-friendly approach from Gálvez’s Frente Amplio por México coalition, keeps investors in suspense. 

CNH has also expressed an inclination for an industry more welcoming toward private companies. Héctor Moreira, Commissioner, CNH, shared that the market needs more fiscal incentives to encourage investments in projects that are not productive in the early stages. "You need to encourage investment in exploration, and then you can impose all the taxes you want," commented Moreira to Energy21.

According to Óscar Roldán, Director of the Oil and Gas Division, R9 Holdings, the main challenges for the oil and gas industry in Mexico are in regulation, which is very difficult to navigate in the country and very time consuming. An improved fiscal regime is needed that could spark more interest and make many interesting areas more viable. The country needs to change its view of the oil and gas industry as a mere source of fiscal revenue, explained Roldán at the Mexico Oil and Gas Summit 2023.

Various upstream operators in Mexico have exited the oil market. Despite the abandonment of blocks, oil rounds remain suspended, and no new areas are being granted to operators. Because of this, different stakeholders have called for the resumption of area auctions. By the end of 2022, more than 22 exploration areas had been abandoned, and in 2023, at least 16 companies have initiated procedures to give up their contracted areas. 

Gálvez’s Vision for the Industry

During her participation in the National Convention of Delegations, Sectors, and Branches of the National Chamber of the Transformation Industry (CANACINTRA), Gálvez shared that she aims to strengthen rule of law. She referred to the current controversy that the Supreme Court is facing following the resolution in favor of asymmetric regulation for PEMEX, which the candidate characterizes as an attack on the SCJN.

Gálvez also explained that the government’s decision to set the oil price at US$54/b for next year’s federal budget despite higher international oil prices is a sketchy move to deviate resources and allegedly fund MORENA’s presidential candidate Claudia Sheinbaum. In this context, the Frente Amplio por México political coalition published their own alternate economic package. The coalition's proposal adjusted the oil price at US$76.7/b.



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