Oil Investments Stalled in 2022

Foreign Direct Investment (FDI) in the oil and gas sector fell by 63% during 1Q22 compared to the same period in 2021. While FDI in 1Q21 accounted for US$753.3 million, in 1Q22 it amounted to US$278.3 million, one of its lowest points since 2016. Inversely, FDI in the electric sector grew by 4% and reached US$623.5 million.

Furthermore, many E&P activities were abandoned in 2022. Although CNH has assured that companies deciding to focus on more profitable areas is a normal process, no further bidding rounds have been granted during this administration toward further exploration.

Oil investments in Mexico have plummeted in 2022 to US$1.621 billion, the lowest level in four years. Despite the increase in crude oil prices, both PEMEX and private players invested fewer resources in the exploration and development of oil and gas fields.

Moreover, approved investments for exploration, evaluation and development plans reached US$46.8 billion in 2022, a 10.39% increase. Most of the approved investment is planned to be made after 2025. The field with the most investment Ek-Balam, followed by Amoca, Miztón and Tecoalli.

According to Luis Miguel Labardini, Partner, Marcos & Asociados, one reason for the suspension of bidding rounds may be because this administration assumes that it loses sovereignty over the granted areas. However, he explains, the sovereignty still belongs to the state. “This administration, for ideological reasons, considers that when a field is managed by a private company, the private company appropriates the profits. This is not the case because we have a good tax regime that has already been tested in other parts of the world and, surprisingly, the first to invent it was the president who nationalized oil in Mexico, Lázaro Cárdenas, in 1937, one year before the expropriation,” he told BNamericas.

Limited access to exploration areas has also paved the way for a secondary market where a company must contact the owner of a granted concession if it wants to secure a contract area. Another hindrance to private investment is that most operators must sell their production to PEMEX, which represents a great risk due to the NOC’s liquidity problems. Nevertheless, some operators, such as ENI, have been able to export their production.