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Mexico failed in communicating energy reform: CNH


By Argus

Petroleumworld 02 27S 2019

Mexico's government and regulators failed in communicating the success of Mexico's historic 2014 energy reform, oil regulator CNH said.

"We have not been able to effectively communicate the success to the wider population," CNH commissioner Alma Porres said yesterday during a seminar. "We have not known how to explain it."

President Andres Manuel Lopez Obrador has repeatedly blasted the 2014 energy reform that dismantled state-owned Pemex's monopoly for its alleged failure to increase declining production and to secure promised investment from the private sector.

Lopez Obrador claims the reform has failed to deliver a single barrel of oil. Yet small, independent companies produced 13,400 b/d in November, more than six times more than in November a year earlier. Larger scale production is expected to ramp up this year as the first shallow water contracts are put into production.

"We should not evaluate the success of the reform in barrels, those will come, but it will take time," commissioner Sergio Pimentel said.

Key errors in communication include the decision by Enrique Pena Nieto's government to pledge production of 3.4mn b/d of oil by 2018.

"This was clearly a mistake," Pimental said.

Pemex produced 1.62mn b/d of crude in January, a five-year low that is down by 5pc from December and by 15pc from last year.

Instead, the reform should be measured by other indicators including the more than $3.7bn invested in seismic imaging and information.

"Mexico now has six times the amount of seismic information Brazil has and four times the information Norway has," Pimentel said.

Discourse surrounding the reform has polarized under Lopez Obrador's government, with CNH and energy regulatory commission, CRE, characterized as bureaucratic institutions that have slowed development of the energy sector. Lopez Obrador escalated his rhetoric last week, attempting to discredit CRE president Guillermo Garcia Alcocer for alleged conflicts of interest, following the latter's vocal criticism of the president's selection of new candidates for the CRE.

"A clear message, with hard facts and distanced from moral judgments," is the answer to addressing misinformation surrounding the reform, Pimentel said yesterday.

Mexico's private-sector oil company association (Amexhi) threw its support behind the regulators yesterday.

"Amexhi reaffirms its conviction about the importance of maintaining the autonomy and strength of the energy sector regulators in ensuring the protection of the nation's interests and the long-term interests of society," the association said. "Both regulators allow participants in the energy industry to compete on an equal footing which is fundamental in order to maximize the value of the projects for Mexico."

Since 2014, CNH has held three main upstream rounds for onshore and offshore blocks, as well as three farm-outs in which Pemex has partnered with the private sector to develop acreage awarded under the reform. More than 100 contracts have been signed with 73 companies from 20 countries as a result. Total investment is expected to reach $161bn if all licenses prove viable, CNH said.



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