Shale Daily / Gulf Coast

Mexico’s Lopez Obrador Vows to Review E&P Contracts if Elected

Mexican presidential candidate Andres Manuel Lopez Obrador said Tuesday that, if elected, he would seek to review exploration and production (E&P) contracts signed after the country’s 2013 energy reforms.

Speaking at the Wilson Center in Washington, DC, the former Mexico City mayor said the proposed review would focus on rooting out corruption and deals deemed unfair to the Mexican people.

“We are not going to act in an arbitrary fashion, we are going to respect the law, but we will review the contracts,” he said. “Why? Because we don’t want any contracts marred by corruption or that are one-sided.”

He also pledged to reverse Mexico’s declining oil production and to modernize and expand its refining capacity.

Lopez Obrador, popularly known as AMLO, has made combating corruption a central theme of his campaign. He is one of the frontrunners among the current crop of presidential candidates for the 2018 general elections, which are to take place July 1.

Since the reforms began in late 2013, Mexico has called seven tenders to award E&P blocks, while Petroleos Mexicanos (Pemex), the national oil company, has sought private partners to develop its onshore and offshore assets through an ongoing farmout program.

To date, the country has signed 70 contracts with private and foreign companies, according to the National Hydrocarbons Carbons Commission.

On Tuesday, Lopez Obrador cited the corruption scandal at Brazilian construction giant Odebrecht, which has implicated politicians across Latin America, as a motivation for his plan to review contracts in the oil and gas sector.

“We want to avoid any surprises, any bad experiences, that the contracts with the oil companies may have traits like the Odebrecht case,” he said. “There will be opportunities in Mexico for private and foreign investors, but with honesty and adherence to the law.”

Lopez Obrador, a left-leaning populist representing the MORENA party, has been a vocal critic of the energy reforms and, in the past, has pledged to “cancel” them if elected. More recently, MORENA representatives have clarified that Lopez Obrador would not seek a total reversal, but rather look to renegotiate specific elements of the reforms.

Mexican officials and independent experts have said it would be challenging for the next administration to roll back the energy reforms at this point, citing various political, regulatory and economic checks and obstacles.

“The next administration will obtain the fruits of the efforts by this [administration],” Rosanetty Barrios said at the US-Mexico Natural Gas Forum, held last month in San Antonio.

Barrios, who is head of the industrial transformation unit at the Mexican energy ministry (Sener), said, “I don't see any reason to reverse the process, especially when all of the political costs were absorbed” by the current government.

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