Mexican officials will push for President Enrique Peña Nieto’s energy reform to the very last day of his administration in 2018, Energy Secretary Pedro Joaquin Coldwell said Monday.
Joaquin Coldwell was speaking at a ceremony to present the winners of 10 offshore production sharing contracts awarded in June at the first auction of the second round of the country’s energy reform, known as Round 2.1.
Peña Nieto is due to hand over to his successor on Dec. 1, 2018. Mexican presidents hold office for six years, and there is no re-election. The next Mexican president is to be elected in July.
The energy ministry’s remarks emphasized the current administration’s determination to complete its job without yielding to any lame-duck tendencies that might emerge late next year. Joaquin Coldwell admitted that nature has presented Mexico with a tough hand in recent weeks, first in the form of hurricanes and tropical storms, then with three large earthquakes.
Thelatest earthquake, on Sept. 23, rocked southern Mexico and measured 6.2 on the Richter scale, but damage was minimal. However, a quake on Sep. 19 measured 7.1 on the Richter scale, causing serious damage and loss of life to Mexico City and surrounding states. At least 324 died in the quake.
At the presentation, Italy’s Eni SpA and Mexico’s Citla Energy were awarded three each of the production-sharing contracts. Other winners in Round 2.1 included units of Royal Dutch Shell plc, Total SA, Ecopetrol, Lukoil, PC Carigali, Repsol SA, and two Mexico companies, state-owned Petroleos Mexicanos and privately owned Sierra Oil & Gas.
All 10 blocks are offshore the southern Gulf of Mexico states of Veracruz, Tabasco and Campeche.
The production sharing contracts are for 30 years, with a possible extension of five years. Joaquin Coldwell said the contracts are expected to generate investments of $8 billion and production of about 170,000 boe/d over their duration.
In 1985, one of the world’s biggest earthquakes ever devastated Mexico with nearly 10,000 fatalities and years of hardship for a population, government and business community that were seriously underinsured. The recent quake is much smaller in every sense, and this time Mexico appears to be relatively well covered by the insurance industry, as it has in hedging its crude exports against the vagaries of the international oil market.
Despite “a chain of catastrophic events [that] struck Mexico over the past two weeks…Mexico’s insurers will show resilience,” said S&P Global Ratings analysts. “We believe that insurers’ adequate catastrophe risk management, reinsurance protection, and a prudent regulatory environment that requires high levels of equalization reserves will help to balance insured losses.”
Editor Enrique Quintana of Mexico’s leading financial newspaper, El Financiero, on Monday published “Five reflections on a month of disasters. “The reconstruction effort will cost a lot, but it won’t put a brake on the economy.” There inevitably be will severe consequences for thousands of families, especially in the poorest states and regions, but spending on the reconstruction will be positive for the overall economy, “and it won’t dislocate the nation’s financial resources.”
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