February 9, 2018 / 6:28 PM / a year ago

Mexico energy minister says election no obstacle to 2018 oil auctions

MEXICO CITY (Reuters) - Mexico will push ahead with more oil auctions through the end of this year even if the leftist presidential front-runner and sharp critic of the energy opening were to win the July race, Energy Minister Pedro Joaquin Coldwell said in an interview.

Mexico's Secretariat of Energy Pedro Joaquin Coldwell speaks during an interview with Reuters in Mexico City, Mexico February 8, 2018. REUTERS/Carlos Jasso

In addition to a March auction covering shallow water oil and gas blocks in the Gulf of Mexico, and an onshore auction in July, the energy ministry may also seek more partnerships for national oil company Pemex in October, Joaquin Coldwell told Reuters late on Thursday.

The auctions to select equity partners for the Pemex joint venture partnerships would take place some three months after the election, but before the new president takes office in December.

The front-runner in the polls is Andres Manuel Lopez Obrador, a two-time presidential runner-up and fierce resource nationalist who has pledged to review all contracts from Mexico’s previous eight oil auctions.

While the former Mexico City mayor has been somewhat vague about how he would approach the 2013 constitutional energy reform if elected, Lopez Obrador has stopped short of calling for it to be scrapped.

The reform allowed private producers to operate oil and gas fields on their own, while ending Pemex’s decades-long monopoly and allowing it to enter into first-ever joint ventures.

“It’s going to be a year of intense activity... These auctions are going to happen regardless of who wins the presidency,” Joaquin Coldwell said.

Around 90 exploration and production contracts have been signed with oil majors including Chevron Corp and Italy’s Eni SpA. Joaquin Coldwell expects that number to increase to more than 100 by the time President Enrique Pena Nieto’s term ends.

Pena Nieto is barred by law from seeking a second six-year term.

Joaquin Coldwell, who also serves as chairman of Pemex’s board of directors, described the energy reform as “irreversible” as its major tenets are enshrined in the constitution, and would require a super-majority in Congress to reverse.

The long-term contracts can only be revoked by the sector’s independent regulator, the National Hydrocarbons Commission. Companies can also take disputes to international arbitration.

“These contracts are bullet-proof,” said Joaquin Coldwell, who served as chairman of the ruling Institutional Revolutionary Party before taking the helm of the energy ministry.

He added that the already-signed contracts are likely to bring in some $150 billion, saying that it would be “complete nonsense” to forgo such investment.

A late January deepwater oil auction that saw Anglo-Dutch major Royal Dutch Shell win nine contracts is alone forecast to bring $93 billion in investment.

Mexican crude oil production hit a record 3.4 million barrels per day (bpd) in 2004, but has consistently dropped since then to total about 1.9 million bpd last year.

Joaquin Coldwell said $640 billion in investment over the next 15 years will be needed to push output to its peak.

Reuters has reported that the Mexican government is studying the possibility of stepping in to replace Venezuela’s oil program Petrocaribe if the government of President Nicolas Maduro were to fall.

But in the interview, Joaquin Coldwell downplayed the possibility.

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“It would be very hard for Mexico to assume such a responsibility since our own oil production has been declining,” he said, emphasizing that the Petrocaribe analysis has mostly been led by the foreign ministry.

Late Venezuelan President Hugo Chavez launched Petrocaribe in 2005, offering discounted supplies to a dozen countries using low interest rates and allowing members to pay for crude oil with goods such as food and clothing.

But since then, the amount of oil distributed by the program has dwindled.

Reporting by Ana Isabel Martinez; Writing by David Alire Garcia; Editing by Tom Brown

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