The Mexican government may need to effect changes in the country’s constitution to strengthen its control of state oil giant Pemex, President Andres Manuel Lopez Obrador said in a memo cited by Bloomberg.
"We must advance to the limit permitted by the current legal framework. However, if in order to apply the new rescue policy to Pemex and CFE we need to propose a new energy reform, we don’t rule out that possibility," Lopez Obrador wrote in the memo.
Obrador came to power with a pledge to, among other things, restore state control over Mexico’s energy industry, which effectively came down to a reversal of the energy reform the previous government, led by Enrique Pena-Nieto, which dismantled Pemex’s monopoly of the local energy market and encouraged foreign oil and gas companies to develop Mexico’s resources.
After Obrador won the elections, he suspended new oil bloc auctions to review the contracts already inked with foreign operators for signs of corruption. Then the new government provided the state company with huge tax relief to prop up its finances.
Like other oil producers around the world, Pemex has been grappling with low demand and lower sales. On top of that, it has a debt pile of $105 billion, and in May, it reported a quarterly loss of $23.6 billion—one of the worst quarterly results in its history.
Yet the company is at the center of President Lopez Obrador’s energy plans. AMLO, as he is popularly referred to, wants to boost Mexico’s crude oil production to 2.5 million bpd by the end of his term, from 1.68 million bpd last year. For this year alone, Pemex had planned to boost output by 300,000 bpd.
According to the memo, oil production this year should be raised to 1.8 million bpd and further to 2.2 million by 2024.
By Irina Slav for Oilprice.com
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