Mexico’s incoming president has begun fleshing out his rescue plan for the country’s long-neglected oil sector. Andrés Manuel López Obrador’s proposals include a $4bn capital injection for state oil company Pemex to boost exploration, a new refinery to slash reliance on US fuel imports and a 600m barrel-a-day increase in crude production in two years. But analysts warn that his nationally focused energy policy risks putting unsustainable pressure on the world’s most indebted oil company.
In particular, they point to plans for a 160bn peso ($8.6bn) refinery to be built in his home state of Tabasco over the next three years — an investment equal to the size of Pemex’s loss in the second quarter. Mr López Obrador has not spelt out how he would fund his proposals but has named Octavio Romero Oropeza, a long-time confidante and agronomist from Tabasco, to take the helm of Pemex. “We are estimating overall investment to rescue the sector of 175bn pesos next year,” said the president-elect, who takes office on December 1.
The cash injection comes as Pemex has seen output fall from a peak of 3.4m barrels a day in 2004 to 1.866m in the second quarter this year. Mr López Obrador said output was plunging because “the energy sector and oil industry were abandoned”, and has pledged to lift production to 2.5m b/d in two years. He has yet to make clear whether he intends to continue with oil tenders that have seen more than 100 contracts awarded to 73 companies since 2015 under a landmark reform designed to lift Mexico’s oil output from a four-decade low. The new administration wants at least a temporary pause to oil tenders. “Four billion dollars is a significant amount, there’s no doubt. But it is important to put it in perspective . . . One single tender round can inject more investment,” said Pablo Zárate at think-tank Pulso Energético.