Year One of Mexican Energy Reforms Under President Lopez Obrador

By Orlando Segura and Juan M. Alcalá, Holland & Knight
 
In 2013, the Mexican Government under former President Enrique Peña Nieto ushered in a series of constitutional amendments that comprehensively reformed the country’s oil, gas and electricity sectors. These reforms included opening fields for private oil companies to participate in public tenders as well as allowing the operation and ownership of privately owned electricity generation, thus ending the decades-long monopolistic control of these sectors by state-owned Pemex and the Federal Electricity Commission (CFE). These reforms led to an increase in the level of foreign direct investment in the country, with some $200 billion either spent or committed by 2018, according to the Mexican Secretary of Energy. [1]

With the 2018 election of President Andres Manuel Lopez Obrador (commonly known as AMLO), many observers expected the rollback of many of the reforms passed under his predecessor. Although a complete rollback has not taken place, AMLO’s Administration (during his first full year in office), did implement numerous actions that are expected to stem the liberalization of the energy market, including:

  • In December 2018, AMLO announced that Mexico’s oil exploration and production auctions would be suspended for three years,[2] though existing contracts will be respected if they result in production, and exploration activities are continuing to be authorized for areas that were awarded in previous rounds of auctions. Additionally, the business of storage, transport and marketing fuels are still open to private companies, with many projects still operating or being developed.
  • In February 2019, Mexico’s National Energy Control Center (CENACE) announced that the country’s auction for large scale renewable energy projects would be cancelled at the request of Mexico’s Department of Energy (SENER).[3]
  • In May 2019, AMLO passed over bids by leading international private firms for the construction of a new oil refinery in the State of Tabasco, and instead handed management of the project’s construction to Pemex and the Ministry of Energy, though it is expected that both Pemex and the Ministry of Energy will have to retain private subcontractors to complete the refinery. The government has represented that the project will cost some $8 billion, but three international firms had offered bids that estimated costs at $10 billion to $12 billion.[4]