Mexican oil output could return to 2 million barrels per day (MMbbl/d) by about 2022 if the next government pursues plans to auction off development blocks to private investors, Energy Minister Pedro Joaquin Coldwell said June 5.
Mexico will elect a new president on July 1 but the front-runner in opinion polls, leftist Andres Manuel Lopez Obrador, has threatened to delay opening the energy sector to private investment. He wants further oil and gas auctions to be halted if he wins.
Opening the country’s oil and gas industry to foreign investors was a central pillar of President Enrique Pena Nieto’s plan to lift Mexico’s sluggish economic growth. However, that policy has been shaken by U.S. President Donald Trump’s threats to dump the North American Free Trade Agreement.
The next Mexican president is scheduled to take office in December.
The current Energy Minister Joaquin Coldwell told Reuters in an interview that two further auctions planned before the handover would go ahead, as would tenders for seven joint ventures known as farmouts.
Joaquin Coldwell says Mexico must invest around $640 billion to arrest a longstanding slide in production and return output to 3 MMbbl/d.
Production, which peaked at almost 3.4 million in 2004, stood at 1.886 MMbbl/d in April, official data show. It will probably not return to 2 MMbbl/d for a few more years, he said.
“Two million (bbl/d) could be in the second half of the next government if the auctions continue,” he said, “from 2022 approximately, and 3 million (bbl/d) by 2040."
Mexican presidential terms last six years.
The auctions stem from 2013-2014 changes to Mexico's energy laws and began in mid-2015. However, they have yet to translate into higher crude oil output in Latin America’s No. 2 economy.
Joaquin Coldwell said oil exploration and production was a long-term process and companies that had already made discoveries could add about 35,000 to 50,000 bbl/d to output by the second half of next year.
Lopez Obrador says the contracts awarded under the opening should be revised to ensure there was no corruption involved and that all further auctions should be halted in the meantime.
Several of Lopez Obrador’s economic advisers have said they expect the process to continue after the revisions, though he has floated the idea of unpicking the reform.
Minister Joaquin Coldwell said the process of auctions had been the most transparent in the history of Mexico.