López Obrador pursues his oil dream with an energy sovereignty plan for Mexico


The president of Mexico, Andrés Manuel López Obrador, during a visit to a Pemex plant in 2019.
The president of Mexico, Andrés Manuel López Obrador, during a visit to a Pemex plant in 2019.Handout . (Reuters)

In Mexico the words oil and people almost always go hand in hand, at least in the speech of the authorities and in the slogans of the Government. The president, Andrés Manuel López Obrador, has accelerated his plans to pursue the “energy self-sufficiency” of the country, an old dream that starts from an ideological premise and moves towards a still uncertain horizon. The springboard to achieve the purpose is Pemex, a giant cornered by a debt of 113,000 million dollars (100,000 million euros) that now seeks to strengthen itself through the reactivation of the national network of refineries and avoid, or reduce drastically, the export of crude. The state oil company presented on Tuesday a decalogue that aims to mark a change of course in line with the president’s political project, clearly nationalist in energy matters.

“For the rescue of sovereignty.” The motto of Petróleos Mexicanos, the largest company in the country, is unequivocal and dates back to 2019. The declaration of intent coincided with the coming to power of the new Government and since then, López Obrador has tried to thoroughly reform the entire energy sector, starting with the electrical system. It did so with a law that changed the rules of the market game and granted another state behemoth, the Federal Electricity Commission, the preferred lane for production and distribution. Its critics called it a covert renationalization. In any case, the initiative has remained for the moment in borage water, first because justice paralyzed the measure before the avalanche of appeals brought by private companies and now because it can only be unblocked with a constitutional reform for which there is not enough consensus in the Parliament.

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However, the president did not give up and focused on hydrocarbons. This week it announced that in January Mexico will close the purchase of Deer Park, a Shell-owned refinery located in Texas, for 1.6 billion dollars (1.418 billion euros). And on Tuesday he invited Pemex CEO Octavio Romero Oropeza, a veteran leader of the left, to his daily press conference at the National Palace, who laid out a plan to regain the prominence of the company with a change of model.

The shift consists, in essence, in progressively closing the oil tap abroad so that by 2023 all production can be turned into fuel in Mexico or in state plants. The trend reversal proposed by the Executive has already begun and is such that if 506,000 barrels were processed in 2018 and 1.19 million were exported, this year the refining capacity has increased to 714.00 barrels. The goal for 2022 is to double that amount and export 435,000. “By the 23rd and 24th practically all of Pemex’s production will be processed, it will be refined […] in our country to guarantee the supply of fuels ”, assured the head of Pemex.

That is the stated purpose of the plan, in addition to maintaining some control over prices by reducing dependence and import costs, although behind it there is also a decade marked by a vertiginous fall in reserves. From 2012 to 2018, under the previous Administration of Enrique Peña Nieto (PRI), they plummeted from almost 14,000 million barrels to half. This Executive hopes to close its period in 2024 with that average, about 7,000 million.

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But what are the tools with which Mexico wants to embark on this path? In the so-called Fourth Transformation, the project of López Obrador and his party, Morena, everything is connected. Another main line of the Government program is large infrastructures and among these works are the Dos Bocas refinery and the Cangrejera project, in the Caribbean, to which is now added the purchase of the Deer Park petrochemical complex in the United States. With these plants, according to the Secretary of Energy, Rocío Nahle, at the end of the six-year term, 858,000 barrels of gasoline and 542,000 of diesel could be produced, leaving the refining capacity at 86%.

Óscar Ocampo, coordinator of the Energy Department of the Mexican Institute of Competitiveness (IMCO), does not see it as easy. “It is unfeasible for those goals to be achieved. The idea of ​​Cangrejera is retaken, but it is not in the Expenditure Budget for 2022. And it seems difficult for the Dos Bocas refinery to be fully inaugurated, beyond the symbolic, and for it to be fully operational before 2024 ″ . To this are added the great burdens of Pemex, continues the analyst: the debt of 113,000 million dollars and the deterioration of its industrial subsidiary, precisely the one in charge of production and transformation of crude oil. “His great sin”, he concludes, “is that he has always been at the mercy of political powers and not so much economic.” In this context, the Ministry of Finance presented at the beginning of December a rescue proposal that contemplated a debt refinancing, a corporate governance reform and a business plan. Many experts thought it was a good sign, although now López Obrador has once again emphasized sovereignty.

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“That the oil be taken care of, that it belongs to the nation, that it belongs to the people, that it be used for internal consumption, that crude oil and gasoline continue to be sold and that fuel prices be kept fair,” the president proclaimed. on Tuesday before giving the floor to the secretary general of the oil company. The path is marked and it is part of the legacy that the president, an admirer of Lázaro Cárdenas and Adolfo López Mateos, the leaders who nationalized the energy sector, is determined to leave to the Mexicans.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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