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Business groups defend private sector’s participation in energy

Business says positive results seen from energy reform; AMLO calls it 'a resounding failure'

Business groups have defended the private sector’s participation in Mexico’s energy industry after President López Obrador called energy reform “a resounding failure” and declared that the government would not hold new oil and gas auctions this year.

The Business Coordinating Council (CCE) said in a statement Thursday that the participation of private companies has benefited the Mexican energy market.

“The [2014] energy reform has had positive results considering the short time since its approval,” the CCE said

Private companies have already invested US $11 billion in the energy sector and have plans to invest more than US $36 billion, it added.

The powerful lobby group asserted that holding auctions to sell off oil and gas blocks allows for greater exploration and production without the government having to “assume risks or losses of any kind.”

The CCE also said that auctions benefit the government because it receives royalties and tax revenue from the companies that operate the blocks.

“In addition, [auctions] encourage the purchase or leasing of national goods and services and the hiring and training of labor; investment in local and regional physical infrastructure increases and technology transfer processes are created,” the statement said.

The CCE entered the debate a day after the Mexican Association of Hydrocarbon Companies (Amexhi) refuted a claim made by López Obrador that private companies were only extracting 10,000 barrels of oil per day from fields they won in auctions.

The president used the figure as justification for not holding new auctions, stating that the government is urging companies that won blocks previously to invest in them and produce.

Amexhi, however, said that fields operated by its members had in fact yielded an average of 47,000 barrels per day (bpd) during the first 11 months of 2019 and that production was expected to rise to 280,000 bpd by 2024.

It also said that private companies that bid successfully in auctions held by the previous government had complied with 100% of the commitments they made.

In its statement, the CCE called for dialogue between the private sector and the government in order to discuss the former’s participation in the energy sector and to evaluate the existing agreements between the two parties.

The president of the Mexican Business Council also weighed in on the debate, asserting that the energy sector needs “hundreds of billions of dollars” in investment that the government and the Mexican private sector are incapable of raising on their own. Therefore, Antonio Del Valle said, foreign investment is also required.

“There are many opportunities in the hydrocarbons sector such as in the generation of electrical energy. What we need to have are clear rules [for investment] . . .” he said.

“If we want [the economy] to grow at higher rates in coming years, we’re going to need energy for industry, commerce and homes,” Del Valle added. “So we have to develop energy generation and . . . transmission [capacity and] we need a much larger and more efficient gas pipeline system.”

José Manuel López Campos of the Confederation of Chambers of Commerce, Services and Tourism said that there are a lot of opportunities in the energy sector and that private investment is needed.

Even though the government has indicated that it won’t hold new oil and gas auctions this year, private companies can still invest in oil terminals, gas stations, the generation of both traditional and renewable energy and infrastructure to distribute natural gas, he said.

“. . . There are many more [areas] in which . . . they can work . . . There is a very large need for natural gas; only 20 of the 32 states have natural gas.”

Source: El Financiero (sp) 

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