Mexican media reported on October 24, local time that 43 members of the US Congress sent a letter to President Trump, accusing the Mexican government of obstructing the investment of US energy companies in Mexico, violating the spirit of the “U.S.-Mexico-Canada Agreement.”
In response, Mexican President Lopez responded that day that the Mexican government under his leadership has never reached any agreement with the United States and Canada in the energy sector. The premise of the signing of the “U.S.-Mexico-Canada Agreement” is to protect Mexico’s complete sovereign rights.
This open letter, initiated by Texas Republican Senator John Corning and signed by 43 members of Congress, accuses the Mexican government of granting privileges to state-owned energy companies represented by Pemex, making them competitive Enjoy preferential treatment. At the same time, lawmakers said that regulatory agencies such as the Mexican Energy Regulatory Commission (CRE ) have interfered with US energy companies’ investment in Mexico by delaying the issuance or cancellation of permits.
The letter mentioned that Mexican President López signed a memorandum in July this year, requiring Mexico’s energy regulators to use all resources within a functional framework to protect the two state-owned companies, Pemex and CFE. Energy giant. The letter also warned that Mexico’s ruling party, the National Renaissance Movement Party, is pushing the Mexican Parliament to amend the constitution, liquidate the energy reform led by former President Peña, and even try to cancel all existing energy contracts that are still in force. They worry that this series of intentions may undermine the certainty and fairness enjoyed by American companies operating in Mexico in the competition.
Mexico is one of the first countries in the world to implement resource nationalization, and it is also the country that has implemented a state-owned monopoly over the oil and gas industry for the longest time. The operations of the two monopoly state-owned energy giants, Pemex and CFE, are directly related to Mexico’s national economy and people’s livelihood.
The letter emphasized that the actions of the Lopez government threatened U.S. investment in Mexico, prevented U.S. companies from entering the Mexican market, and violated the spirit of the US-Mexico-Canada Agreement. The lawmakers reminded U.S. officials that Mexico is the largest export market for U.S. crude oil products, and demand for U.S. natural gas continues to grow. The integration of the energy markets of the three North American countries is not only in the interests of American energy companies, but also in the interests of Mexican workers and consumers.
In response to the accusations of US congressmen, Mexican President Lopez revealed on the 24th that the “U.S.-Mexico-Canada Agreement” was able to take effect after he took office because the United States and Canada agreed to revoke their previous cooperation with the former President Peña’s government in the energy sector. A series of agreements reached, these agreements made him feel “uncomfortable”, so he directly rejected the above content when restarting the negotiations. Lopez assured Mexican citizens that Mexico does not currently have any commitments to the United States, including Canada, in the energy sector.
Oil is an important pillar of Mexico’s national economy and one of the main sources of fiscal revenue. Mexico was once the world’s fifth largest oil producer and the second largest source of US crude oil imports, with the highest annual output reaching close to 200 million tons. However, since the beginning of the 21st century, Mexico’s oil production has continued to decline, especially between 2004 and 2012, when the daily oil production fell by as much as 40%.
At the same time, Mexico’s domestic oil refining capacity is seriously insufficient, and it has to import a large amount of refined oil from the United States. In recent years, Mexico’s imports of oil and natural gas from the United States have increased year by year, and its dependence on imported energy products from the United States has become stronger and stronger. It has gradually changed from an oil exporter to a net oil importer.
In order to reverse this situation, the former President Peña launched a drastic energy market reform shortly after taking office in 2013, covering various aspects such as constitutional amendment, separation of government and enterprise, institutional adjustment, market opening, and mineral rights bidding. Break monopolies, open up investment, increase oil production, revitalize the national economy, increase fiscal revenue, and expand domestic employment. However, over the past few years, the decline in Mexican crude oil production has not only failed to be reversed, but daily production has fallen from 2.5 million barrels per day in 2013 to less than 1.8 million barrels per day in 2018. And Peña himself was recently investigated for allegations of bribing opposition lawmakers through the energy reform plan.
Where Mexico’s current President Lopez took office, he vowed to restore crude oil production to 2.4 million barrels per day in 2025. However, catching up with the continuous decline in international crude oil prices and the sudden new crown epidemic made this goal impossible.
At the same time, he hopes to learn from China’s “three barrels of oil” model, strengthen the leading role of state-owned energy companies, strengthen local refining capabilities, increase the added value of petroleum products, and reduce dependence on imported oil and gas. To this end, on the one hand, the Lopez government promised to abide by the oil and gas exploration and extraction contracts signed during the previous government’s tenure, and on the other hand confirmed that it would not conduct similar tenders.
In terms of electricity, Lopez advocates restoring the CFE’s “dominant” status. In terms of new energy, since he took office, he has repeatedly postponed new energy auctions that have attracted the attention of international investors. He has also announced the suspension of grid connection of renewable energy projects and prohibits the construction of solar communities. In addition, he insisted on stopping subsidies to private companies in the energy sector, and at the same time hoped that through debt restructuring, the two giants, the National Oil Company and the State Power Company, were on the verge of bankruptcy.
Lopez’s series of actions will inevitably undermine the confidence of some overseas investors, but also arouse dissatisfaction from some domestic private enterprises and even environmental protection organizations. In the context of the unprecedented setback of the country’s economy due to the epidemic, analysts are cautiously waiting and watching whether these policies can revive Mexico’s energy industry.
