Mexican oil companies ask Sheinbaum to relaunch bid rounds and farm-outs

Mexico's privately owned oil companies are calling on the incoming government of Claudia Sheinbaum to rebuild ties with the industry after years of neglect.

Outgoing president Andrés López Manuel Obrador, who came to power in 2018, cancelled bid rounds for exploration and production and dropped plans for national oil company Pemex to sell fields to private operators in so-called farm-outs.

On Monday the Mexican association of hydrocarbon companies (Amexhi) published a document containing eight policy proposals for the Sheinbaum administration.

On its wish list, Amexhi calls for the next government to restart the bid rounds and implement new farm-out agreements between Pemex and the private sector to operate oil and gas fields. 

Sheinbaum will take office on October 1.

“We are looking to move closer to the government,” Alberto de la Fuente, chairman of Amexhi, told Imagen Radio on Monday. “We believe that we are at a good time to have a conversation with the administration of Claudia Sheinbaum.”

According to Amexhi, private oil companies have invested US$35bn in Mexico, have made 21 discoveries and currently produce 88,500b/d of oil and 194Mf3/d of natural gas. That is about 5% of the country’s production. 

If annual bid rounds resumed with similar results to previous years, Mexico's production could rise by as much as 1Mb/d of oil and 2.4Bf3/d of natural gas, Amexhi estimates.

Furthermore, by farming out stakes in oil and gas fields to private operators, Pemex would be able to reduce its debt burden and lower costs, while Mexico would increase its production.

Amexhi also calls for an open and informed debate about the use of fracking technology. The outgoing government is proposing a constitutional ban on fracking, a drilling technology which is used to produce oil and gas from unconventional fields but which makes intensive use of water.

According to Amexhi, 53% of the country's prospective hydrocarbon resources have not yet been allocated for development to either Pemex or to a private operator. Most of these resources are located in unconventional fields which will require the use of fracking.

De la Fuente also emphasized the need to develop Mexico's natural gas resources to take advantage of the nearshoring trend and to increase the country's energy security. Mexico currently imports 75% of its natural gas from the US.

Increasing domestic production of natural gas would support the growth of downstream industries, such as petrochemicals and power generation, he said.

Amexhi's policy document, in Spanish, can be downloaded from the Documents box in the top-right corner of the screen.