Tenaris CEO hits out at energy policy delays in Mexico, Argentina

Steelmaker Tenaris, a key supplier of tubes and pipelines to oil and gas companies, blamed energy policy delays in Mexico and Argentina for part of a slump in sales and profits in the second quarter.

"The change in the government in Mexico and the uncertainties surrounding policy for the energy sector are limiting drilling investment," Paolo Rocca, chairman and CEO of Tenaris, said on a conference call on Thursday.

"In Argentina, the necessary stabilization of the macroeconomic environment is delaying investment in drilling and the development of infrastructure in Vaca Muerta."

In the second quarter, the company's sales of tubes fell by 35% in South America to US$582mn and were down 34% in North America. Net income dropped 70% to US$335mn.

In Mexico, Rocca said there were was still major uncertainty over the future of energy policy. He noted that president-elect Claudia Sheinbaum has still not appointed new CEOs at national oil company Pemex and state-owned electricity company CFE.

"It's more difficult to understand what the policy of the new government and Claudia Sheinbaum is," Rocca said. "Pemex needs action by the government to refinance part of its debt."

Tenaris, a major supplier of piping products to Pemex, said that the highly indebted company has delayed payments beyond the agreed-upon due dates.

On the conference call, Rocca said that Mexico clearly needs investment in energy, citing recent power outages. However, he said it was now too late for Tenaris to benefit this year from any new energy policy that Sheinbaum's government introduces after taking office in October.

"We expect the postponement of some of the demand," he said.

In Argentina, Tenaris highlighted delays in defining the pipeline infrastructure investment required to develop the Vaca Muerta shale field.

"We're convinced that there's ample scope for expansion and for demand in Argentina," Rocca said. "The macroeconomic environment is postponing the moment at which this project could be reliably financed."

"I'm very confident that Argentina has relevant plans for developing Vaca Muerta by different operators. It will take time to formalize finance and get all the clearance for the project."

"Argentina will recover credibility and access to the market but it will take a little more time. We were all probably over optimistic," he added.