Mexico slashes energy investment portfolio

Mexico's government cut its estimate for the worth of a portfolio of long-awaited energy investment plans amid the lowest crude prices in years and the coronavirus pandemic.

The country will next week announce energy investment projects to include "collaboration with the private sector" worth up to Ps339mn ($13.4bn), President Andres Manuel Lopez Obrador said in a quarterly address to the nation today.

The value of the plan declined from the government's initial estimate of $100bn given late last year. Officials have provided few details about the initiative. More information was to be announced last in late February.

Lopez Obrador closed many avenues for private-sector energy investment, opened under a 2014 reform, after he took office in December 2018.

The president for the second time since late last week insisted that Mexico's state-owned refineries will take advantage of low global crude oil prices by refining an additional 400,000 b/d, which would almost double their current level of processing. The country's six refineries have struggled to increase output after decades of low investment.

The six refineries were running at 36pc capacity in the week ended 20 March.

The president vows to continue work to repair and refurbish the refineries, as well as build a controversial new 340,000 b/d refinery in Tabasco state.

Refining more would avoid "cheapening the national crude," the president said. Mexico's crude basket, which is a representative price of its export grades, fell to $10.40/bl on 30 March.

On 3 April, the price increased by 51.5pc from the previous day to $16.05/bl, after US president Donald Trump said he expects and "hopes" Saudi Arabia and Russia will cut their oil output by 10mn-15mn bl. Mexico has also called on the two countries to reach agreement.

The low crude prices put Mexico's finances and those for state-owned oil company Pemex in jeopardy, ratings agencies have said.

The president confirmed that the government will go ahead with a tax cut for Pemex approved since October.

But the president gave few specifics of how the country's economic recovery will begin soon, as he promised. He said that he will not resort to "gasolinazos," or raising fuel taxes or prices.

Mexico's fuel demand has fallen by roughly 20pc as the country in late March began coronavirus mitigation efforts in earnest.

By Sergio Meana

source: Argus Media