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Q&A: AMLO wants 'radical change' in Pemex

05 Mar 2018 12:07 GMT
Q&A: AMLO wants 'radical change' in Pemex

Mexico City, 5 March (Argus) — Leftist Morena party leader Andres Manual Lopez Obrador has been leading the polls ahead of Mexico's July 2018 presidential election for more than a year.

Argus talks with Rocio Nahle Garcia, the Morena lower house representative he has said would be his pick for energy secretary. Nahle, a petrochemical engineer, would be in charge of implementing the party's Mexico-first agenda.

Why was your party so fiercely opposed to the energy reform?

We maintain that it was a bad opening. If it had to happen, it should have been done gradually. We open, see the results, and then, if they are good, go forward.

Aside from that, the people who carried out the opening are totally untrustworthy, with a long history of corruption. There are Mexican politicians inside the companies seeking contracts, which is a problem of conflict of interest.

On the other hand, oil is a nonrenewable resource. All countries, when they extract their resources, must have a responsible management program. The moment you open [the sector] and award all your resources in an indiscriminate way — via production-sharing or license contracts like we are doing now — this is a product that we are losing. All countries try to protect their resources, for their national energy security and self-sufficiency. In Mexico, we have to do the same. We have to exploit in a rational way. We could have said, "Let's do it through public-private associations."

Andres Manuel Lopez Obrador had initially promised a referendum to potentially revoke the energy reform to which he was opposed. He has now softened his speech, and said that instead, his administration would be reviewing all awarded contracts. How?

We will be reviewing the contracts. Now, what is it that preoccupies us at Morena? We need to give confidence and certainty to all the serious investors that have come to Mexico. And those who have invested in the country and have done it the right way, without any influence peddling, they have nothing to fear.

If their costs of operation and production are normal, not inflated, and if both the state and private companies are winning, that is great. But this is what we are going to start reviewing. There are international standards to measure this. We are not closed to business. But we want to do it in a responsible way.

No other country in the world has awarded so many blocks in such hurry. We need to look at what is happening with the 91 contracts already awarded. If the experience is positive, we will continue. We are told that first production will begin around 2018-2019. It will be interesting to see those first results.

If you win the election in July, what will be your first steps?

We already have a work plan, for the hydrocarbons sector but also power and renewables. We did an energy assessment, in which we are considering the renovation of our six refineries.

They are in ruin, because of the [the current government's] technical incapacity, corruption and a lack of a sense of ownership. We used to be self-sufficient in [natural] gas and gasoline. But after the energy reform, they took a bet on gasoline imports. And this is why they intentionally stopped investing and abandoned the country's refinery sector. So we are going to renovate them.

Pemex was in the hands of pure looters — irresponsible, corrupt people and today we see the results. We need to appoint adequate executives and we know who they are. We want to develop our own model, but not one that is closed to the world, on the contrary.

Pemex has a very aggressive fiscal regime, that we need to change, so that it can be managed as a real company. Last year, Pemex had to give to the finance secretary 110pc of its profits! It had to borrow money.

You have also said you want to build one or two new refineries. How would you fund the new refineries?

First, we need to get there [win the election], to see what the Pemex treasury looks like. For a refinery, you can get financing from international banks. It can also be done with public money, or a public-private association.

But that, we will decide when we get there, when we know how much [money] we have. And then it will pay itself in four to five years. That is how we built the refineries we already have.

This year, Pemex was given a Ps50bn ($2.65bn) budget for its refineries, a lot of which went to absurd projects such as computing equipment... instead of channeling it into a corrective and preventive maintenance. There will certainly be a radical change in the organization of Pemex — its priorities, its expenses, its waste … it is terrible. Politicians are now running Pemex, not technicians.

What about the shale auction. Is unconventional E&P something you would pursue in your government?

If we want clean energy, we need to find a balance when it comes to shale gas. Shale wells are exhausted very quickly and what you leave behind, underground, is a great environmental impact.

The fluids they use together with water to break the rock are very aggressive. We have been doing it for over 35 years, for instance in Chicontepec. We are not against it. We will look into it if we need gas. Today we are severely dependent on the US. But the US has very low gas prices and we also need to take advantage of that.