Biden win could alter Mexican energy detente
The US presidential election in November could lead to an abrupt change in Washington's recent hands-off approach to Mexican energy policy.
A win for Democratic challenger Joe Biden would push the US away from Mexico on key policy issues, as the former vice-president vows support for clean energy and action to combat rising greenhouse gas (GHG) emissions.
Mexican president Andres Manuel Lopez Obrador shares his US counterpart Donald Trump's scepticism when it comes to climate change. Lopez Obrador's government has prioritised conventional fossil fuels in power generation, intentionally marginalising renewables, as he looks to restore the historic dominance of state-owned oil firm Pemex and power utility CFE in their respective sectors.
But a Biden victory could prompt Lopez Obrador to alter course. Biden is targeting net-zero GHG emissions by 2050, as part of a clean-energy revolution. The US would also recommit to the UN Paris agreement on climate change, which Trump had abandoned.
Biden has proposed a ban on all new upstream permits on federal land and offshore, although he says he will not prohibit use of fracking technology crucial for shale exploration on private land. Lopez Obrador has vowed to prevent any further fracking in Mexico, although the response from his officials in the energy sector has been more nuanced.
Biden has said he would base all international economic engagement in countries where climate change is being taken seriously, a former Americas adviser to Biden, Juan Gonzalez, says. If carried through, this would have significant implications for relations with Mexico in the energy sphere.
"We must make sure that when we are investing in the recovery of the region, we are investing in the technology of the future," Gonzalez argues. "It is not enough to go back to being commodity dependent. When you have a global energy transition under way [and] a Mexico that is dependent on fossil fuels, you need to help prepare these governments for future economic competition."
Trump during his presidency has sought to exert economic pressure on Mexico with regard to migration and security issues. Lopez Obrador's willingness to accommodate Trump on those issues, despite repeated racial slurs made by Trump against the Mexican population, has helped insulate Mexico City from US criticism on other policy matters.
Call for Trump card
The Trump administration has downplayed calls from US energy firms to intervene on their behalf as Lopez Obrador's government seeks to restore Pemex's primacy. "Companies were hoping Trump would mention changes to energy regulations to Lopez Obrador during their July meeting in Washington, but he did not," academic and former Mexican congressman Carlos Heredia says.
US firms, including ExxonMobil and Chevron, won eight upstream contracts in the three bidding rounds held following Mexico's historic 2014 energy reforms and have committed $8.69bn in approved production and exploration plans, according to data from Mexican oil regulator CNH.
Any attempt by Lopez Obrador's government to cancel contracts awarded under the reform, as proposed by elements of his Morena party, would test the arbitration provisions of the recently signed USMCA free trade agreement between the US, Mexico and Canada, a partner at Mexican law firm Von Wobeser y Sierra, Adrian Magallanes, says. "The USMCA is a treaty that was enacted," he says. "Unless the US decides to denounce the treaty, or Mexico does, the mechanisms will remain in place," irrespective of the outcome of November's ballot.
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Cenovus boosts oil sands output by 4pc in 1Q
Cenovus boosts oil sands output by 4pc in 1Q
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US gas industry pins hopes on AI power demand
US gas industry pins hopes on AI power demand
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Tankers can take TMX crude mid-May: Trans Mountain
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