Set to take office Oct. 1 as Mexico’s first woman president, Claudia Sheinbaum has a lot of people wondering if her energy policies will be any more enlightened than those of her predecessor, fellow Morena Party leader Andrés Manuel López Obrador.
Prior to becoming mayor of Mexico City from 2018-23, Sheinbaum was the municipal secretary of the environment while López Obrador was mayor. She has a Ph.D. in energy engineering and has written more than 100 scholarly articles and two books on energy, the environment and sustainable development.
Odessa oilman Kirk Edwards, State Rep. Brooks Landgraf and Waco economist Ray Perryman say it will be very regrettable if Mexico’s abundant fossil fuels stay relatively untapped.
“Mexico has always been such a dysfunctional country when it comes to the exploitation of its abundant hydrocarbons,” Edwards said. “Like Texas, Mexico is blessed with vast reserves of oil and natural gas both onshore and in the Gulf of Mexico. But there the similarities end. Mexico depends upon its nationalized oil company PEMEX to deliver the much-needed energy for its own use, but low and behold, politics, corruption and cartels have kept Mexico from reaching anywhere near its overall potential.
“Texas, on the other hand, has been the beneficiary as numerous pipelines deliver much-needed energy to Mexico in many ways. And those exports from Texas are only growing as the Permian Basin and Eagleford shales supply large amounts of badly needed natural gas to Mexico.”
Edwards said the newly elected president will probably do little to change things for the better.
“Mexico does not allow foreign ownership in its energy sector and thus very little if any outside monies come into the country to invest,” he said. “It’s a shame really as this country, if stewarded correctly in its energy sector, could have the power of OPEC and do so much for its population with the revenue oil profits could make for them.”
Landgraf said Mexico has the potential to become a major global energy player with its vast oil reserves.
“Yet one key factor continues to hold it back: excessive government intervention,” the Odessa Republican said. “As we’ve seen in countries that have nationalized their oil and gas industries such as Venezuela, Iran and Mexico, state control often leads to inefficiency and declining production.
“In 2013, Mexico made bold strides toward privatization, opening its energy sector to outside investment. Unfortunately, President López Obrador reversed many of these reforms, prioritizing PEMEX over competition and private-sector growth.
“As a result, Mexico’s oil and gas production continues to decline, harming the country’s economy and its people.”
But now there is a renewed opportunity for change with Sheinbaum seemingly keeping her options open, Landgraf said.
“PEMEX is deeply in debt and Mexico’s economy is struggling, creating a strong incentive for her to allow foreign companies to explore and develop oilfields,” he said. “However, the same could have been said for her mentor, López Obrador, when he took office.
“In my view, her choice should be straightforward: allow private companies including some of the same companies that have transformed the Permian Basin and secured America’s energy independence to drive Mexico’s energy sector forward and improve the lives of its citizens.”
Based on her stance to date, Perryman said, it appears unlikely that Sheinbaum’s incoming administration will be interested in efforts aimed at increasing Mexican oil and gas production.
“In fact, she has indicated that she will limit oil production to approximately the current level,” Perryman said. “Instead she has indicated a preference for the country to shift to renewable energy to meet demand growth.
“It will be a difficult path with budget deficits and imports of natural gas and refined fuels rising. However, she appears to be committed to reducing fossil fuel use and privatizing the industry is also unpopular.”
Given the under-investment in exploration which has been occurring, Perryman said, it is likely that production will continue to fall barring a major change in policy.
“Having studied the Mexican economy extensively for decades and been involved in a number of major initiatives, I have learned that things that are sometimes volatile can change very quickly,” he said. “The country has a lot to gain economically by opening its energy sector to more private investment and the accompanying enhancements in technology, efficiency and production; but there appears to be little or no momentum in that direction at the present time.
“Unless there is a major and unexpected policy shift, which would likely only happen if there were a currency (financial) crisis, the current situation will likely persist.”
