Page 12 - LatAmOil Week 49

LatAmOil MEXICO LatAmOil

Mexico may collect $2.5bn from oil hedge

THE government of Mexico is expected to In April, Mexico’s main grade of crude for
receive a payout of around $2.5bn from its 2020 export, Maya, dropped to historic lows and
sovereign oil hedging deal. This will be only the even traded briefly below zero. Around the same
fourth time in the last two decades that Mexico time, Lopez Obrador said that the government
has received a payout from its annual hedge, could receive as much as $6bn from the hedge
according to Bloomberg. if prices remained at such low levels. However,
The news agency calculated the size of the the Ministry of Finance estimated Mexican oil
payout on the basis of financial data released would average around $24 per barrel for the
earlier this year. The Mexican government has remainder of the year.
not yet published any official data on the results Meanwhile, oil prices have since recovered.
of the hedge, which is usually the largest annual Maya has been trading at close to $45 per barrel
oil deal carried out on Wall Street. this week. ™
Each year, Mexico buys financial contracts
worth up to around $1bn to execute the hedge. It
does so to ensure that it collects sufficient oil rev-
enue, regardless of fluctuations in world crude
markets. Typically, it finances the programme
by a combination of purchasing options from
North American banks and oil majors and
reserving part of a special fund.
The Mexican government asked banks
to submit quotes for its 2021 oil hedging pro-
gramme, which fixed crude oil prices at $49 per
barrel, in April. The hedge runs annually from
December 1 to November 30 of the next year,
and the 2020 hedge, which was arranged last
year, expired early last week.
Mexican President Andres Manuel Lopez
Obrador has said that this year’s hedging pro-
gramme will help safeguard oil revenues, one
of the government’s main sources of revenue.
Oil earnings have fallen this year because of the
coronavirus (COVID-19) pandemic, which led
to a sharp decline in energy demand, as well as a
war for market share between Russia and Saudi
Arabia, which drove supplies up and prices even
further down. Maya is Mexico’s main export grade of crude (Image: CNH)

CNH gives green light to Pemex’s

unconventional exploration plans

MEXICO’S national oil company (NOC) able to stem the long-term decline in Mexico’s
Pemex is taking another look at proposals for oil output.
exploration of the country’s unconventional Even so, the state-run company has put
hydrocarbon resources. together an incremental plan for exploring
Currently, Pemex is not actively engaged in unconventional reserves in the Tampico-Mis-
unconventional or deepwater exploration work. antla Basin in the event of a policy change.
Instead, it has chosen to focus in recent years Moreover, it has secured the approval of the
on shallow-water areas, which tend to be less National Hydrocarbons Commission (CNH)
expensive and difficult to operate. This approach for these plans. On December 8, members of the
is in line with government policies designed to commission gave Pemex a green light for incre-
sustain production levels, but it has not been mental exploration of unconventional deposits.

P12 www. NEWSBASE .com Week 49 10•December•2020