Page 8 - LatAmOil Week 11 2020

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Mexico touts success of annual oil hedge
MEXICO’S government has said that it does not expect to lose any budget revenues as a result of the downturn in world crude oil markets. Finance Minister Arturo Herrera attributed this success to the country’s annual oil-hedging programme, saying that the deal had served its purpose.
“The hedge is usually not cheap. It is expen- sive, but it is for occasions just like this,” he told Televisa in an interview broadcast on March 10. “The income part is covered. We will not have a direct impact on the budget.”
He was referring to the Hacienda Hedge, a process in which the Mexican government engages every year, working with Wall Street banks and international oil companies (IOCs) to ensure revenues from crude production. The deal usually involves the purchase of about $1bn worthofputoptionspreadsthatlockinpricesat an agreed level.
Mexican authorities have kept most details of the deal secret this year, but they did say in January that the government was spending $1.37bn on the hedge so that it could base this year’s budget on an oil price of $49 per barrel. This appears to have been a very lucky bet, given that Brent crude prices sank below $35 per bar- rel on March 9, losing nearly a quarter of their value after the collapse of the OPEC-plus deal on March 6.
Even so, Reuters said on March 10 that it could not determine exactly how much protec- tion the hedge had actually afforded the Mex- ican government, since the Finance Ministry has not revealed exactly how much of the coun- try’s oil output was covered by the programme. Other sources have reported that the hedge involved some 234,000 barrels per day (bpd) of crude, equivalent to almost 14% of the country’s production.
Meanwhile, Herrera cautioned on March 10 that conditions on world oil markets warranted close monitoring, even though the hedge had
been successful. “[It] is still a worrying situa- tion,” he remarked.
The minister explained that the government would be taking another look at its forecast for economic growth in 2020 in light of recent events. Re-evaluation is necessary because “con- ditions have clearly changed,” he said.
Offer of assistance
In related news, Herrera also said on March 10 that Mexico’s government was prepared to mediate the disputes between Russia and Saudi Arabia that have led to the collapse of the OPEC- plus agreement.
Speaking to reporters in Mexico City, he said that Mexico was one of several parties that had offered to help on this front. “We, along with some other countries, are looking to be a type ofthirdpartytobuildbridges,”hewasquotedas saying by Reuters.
He also pointed out that Mexico had some experience in this matter, since it acted as the middleman in a spat between Saudi Arabia and Venezuela in 1998. (Reuters hinted, though, that Mexico might not be as successful this time around, since its influence among other oil-producing states had declined along with its output.) ™
Mexico’s Finance Minister Arturo Herrera (Photo: El Economista)
Mexico will not resume oil and gas auctions, finance minister says
Mexico’s Finance Minister Arturo Herrera has said that the government does not intend to resume auctions for joint venture projects with the national oil company (NOC) Pemex.
Herrera said last week that he did not “think
[restarting auctions] makes sense, considering
where oil prices are.” He was speaking after oil
prices crashed, partly because of the collapse of
the OPEC-plus deal and partly because of the coronavirus outbreak’s impact on fuel demand. 
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w w w . N E W S B A S E . c o m Week 11 19•March•2020