Page 8 - NorthAmOil Week 06 2021

NorthAmOil COMMENTARY NorthAmOil

Is a trade dispute brewing

between the US and Mexico?

Lopez Obrador’s efforts to help CFE dominate the power sector have

implications for the oil and gas industry

US-MEXICO MEXICAN President Andres Manuel Lopez the administration with respect to certain pro-
Obrador has made no secret of his dissatisfac- visions of the legislation. It explained by point-
WHAT: tion with the energy reforms enacted by his pre- ing to the government’s plan to give CFE extra
Mexico’s presidential decessor Enrique Peña Nieto in 2013-2014. He advantages over privately owned renewable
administration hopes to has said many times that he does not believe that energy operators, saying that these changes
secure approval for rules Mexico will benefit from these measures, which would both inhibit competition and complicate
that will benefit CFE. aim to break state-owned companies’ monopo- efforts to reduce emissions.
lies over the oil, gas and power sector. Although the draft legislation does not per-
WHY: Thus far, however, he has refrained from try- tain directly to Pemex, these recent develop-
His efforts are part of ing to overturn the reforms outright, despite ments are likely to have implications for the oil
a wider campaign to his own belief that preserving public-sector and gas sector. The president is still working to
secure extra advantages entities’ dominance is in Mexico’s best inter- secure passage of the bill favouring CFE, and
for state-run companies, ests with respect to financial and operational he may very well succeed, since his National
including Pemex. performance. As a result, private investors still Regeneration Movement (MORENA) party
have opportunities to compete with Pemex, the controls the legislature. But if he fails – or if the
WHAT NEXT: national oil company (NOC), and the Federal Supreme Court strikes the law down – he may
Disagreements on this Electricity Commission (CFE), the national take the more drastic step of working to amend
front could lead to power provider. Mexico’s constitution in order to secure his pol-
debates about USMCA Nevertheless, the windows of opportunity icy goals and to ensure that state-run entities
violations. have been narrowing. Lopez Obrador has continue to play the leading role in all parts of
explicitly instructed his government to give the energy sector.
CFE and Pemex the upper hand in the fuel If so, Lopez Obrador’s administration is likely
and energy sector whenever possible, and state to find itself at odds with the US business com-
agencies appear to be mostly amenable to fol- munity – and perhaps the US government as
lowing his lead. well.
In late January, the president went a step fur-
ther. Specifically, he submitted to the legisla- The USMCA factor
ture a bill drafted by the Secretariat of Energy The issue at stake is whether policies favouring
(SENER) that calls for giving CFE even more state-run companies would violate the terms of
preferential treatment. Mexico’s Supreme the US-Mexico-Canada Agreement (USMCA),
Court responded last week by ruling against the trade deal enacted last year to replace

Mexican President
Andres Manuel Lopez
Obrador has been
trying to maintain the
dominance of state-
owned firms in his
country’s energy sector.

P8 www. NEWSBASE .com Week 06 11•February•2021