Page 6 - LatAmOil Week 41 2022

LatAmOil MEXICO LatAmOil

Mexico reportedly starting

to work on 2023 oil hedge

MEXICO’S government has begun working has spent more than $16bn on the transaction,
with major financial institutions to set up its which allows it to guard against unexpected dips
next round of crude oil hedges, sources famil- in oil prices. As of last year, the hedge had paid
iar with the matter told Bloomberg earlier this out on four occasions, allowing the country to
week. earn $16.5bn back.
The sources, who spoke on condition of ano- Several years ago, Mexico City began keep-
nymity, informed the news agency that Mexico ing some of the details of its annual hedging
City was working to protect itself from losses in arrangements confidential. Since then, Mexican
the event that crude prices drop next year. The officials have become less and less forthcoming
programme under discussion covers the first six about the programme, and the government now
months of 2023 and will ensure that oil earnings classifies certain information about the hedge as
never drop below $75 per barrel during that a state secret.
period, one source said. Mexican government representatives have
Bloomberg also quoted one of its sources as explained this move towards confidentiality
saying that Mexico was working mostly with by describing it as an attempt to prevent hedge
major oil companies to execute the hedge rather funds and other third parties from trading in
than with financial institutions such as Goldman advance of the hedge. Front-running may help
Sachs, as it has done in years past. The source did these third parties secure the lowest prices for
not say why this change had been made, but the put options, they have said, but it also increases
news agency noted that oil majors had come to the cost of the transactions for Mexico.
play a more prominent role in hedging deals in This concern is not necessarily overstated,
recent years, since their physical assets served as the scope of the hedging programme is large
effectively as natural hedges that allowed them enough to have discernible effects on oil prices.
to assume higher levels of risk. Bloomberg noted this week that rumours of
None of the sources revealed the size of the Mexico City’s plans had helped pushed Brent
2023 hedging programme. In past years, Mex- crude prices out of its their previous trading
ico’s government has arranged to lock in the ranges. ™
price of 200-300mn barrels of crude oil at a time,
buying large amounts of put options to set up
large-scale hedges worth around $1bn. It has not
previously locked in prices at levels as high as
$75 per barrel; for the 2019 hedge, for example,
it set the threshold at $55 per barrel, and for part
of its 2022 hedge, it set the threshold at $60-65
per barrel.
Mexico executed its first oil hedge deal in
1991 and began carrying out annual hedges
regularly in 2001. Within the last two decades, it Mexico’s first oil hedge was in 1991 (File Photo)

Pemex effectively confirms failure to

report methane leaks at Zaap-C platform

MEXICO’S national oil company (NOC) Pemex The news agency said last week that Pemex’s
has effectively confirmed that it did not submit response to its freedom of information request
any reports on the methane leaks detected at the on the events in question demonstrated that the
Ku-Maloob-Zaap oilfield cluster last Decem- NOC did not report the leaks to Mexico’s envi-
ber via satellite data from the European Space ronmental regulatory agency ASEA, as required
Agency (ESA), according to a Reuters report. under the country’s laws.

P6 www. NEWSBASE .com Week 41 12•October•2022