Page 6 - LatAmOil Week 41 2022
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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
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