President Andrés Manuel López Obrador has stepped up his onslaught on Mexico’s energy reform, sending a bill to Congress to allow the government to suspend permits granted to private companies in the hydrocarbons sector and give state oil company Pemex more control.
Fuel and oil imports and exports, storage and distribution permits could be suspended under the bill on the grounds of national security — a vague and discretionary definition that experts said would only increase uncertainty and alienate investment in the sector.
The bill is the nationalist López Obrador’s latest attempt to turn back the clock and unravel the 2013 energy reform — which he believes was an attempt to ruin Pemex and state utility CFE — without changing the constitution.
Earlier this month, Congress approved sweeping changes to the electricity sector that would prioritise costlier and dirtier CFE generation over cheap power from renewables. After a welter of injunctions, that bill has now been put on hold.
Friday’s bill was not expected to encounter any hurdles in Congress, where López Obrador has majorities in both houses. But it would also trigger legal challenges, analysts said.
The bill showed López Obrador was not giving up on his ambitions to restore state energy companies to what he sees as their rightful place at the heart of the economy. “There is no doubt about the preponderant role that Petróleos Mexicanos should hold,” he wrote in the bill’s introduction.
Alfredo Sandoval, an economist at Banco Base, highlighted two other worrying elements. If a permit were to be suspended, the government could send in a state productive enterprise — as Pemex and CFE are known — to run things, but without affecting the legal ownership.
“That means that if you suspend the permit for a petrol station, Pemex can take over running it,” he said.
In addition, in a proposed reversal of the current rules, if the authorities did not respond to a permit application within 90 days, the permit would be considered not to have been granted.
“It’s a more efficient way of denying permits,” Sandoval said.
Gonzalo Monroy, an energy consultant, said the bill would not enable the government to suspend licences granted to private oil companies in historic auctions following the reform, which ended Pemex’s eight decades-long monopoly of the sector. But it could suspend a permit to allow a company to export any crude oil it produced.
The reform also freed filling stations from the obligation to buy fuel from Pemex. Under the bill, such import permits could be put on ice, analysts said.
“It is unfortunate that the Mexican government persists in pursuing the wrong energy policy, in blunt disregard for our health, environment, competitiveness, investment, jobs, our laws and trade treaties,” said Armando Ortega, who helped negotiate Mexico’s Nafta free-trade deal with the US and Canada that has now been updated as USMCA.
“Any revocation can be construed as ‘tantamount to expropriation’ under the investment chapters of USMCA, CPTPP and the Mexico-EU free trade agreements,” he added. “They have to be very careful.”