Mexico Moves To Amend Constitution To Favor State Power Firm

Authored by Tsvetana Paraskova via OilPrice.com,

Mexico’s Senate approved amendments in the constitution that give preference to state electricity firm CFE over other companies in dispatching electricity to the system.

The constitutional amendment was passed in the Senate with 86 votes in favor to 39 against. This met the requirement of a two-thirds majority of votes in favor of amending the constitution.

Mexico’s new President Claudia Sheinbaum continues the policies of her predecessor Andres Manuel Lopez Obrador to support and favor the state energy majors, including oil firm Pemex and the state-owned power company Comision Federal de Electricidad (CFE).

The constitutional amendments favoring CFE will come into force after it passes a majority of state legislatures and is published in the official gazette.

Under the change, national grid operator Cenace will be required to take first and prioritize electricity from the power plants owned and operated by the state company CFE regardless of the price and whether it is more expensive than the electricity generated from private power producers.

The new Mexican Parliament is also moving to give the president more control over Pemex and CFE.

Despite the reclassification that would give the government a greater say in Pemex operations, the new government is in favor of the company working with private companies to develop the country’s oil and gas resources.

Mexico currently produces around 1.5 million barrels per day (bpd) of oil, down from a peak of 3.4 million bpd some 20 years ago.

Underinvestment has plagued the industry for years, which was the motivation for the Pena Nieto administration’s reforms that invited foreign players into the local industry.

When former president Lopez Obrador came into power, he did away with the reform, launching reviews of existing contracts with foreign entities on allegations of corruption.

As a result, Pemex has failed to increase oil production as planned by the government. In August, the latest month with available data, production dipped below 1.5 million bpd.