The Mexican government’s ban on the hydraulic fracturing of dense petroleum deposits known as fracking, as well as its decision to suspend oil auctions, has drained investor interest, the founder of Renaissance Oil told Reuters on Friday.
President Andres Manuel Lopez Obrador, a sharp critic of the 2013 energy overhaul enacted by his predecessor that for the first time in decades opened the oil sector to private producers, has instead sought to centralize control in state-run Pemex.
While Lopez Obrador has routinely criticized foreign and private oil companies which won over 100 contracts at auction as underinvesting in Mexico and failing to produce, he has stopped short of seeking to formally revive Pemex’s former monopoly.
Ian Telfer, the former chairman of Goldcorp who in 2014 founded Canadian-based Renaissance Oil, noted that earlier this week the company announced it would begin to diversify away from Mexico’s energy sector and had already begun seeking out new projects in the African nation of Botswana.
“Put us down as very disappointed, very sad and disappointed that we’ve been forced to diversify by the changes and the policies in Mexico,” said Telfer, a major Renaissance shareholder who said the company was initially formed with an exclusive focus on Mexican projects.
In 2017, Telfer sought aggressive expansion in Mexico including potential joint venture partnerships with Pemex after Renaissance won four oil contracts at auction two years earlier, as well as inking a separate tie-up with Russian producer Lukoil covering the onshore Amatitlan block in eastern Veracruz state.
Telfer said the development of Amatitlan, in which Renaissance holds a 25% stake and is located in the tight-oil Chicontepec basin, has been hobbled due to Lopez Obrador’s opposition to fracking, which Telfer said has been selectively applied to only private companies.
“That’s the one that we were counting on, and that’s the one where, due to the changes made by (Lopez Obrador), it may never be exploited,” said Telfer, adding that the project could yield 100,000 barrels per day from as much as 700 million barrels in recoverable oil.
Moreover, Lopez Obrador’s shift to a model that only offers oilfield service contracts to would-be Pemex partners has been another knock on the attractiveness of investments in Mexico’s oil patch, said Telfer.
“The government seems to prefer service contracts rather than equity interests, and for foreign investment, it only really works if we have equity interests,” he said.
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