Mexico to boost fuel purchase to attract investments

By Staff Writer

Feb 23, 2016 08:58 AM EST

Mexico is currently aiming to accelerate its fuel purchase in order to attract investment as well as to bring down the fuel prices for buyers, sources said quoting Enrique Pena Nieto, president of Mexico at HIS CERAWeek. As part of the purchase strategy, the nations' private oil companies will be importing diesel and gasoline from foreign producers for the first time in the history of the sector since 1938.

The president has been struggling hard to lure investment into the nation following a drop in crude prices that weakened his act to renovate the nation's fuel market. The falling production in Petroleos Mexicanos, the only government owned oil producer, failed to be in line with the growing fuel demand in Mexico.

According to the president, the gasoline purchase of private firms is a "decisive action" of the government to boost investment into Mexico and to enable robust competition in the sector within 2018. John Aures, Turner Mason & Co's executive vice president, said Bloomberg that the nation need to apply lenient price policies at the pump to encourage participation among private oil firms. He added that it will become hard for the nation to receive investment if the prices at the pump are controlled.

The president also announced the date for the auction of the country's deep water oil fields that is situated in the Gulf of Mexico. According to the auction deal, which is scheduled in December, private Mexican firms will bid to produce oil and boost the growth in the oil fields at the Mexican gulf region. However, the oil firms are less interested in the tender owing to the collapse in the energy prices worldwide. President Pena Nieto still wants to proceed with the auction, as reported in Reuters.

The government announced a tender offer worth $1.2 billion in the second quarter, enabling private firms to bid on the 372 miles transmission current line carrying hydroelectricity and wind generated electric power from the southern region to the mid region of Mexico. This tender ended the monopoly enjoyed by the government owned electricity firm Comision Federal de Electricidad.

Meanwhile, the International Energy Agency (IEA) expects the worldwide crude prices to recover from the slump in 2017. Unless the OPEC nations reduce their energy production to boost global demand, there will not be any improvement in the crude prices in 2016, the agency noted. The IEA is hopeful that the energy supply will match the global demand within 2017. Earlier in 2014, the energy prices were more than $114 a barrel, but it significantly reduced to $35 a barrel in the current period owing mainly to rising oil production and poor demand from oil buyers like China, as reported in BIDNESS ETC.

The energy reform by the president of Mexico not only end the monopoly enjoyed by the public oil firm Petroleos Mexicanos but also regulate the energy prices at the local pump. This move will indirectly boost domestic fuel demand and strengthens private competition.

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