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Mexico to Cancel Feb Auctions for Oil, Gas Blocks including 1st Shale Areas

Source: Reuters 12/9/2018, Location: South America

Mexico’s energy secretary Rocio Nahle said that President Andres Manuel Lopez Obrador’s newly installed administration would cancel two February bidding rounds for oil and gas blocks, including Mexico’s first shale areas on offer.

Lopez Obrador, who took office on Dec. 1, has sharply criticized the landmark energy opening enacted by his predecessor, President Enrique Pena Nieto, whose government planned the February auctions.

The new president previously said he would suspend future oil auctions pending a review of the more than 100 contracts already awarded, but has not detailed what would become of the auctions slated for February.

Mexico’s oil industry is struggling to stem a long-running crude output decline, posing one of the biggest challenges for Lopez Obrador’s six-year term. He has yet to disclose a full plan for the sector.

Nahle told reporters at an event in the state of Chiapas on Saturday that two bidding rounds would be canceled. Together they would have auctioned off 46 oil and gas blocks, including the first shale areas in Mexico to be offered to private and foreign oil companies.

The dense rock has been successfully tapped over the past decade in the United States, including the lucrative Eagle Rock formation in Texas just across Mexico’s northern border.

Nahle did not address auctions for partnership rights for seven onshore joint venture contracts with national oil company Pemex, which are also scheduled for February.

Under Mexican law, the independent oil regulator known as the National Hydrocarbons Commission (CNH) runs the auctions and supervises contracts. The commission did not immediately respond to a request for comment.

Lopez Obrador’s energy initiatives have so far focused on reducing fuel prices by building a new refinery in his home state of Tabasco, where he is expected to announce details of the project.

He has also encouraged private oil producers already awarded contracts in Mexico to deliver barrels quickly.

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