Mexico should leave IEA, eye OPEC: Pemex adviser

Mexico should end its recently acquired membership in the International Energy Agency (IEA) and instead look towards Opec, said a long-time Pemex adviser slated for a role in the state-owned company.

"We should explore the possibility of better cooperation with OPEC," Fluvio Ruiz said today at Rice University's Baker Institute.

The incoming administration of Mexico's President-elect Andres Manuel Lopez Obrador has not defined what Ruiz's role will be in Pemex, but the former Pemex board member has been outlining his proposals to "make Pemex great again" at forums in Mexico and abroad.

"I will be something in Pemex," Ruiz said. "I am not sure what yet."

Leftist Lopez Obrador and his transition team — of which Ruiz is not officially a part — have sent mixed messages about the degree of openness to private energy investment that will continue after they take office on 1 December. His predecessor Enrique Pena Nieto led a groundbreaking energy reform that ended state dominance of the energy sector. But in the five months between the general elections and inauguration, the announced policy intentions have overall moved away from Lopez Obrador's initial outright opposition to the energy reform.

The Paris-based IEA supports market-oriented policies as well as renewable energy goals. Mexico is currently participating as a non-partner in Opec's supply restraint agreement, although the Latin American country's crude output has been in decline for years.

The IEA only approved Mexico's membership in November 2017, which provides Mexico with some technical assistance from the organization and offers collaboration with other members in energy emergencies.

Mexico in 2017 reduced its carbon emission by 4pc from the prior year, the only other IEA member country to do so besides the US, Japan and the UK.

Ruiz said he supports Mexico determining more of its own energy goals without having to meet compliance with IEA membership.

He also said that he proposed Pemex marketing arm PMI being the only seller of state crude from fields operating under production-sharing agreements.

Swiss company Trafigura in December had beat out PMI in an auction to sell crude on the country's behalf for the next three years.

Ruiz said that private companies should continue to market their own share of any crude produced in Mexico as they are now, although independent crude production is still low.

Incoming energy minister Rocio Nahle is leading a review of 107 upstream contracts signed under Mexico's market opening, but Ruiz said there is another objective besides ensuring transparency.

"We want to learn from the contracts that have already been given to understand what is the best model for the type of geological complexity we might see in the future," he said. Licenses, production-sharing and joint ventures could all be appropriate, depending on the conditions and terms, he said.

But he reiterated that Pemex should be allowed to select its own farm-out partners and have greater managerial and budgetary freedom, including being excluded from the central budget.

Ruiz also maintains that three oil auctions initially set for September and October but postponed until 14 February at the request of Lopez Obrador could restart next year.

Yet Ruiz acknowledged that there are different currents within the new administration.

"My sister says I always take the minority position," Ruiz joked. "Even in the new government, I am a minority."