Mexico delays the effects of low oil prices until听2016 with听the country听hedging听the oil price, the country's Ambassador to Turkey said Thursday.
In an interview with The Anadolu Agency, the Mexican Ambassador to Turkey, Martha Elena Barcena Coqui,听said that Mexican economy will not be seriously affected from the six-year low oil price because听the country insured the oil price for $75 per barrel.
Mexico created an option to avoid unstable oil prices as it started听hedging in 2009听when the prices faced a sharp decline. In November 2014, the country hedged the price below approx.听$75 per barrel, so the insurance would cover the revenue difference听when the price went under that amount.
"The insurance will cover the loss for 2015, and the Mexican government will make budget cuts the year after," said Coqui.
"The problem is that the oil income听was between听35-40 percent of the government's budget,"听Coqui听explained, and added听"but the income drop听will not affect the whole economy because oil听covers听only 12 percent of our total exports even though we export 1.5 million barrels a day."
When the oil prices drop, the electricity price, imported diesel and gasoline prices also decrease, she explained.听
"The government was subsidizing domestic gasoline prices but it subsidizes almost nothing now," she added.
According to听Coqui the government's priority听is to maintain听macro-economic stability so the听country or the government will not acquire more debt or it will not increase its deficit.
-Mexico's energy reform progress
Mexico aims to benefit from deep sea and shale reserves with the help of financial and technical capabilities from international companies.
However, most oil companies are reluctant to enter new projects, especially expensive investments,听due to the reduction in profit with the low oil prices.
Mexico has been undergoing an听energy reform since听August when听legislation was passed to听open听its energy sector to foreign investments.
The country has completed a "round zero"听where the state oil company Petroleos Mexicanos, Pemex, has decided on the license areas for hydrocarbons exploration and production, and currently听"round one"听is opening up for tender.
"The licensing will be step by step," said Coqui, and added that mature fields and shallow waters will be opened first and the reaction from the investment sector听to those areas will be assessed.
She indicated that the licensed fields听in Mexico听require听cheaper investments, compared to the production in the North Sea or听Arctic, and she stressed that companies could have cost-effective听results听considering that less technical investment is needed.
The hydrocarbons in the Mexican side of the Gulf of Mexico are considered as "the world's largest unexplored reserves."
In relation to听non-conventional oil and gas, which requires more expensive investments, the Mexican government will consider delaying the opening of听these areas for tender听if low听oil prices continue, said Coqui.
"Currently the energy reform is on schedule,"听she said.听
By Nihan Cabbaroglu
Anadolu Agency
nihan.cabbaroglu@aa.com.tr
听