February 21, 2019 / 3:52 PM / 3 months ago

UPDATE 2-Mexico president says no more Pemex 'farm-out' joint ventures for now

(Adds details on contracts, Fitch, and quote)

MEXICO CITY, Feb 21 (Reuters) - President Andres Manuel Lopez Obrador said on Thursday Mexico will not offer more oil joint ventures between private companies and state energy company Pemex until existing projects produce oil, raising doubts about auctions set for October.

In reply to a question about the contracts, known in the industry as “farm-outs,” Lopez Obrador said the country would not offer more for the time being.

The biggest such project undertaken by Pemex under the last government was the deep-water Gulf of Mexico field known as Trion, in which the Mexican company associated with BHP Billiton .

“Until they extract oil, those who received these contracts, that’s the agreement, when they start to produce we will review the possibility of continuing these contracts,” Lopez Obrador said in his morning news conference.

Lopez Obrador has long been a critic of his predecessor’s liberalization of the energy industry, which allowed private and foreign companies to bid for oil exploration and production both alone and in association with Pemex.

Instead, Lopez Obrador is betting on Pemex raising oil production by issuing service contracts mainly to Mexican companies to squeeze more oil from existing shallow water and onshore fields.

Lopez Obrador, who is from oil-producing state Tabasco, has previously said he will give private companies that won projects under the reform three years to start producing before he decides whether to allow more auctions. He has not been clear whether this also applies to the Pemex joint ventures.

In December, a few days after Lopez Obrador took office, the National Hydrocarbons Commission canceled two auctions for private energy companies set for February. But it chose to delay until Oct. 9 rather than cancel a round of “farm-out” auctions.

Pemex CEO Octavio Romero said several service contracts had been signed for shallow water fields.

CREDIT RATING

Credit ratings agency Fitch downgraded Pemex in January, citing precarious finances and a collapse in oil output. Lopez Obrador said on Thursday the downgrade was based on the oil company’s financial results under the last government.

“We are going to convince them that their projections are wrong. We are not going to fight with them,” he said.

“That ratings agency did not make clear that its rating had to do with last year’s results, and made out that it was our problem. We have acted in a responsible manner.”

In minutes of the last monetary policy board meeting released on Thursday, Mexico’s central bank said the majority of its members considered the financial fragility and future of Pemex a risk for the nation’s macroeconomic outlook.

The board was particularly worried about a further deterioration in Pemex’s credit rating, saying it could affect the federal government’s financing costs. (Reporting by Diego Ore; Writing by Frank Jack Daniel; Editing by Dan Grebler)

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