Cancellation of investments

The cancellations correspond to both local and foreign companies, they refer to all types of structures and represent 18 percent of the total…

In the short term, the level of economic activity can be raised with only a more intensive use of installed capacity. In the long term, the only way growth is possible is by expanding that installed capacity through productive investment. The governments of the world know this indisputable truth – or at least the majority – and for that reason they try to stimulate investment.

Contrary to what was expressed, the main head of El Economista yesterday, December 28, prayed: “Oil firms change their plans; they have returned 20 contracts to the CNH”. The subject is of interest in itself and because of the implications of contagion on other lines of investment, both by national and foreign companies. And the matter was triggered by the recent resignation of the last three of the 20 cancellations produced to date.

The renounced contracts correspond to both local and foreign companies, refer to all types of geological structures and represent 18 percent of the total of 110 contracts that were awarded in bidding rounds in the past six-year period. The Mexican contractors that have partially or totally canceled exploration and development contracts are Canamex Energy Holdings, Consorcio Petrolero 5M del Golfo, Iberoamericana de Hidrocarburos CQ, Servicios Múltiples de Burgos and recently Pantera Exploración y Producción.

Of course, these cancellations and those of foreign contractors would not be a concern if they were replaced by other contracts. But as is widely known, the oil bidding rounds have been suspended in the current six-year term and this fact marks a worrying trend. This, although it is not said in the report, because Pemex is in a delicate financial situation and it will hardly have the surpluses to sponsor the discovery and development of all the deposits available in national territory with production possibilities. Therefore, it is difficult to expect that Mexico’s hydrocarbon reserves can grow much in the immediate future.

Unfortunately, the aforementioned report does not mention the investment amounts that have been cancelled. Possibly some of the cancellations were simply due to being “unprofitable areas”. However, other reasons must be added to this, clearly, “due to the security conditions in the region and the Covid-19 pandemic.” The pandemic is over, but insecurity persists and has possibly even been exacerbated.

bdonatello@eleconomista.mx