Economic impact of CNH lease auctions

Economic impact of CNH lease auctions: A Credible narrative is needed

HOUSTON, July 6, 2017: Public Policy Perspectives 10047 — This report raises general and particular questions about the auctions taking place under the banner of the Energy Reform of 2013-14.

PUBLIC POLICY PERSPECTIVES are issued periodically, in English or in Spanish, as a public service with the aim of inviting fresh discussions of matters of politics, law, policy, regulation and corporate governance.

The topic of inquiry is the lease auction conducted by the National Hydrocarbon Commission (CNH) on December 15, 2015. We note that 18 months after the winners were announced, no new oil or gas wells have been drilled (Exhibit B). This situation (as reported by CNH) is in line with the informal reports from the states where the contracts were awarded that little or no economic activity has taken place. “Here at the local level, it’s as if the upstream energy reform were on standby,” one source in Mexico told us.

Our general argument is that the if the government expects the energy reforms to continue beyond 2018—not only in oil E&P but also in the electricity and natural gas markets—there has to be a much bigger effort to show what the actual results have been. CNH has done a good job of uploaded institutional documents to its website regarding the bid rounds; but the raw documents are not enough. There also must be an attempt at a narrative as to what has happened since the awards.

That story has not been told.

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Mexico Energy Intelligence

Baker & Associates offers niche-market business and policy intelligence related to Mexico's oil and gas, power and chemical industries. Over 1,000 reports have been issued in the last 20 years. Subject matter expert and publisher George Baker, who directs the firm, has carried out consulting assignments starting in the late 1970s at the height of the Oil Boom in Mexico. He brings bilingual and bicultural skill-sets to understanding and responding to challenges of business and public policy, coupled with a deep familiarity with the history and idiosyncrasies of the Mexican operating environment.