Disagreement between Pemex and CNH could paralyze gas project of 1,500 million dollars

The National Hydrocarbons Commission (CNH) and Petróleos Mexicanos (Pemex) disagree on how to develop a deepwater natural gas project. Castling threatens to cripple a $1.5 billion energy company, eight people close to the matter told Reuters.

Regulatory officials have raised questions about whether Pemex can take on the huge project, the people said.

The countryside Lakach it has up to 937 billion cubic feet of reserves, but rising costs have hampered development.

Now, a Pemex proposal to reactivate development with the US liquefied gas company is under discussion. New Fortress Energy.

The fate of the project could depend on the replacement of the head of the CNH, Roger Hernandezwho resigned last week, the people said.

Mexican law stipulates that regulatory approval requires projects to be technically and economically feasible.

The disagreement between the CNH and Pemex over the Lakach field exposes the challenges of Mexico’s effort to develop your own reserves.

President Andres Manuel Lopez Obrador he has sought to defend state companies and keep private investors on the sidelines, an agenda complicated by the lack of capital and Pemex’s huge debts.

Mexican oil has proposed to develop Lakach with New Fortress Energy using a service contract, a formula used before the opening of the energy sector of the country in 2013-14. Under a service contract, Pemex would retain full ownership but take the risk if prices fall.

Historically, service contracts have worked for Pemex when prices are high, a government source said. And they are faster to execute than farm-outs co-owned, the Pemex source added.

But they could pose financial risks for Pemex if prices fall and mandatory fees exceed the value of the oil and gas productionexperts said.

Pemex and Hernández did not respond to requests for comment. The CNH declined to comment on the matter.

The CNH It has argued that Lakach would only be economically viable if Pemex formally contracted a partner through an auction of rights. But López Obrador has ruled out auctions.

Woodside Energy, co-owner with Pemex of the Trion offshore oil project, approved before López Obrador took office, delayed until mid-2023 the final investment decision for the venture, created more than five years ago. (rts)