Nationalization fears for foreign oil companies were slightly calmed this weekend, following initial results from Mexico’s Sunday mid-term elections in which the ruling coalition looks set to lose its qualified majority in the lower house of Congress.
If the ruling coalition loses its qualified majority and maintains only a simple majority, Mexican President Andrés Manuel López Obrador (AMLO) may not be able to pass any significant legislative or constitutional reforms.
Initial official results, as reported by CNN, show AMLO’s party (Morena) with approximately 35% of the vote. Together with partner Partido Verde, the coalition looks likely to win between 265 and 292 of the 500 lower house seats.
Final results are not expected until next week, but in the meantime, foreign oil companies are breathing a temporary—and tentative—sigh of relief.
Under AMLO, the Mexican government has been launched a campaign against foreign oil companies, attempting to restore the former glory of state-run Petroleos Mexicanos (Pemex) on the domestic market.
Last week, the government awarded Pemex operatorship of the country’s biggest private discovery of oil, the Zama oilfield discovered by a private consortium led by U.S.-based Talos Energy in 2015.
The oilfield, in the Campeche offshore basin, has estimated reserves of 670 million barrels of recoverable oil. Zama’s troubles arise from the fact that the field extends into a neighboring field operated by Pemex. Independent evaluators have said that 60% of Zama’s reserves lie in a block operated by Talos Energy, while the remainder lies in Pemex-controlled territory.
The two sides failed to reach a deal, culminating in the Mexican government’s decision last week to grant Pemex operatorship of this huge discovery.
With what appears to be a mid-term election defeat for AMLO, analysts speculate that the nationalization drive may lose some of its steam, though it remains unclear what, if any, impact this would have on the recent decision to hand Zama over to Pemex.