With only weeks remaining until Mexico’s June 2 presidential election, members of the energy industry are weighing in on what the sector might look like during an administration led by Claudia Sheinbaum of the Morena coalition, who has a commanding lead in national polls.
On the campaign trail, Sheinbaum has explained that she would continue with the energy policies of the current administration and that her government would represent the second phase of President Andrés Manuel López Obrador’s so-called “fourth transformation” of Mexico.
Sheinbaum has pledged to continue to support state oil company Petróleos Mexicanos (Pemex) and state power company Comisión Federal de Electricidad (CFE), and has assured they would remain the country’s dominant energy providers.
The only area in which Sheinbaum has deviated from López Obrador’s message is in her promotion of renewable energy generation and an emphasis on carbon emissions reduction. Sheinbaum has said that renewable power would be a hallmark of her administration and members of her team have said the candidate’s goals are for 50% of Mexico’s grid be fueled by clean sources by 2030.
In a recent report from the Woodrow Wilson Center’s Mexico Institute titled, The Mexican Energy Sector After AMLO, authors Carlos Ramírez, practice head of Financial Services and Energy at Integralía Consultores, and Monica R. Díaz of the firm’s energy division, examine what the sector’s policies could consist of during a Sheinbaum government.
“Mexico's current administration, in its final stretch, will leave behind a legacy of a highly controversial and ideological energy policy that in practice halted the progress of the ambitious 2013 energy reform,” the report reads.
Ramírez and Díaz note Sheinbaum’s expressed commitment to continue with López Obrador’s policies and goals for energy sovereignty, and discuss how the dozens of academic research papers published during the candidate’s academic career “provide a scenario of how her perception of the sector has been shaped.”
“From her writings and discourses, it is clear that Sheinbaum shares with López Obrador the idea of having strong state-productive companies to promote energy supply security,” the authors said. Sheinbaum has also expressed in her writings “that a national energy policy should encourage a low rate of energy imports – particularly emphasizing the dependence on foreign natural gas and fuel imports – and that private participation in the energy sector should be allowed but in second-order behind the state's role.”
Energy Background
Sheinbaum, who received her doctoral degree in energy engineering from the Universidad Nacional Autónoma de México (UNAM) and completed the work for her thesis at the Lawrence Berkeley National Laboratory in California, authored more than 100 research articles from 1994-2019, including several detailing her vision and ideology for the nation’s energy industry.
According to Ramirez and Díaz, Sheinbaum has criticized the involvement of foreign companies in the nation’s hydrocarbon activities and the country’s “obsession” with deepwater operations at the expense of exploration and production in shallow waters.
“When it comes to electricity, Sheinbaum publicly backed López Obrador’s electricity reform initiative, particularly the idea of CFE becoming the main electricity generator in Mexico,” the report reads.
The authors point out that Sheinbaum differs from López Obrador’s views on climate change and renewable power generation and “has been a longtime advocate of the need for a broader diversification of Mexico’s energy matrix.”
Sheinbaum has “a specific focus on increasing the share of renewable energy sources, as well as a deeper commitment to the country's climate change goals, where she has expressed the need for the country to be more ambitious,” the report reads. “If one would want to foresee how a Sheinbaum energy policy would look if she becomes the next president of Mexico, the conclusion would have to be overall continuity with ideology continuing to shape many policy decisions, with some minor changes.”
Inherited Challenges
Sheinbaum’s lead in Mexican polls in recent weeks has ranged from 17-34% over her closest competitor, Xóchitl Gálvez of the opposition PRI-PAN-PRD coalition. Gálvez has said on the campaign trail that she would favor private investment in the sector and return to hold oil and natural gas field public bidding auctions.
Whoever wins the June 2 elections would face inherited challenges in the energy sector that are “far more complex” than when López Obrador entered office, according to Ramírez and Díaz.
“In a nutshell, Mexico faces increasing energy demand due to pent-up demand and nearshoring, coupled with insufficient investment in energy infrastructure, mainly for electricity transmission,” the report reads.
“There is also a significant dependence on U.S. natural gas, oil production that has fallen instead of increasing as the administration promised, a deteriorating financial situation in Pemex and, widespread business distrust primarily caused by abrupt legislative and regulatory changes that halted investments and the function of market mechanisms, such as the oil rounds and electricity auctions.”
Ramírez and Díaz emphasize that Mexico’s new president, regardless of ideology, would face a number of daunting challenges in the energy sector.
