Mexico E&P contracts, oil hedge to be continued

MEXICO CITY, July 5, 2018 – Mexico’s nominated finance secretary has said that the incoming administration will abide by E&P contracts awarded in bidding rounds, so long as no irregularities are found, international media reported Wednesday.

“If it looks good, on we go. It’s a contract we have to respect,” Carlos Urzua, chosen by president-elect Andrés Manuel López Obrador to head the Secretariat of Finance and Public Credit, said in a television interview.

Another official told Bloomberg on Wednesday that the new administration would also likely continue the government’s oil hedge programme, which is the largest in the world.

“The formula by which the government is calculating the price of oil is a very stable formula,” the news agency quoted Abel Hibert, an economic adviser to the president-elect, as saying. “Using the hedges reduces uncertainty in financial markets.”

Mexico has been covering its crude production annually since 2000, usually through put options bought from investment banks. Last October, the government finalised its December 2017-November 2018 hedge based on domestic barrel prices of USD 46.

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