Leftist Candidate Could Threaten Pemex Reforms

A firebrand leftist who twice narrowly missed becoming Mexico's president is riding high with a fresh bid for election in 2018, vowing to upend a landmark energy sector opening championed by President Enrique Pena Nieto.

Pledging to root out graft and undo several other Pena Nieto policies, populist Andres Manuel Lopez Obrador, known by the moniker AMLO, leads most opinion polls for the presidential race.

While AMLO has long railed against the energy reform, the combative 62-year-old would take a series of concrete measures to disrupt it if he wins, said his top energy advisor Rocio Nahle. She said AMLO would seek to wean Mexico off of cheap fuel imports, produce more at home at new refineries and bolster ailing state oil giant Pemex.

In 2006, Lopez Obrador came within less than a percentage point of winning. Six years later he lost by about 6 percentage points to Pena Nieto, who is now deeply unpopular for a series of conflict of interest scandals, a lackluster economy and grinding drug gang violence.

Several recent polls show AMLO leading all likely rivals, with a 36 percent approval rating according to a recent poll by leading newspaper El Universal, which could be enough to win in Mexico's raucous multi-party democracy.

Nahle is the leader of Lopez Obrador's new political party, Morena, in the lower chamber of Congress, and also the party's top energy advisor. She detailed how AMLO plans to cripple Pena Nieto's oil opening.

She said Lopez Obrador, mayor of Mexico City a decade ago, would immediately call for a public referendum on whether oil companies should be allowed to develop projects alone, as Pena Nieto's reform envisions.

AMLO would require that Pemex take minimum stakes in all future oil contracts, and may also seek to revoke two dozen contracts already signed with oil companies.

"The contracts that they're signing are not backed by the Mexican people, and when you don't have that support it's a risk," said Nahle.

An AMLO-led executive branch would directly assign more leases for new oil fields to Pemex, instead of putting them up for auction as Pena Nieto planned, she added.

"When we talk about strengthening Pemex, that's what we're talking about," Nahle said.

In a possible shift in AMLO's approach to energy, Nahle said Morena favored a "responsible opening" of the oil and gas sector, and even praised the longstanding Deer Park refinery joint venture between Pemex and Royal Dutch Shell in Texas.

Lopez Obrador and his allies are unlikely to win majorities in Congress needed to repeal the energy reform, which is enshrined in the constitution. Still, he would not be obliged to implement it.

In 2013, a month before Congress passed the constitutional changes that paved the way for the landmark opening, Lopez Obrador sent letters to chief executives at 10 international oil companies, ExxonMobil and Chevron among them, warning them against signing new contracts in Mexico.

So far, the biggest oil companies have mostly steered away from bidding on new contracts, but that is expected to change with the first-ever deep water auction scheduled for December.

More than two dozen major companies have already begun the process of pre-qualification, including Britain's BP and France's Total.