Mexico is running into snags with the old energy economy and the new, with fossil companies giving up on the country’s oil deposits while a Chinese mining giant raises flags about plans to nationalize lithium production.
BP, Spain’s Repsol, and Chevron are among more than a dozen international companies that have abandoned all or part of their permits to explore for oil in the Mexican portion of the Gulf of Mexico so far this year, El País reports. And separately, Mexico announced it was reviewing a decision to strip Ganfeng Lithium of nine licences to extract the critical mineral from deposits in the northwestern state of Sonora, while standing by a year-old policy of nationalizing the lithium industry, the paper writes.
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Fossil companies rushed into Mexico after a previous national government amended the nation’s constitution to, among other things, loosen the grip of state-owned Petróleos Mexicanos (PEMEX) by permitting limited private sector participation in exploration and developments of hydrocarbon deposits. The aim was to attract new money and technology to revive a moribund industry.
Many of the exploration blocks acquired then —carrying terms of up to 35 years— have since been returned to the National Hydrocarbon Commission, El País says. At its most recent hearings earlier this month, the Commission accepted the return of rights from Calicanto Oil & Gas, Repsol, and a consortium of BP Exploration México, Equinor Upstream, and Total México, bringing the total number of withdrawals so far in 2023 to 16.
Many of the companies involved conducted initial exploration between 2016 and 2020, said Gonzalo Monroy, director general of energy consultants GMEC. They concluded that “yes, Mexico has oil, but not in quantities that would be competitive with other areas. Mexico doesn’t have the geological resources to attract interest.”
Now, “there’s practically no interest out in the international market to invest in deep waters in Mexico,” Monroy continued. “It’s quite possible that this famous deepwater treasure will simply stay there underground.”
Pemex’s own production, meanwhile, has stagnated at about 1.6 million barrels per day, far below predictions in 2016 that it would exceed two million barrels by this point in the current government’s term.
Meanwhile, Mexico’s General Directorate of Mining made its decision about the Ganfeng Lithium licences last month after accusing the company—one of the top lithium miners in the world—of not meeting minimum investment requirements to retain the rights. The company disputes the justification.
Ganfeng acquired the concessions in 2021 from Bacanora Lithium, a British company, in a transaction valued at US$260 million. That gave Ganfeng rights to mine an estimated 8.82 million tons of lithium ore until between 2060 and 2065.
The following year, Mexico’s President Andrés Manual López Obrador announced his government’s intention to nationalize lithium extraction in the country and restrict new concessions to a newly-created state enterprise, LitioMx.
Ganfeng initially told investors it did not believe the Mexican initiative would affect its pre-existing licences, and issued a statement denying the Mining Directorate’s allegations of failing to meet required investment levels. It instead charged the agency with “violating Mexican law and international law” by its “arbitrary and unfounded” action. It said it would appeal to the Secretary of the Economy.
Speaking at his daily news conference after the decision became public, López Obrador said its legal basis would be “reviewed, because the mining concessions were basically granted for the extraction of gold, silver, and copper and not lithium.”
The Mexican president insisted, however, that “while we are reviewing that legally, we have made the decision that lithium belongs to the nation, because it’s a strategic mineral. And we’re going to give legal follow-up to the nationalization decree.”
No lithium deposit in Mexico has yet been developed.