The future direction of Mexico’s energy policy is likely to be strongly affected by the outcome of midterm elections to be held on Sunday, when President Andres Manuel Lopez Obrador hopes to see his Morena coalition extend its legislative majority.
With 30 out of 32 state assemblies and thousands of mayorships up for grabs, Mexicans have a chance to either endorse Lopez Obrador's plans for their country or bring him down to earth with a bump.
Polls show that more than half of voters intend to support the ruling Morena party in what will be Lopez Obrador’s first electoral test since taking office in December 2018.
One recent poll by Mexico’s Buendia y Marquez said the Morena coalition will be close to maintaining a qualified majority of around 65% of the seats.
Others suggest that Morena and its allies could fall well short of the two-thirds majority needed in the Chamber of Deputies to amend the constitution.
A commanding victory for Morena is likely to galvanise Lopez Obrador in his mission to recreate the state-led economy he remembers from his youth, guaranteeing a dominant role for state oil giant Pemex.
Lopez Obador is halfway through the single six-year term allowed in Mexico, and opponents fear that a resounding win in the legislative and gubernatorial races will encourage him to push for an amendment permitting an extended or renewed term.
The populist style of the former governor of Tabasco state appeals to many lower income voters, but the Morena coalition's disastrous handling of public health and the economic repercussions of the Covid-19 pandemic have chipped away at its support in many regions.
Security is a notable weak point for Lopez Obrador, who has earned a public perception of being soft on organised crime while Mexico is reporting crime statistics among the worst in the world.
Even with a more modest victory, Lopez Obrador is expected to stick firmly to a vision that has led him to halt licensing of exploration acreage and block any further farming out of Pemex assets.
The president is obsessed with pushing Pemex to higher production and refining volumes and is seen as the driving force behind a costly new refinery project in Tabasco state.
The state-run oil company has been promised more resources to invest in exploration and production, but it has left many Mexican supply-chain companies on the verge of bankruptcy after delaying payments for months when demand collapsed amid the pandemic.
Lopez Obrador’s brand of resource nationalism means Pemex has turned away from joint ventures with foreign companies even though this means deep-water plays remain under-explored.
A focus on core shallow-water and onshore assets means Pemex has reversed a long decline in crude output, but disinterest in the natural gas sector means Mexico’s annual import bill from the US is running into the billions of dollars.
Some oil and gas sector insiders hope that Lopez Obrador may take a more pragmatic view, whatever the election result.
Warren Levy, chief executive of Mexican-owned independent Jaguar E&P, thinks that the gas shortages that occurred when Texas was hit by a pipeline-freezing cold snap in February may have concentrated minds.
Almost 5 million Mexicans were left without power. “The cold snap highlighted the risk. I think the government is now taking a different view of gas," Levy told Upstream.
"There is something like $5 billion per year leaving Mexico due to gas imports. Imagine the benefits of turning this into local production. The economic drip-down effect would be huge,” he said.
Against this backdrop, Levy believes there is a place for agile private gas producers in Mexico to help the country reach its goal of becoming more independent from Texan gas supplies.
On the other hand, a resounding victory for Morena is likely to spur Lopez Obrador forward with his grandiose visions for Pemex, and renew his efforts to undermine the competitive basis of the regulatory framework put in place in 2013.
A federal court recently overturned government-sponsored legislation intended to free Pemex from anti-monopolistic regulations.
Mexico’s Supreme Court has also curbed some of Lopez Obrador’s efforts to squeeze out private-sector investors from the energy sector.
Lopez Obrador mandated state electricity utility CFE to prioritise state-generated power over any sourced from the private sector.
In practice this means Mexico has been burning the high-sulphur crude for which Pemex now struggles to find export markets instead of cheaper and cleaner options.
These policies have unsettled investors and interrupted what was a growing boom in private-sector investments in solar and wind energy in Mexico.
When faced with obstacles, Lopez Obrador has sometimes responded by calling a referendum among a carefully selected category of voters. This was his peeved response when groups blocked a gas pipeline project in the region of the Popocatepetl volcano.
Lopez Obrador's own approval rating is over 60%, yet polls show Mexicans are disgruntled about the economy, public safety and corruption and they do not necessarily transfer their support for him to the Morena coalition.
In an online discussion hosted by Washington DC-based Inter-American Dialogue, Lorena Becerra, head of polling at Mexico's Grupo Reforma, stated: “The opposition has formed successful alliances in some states, federal districts and municipalities that pose an important challenge to Morena.
"Voters will be making their decisions with their local and state authorities in mind, and the most pressing issues focus on the economy, insecurity and the Covid pandemic."