Little change seen from Mexico's election

With two Mexican presidential candidates declaring victory in a race that officials say is still too close to call, two analysts say neither outcome will have much effect on the oil and gas industry.

July 5, 2006

2 min read

By OGJ editors
HOUSTON, July 5 -- With two Mexican presidential candidates declaring victory in a race that officials say is still too close to call, two analysts say neither outcome will have much effect on the oil and gas industry.

Andres Lopez Obrador of the Party of the Democratic Revolution and a former Mexico City mayor has called for a full recount, saying he suspects voter fraud and manipulation in the July 2 election.

Preliminary results indicate Felipe Calderon of the National Action Party received slightly more votes than Lopez Obrador, but Mexican election officials say the race is too close to call until an official count, slated to start July 5.

John S. Herold Inc. analyst Gray Peckham said Mexico's ban on foreign investment in the upstream oil and gas sector will continue regardless of which candidate wins.

Paul Horsnell with Barclays Capital Inc., London, agreed, saying: "Political outlook and political expediency both imply that a contentious reform of the oil sector is perhaps unlikely to be high on the agenda for either" presidential candidate.

Mexico's strategic importance in the oil market comes primarily from its US trade, Horsnell noted in a June 28 research note.

"Exports to the US are running at just below 1.7 million b/d for the year to date, representing the lion's share of total Mexican crude exports of 1.9 million b/d. Mexico accounts for 37% of US imports of heavy crude oil and 57% of heavy crude imported into the upgraded refineries of the US Gulf Coast," Horsnell said. "The exports of Venezuelan heavy crude to the US fell by 0.25 million b/d from 2001 to 2005, while Mexican exports of heavy to the US rose by a matching 0.25 million b/d over the same period."