Washington — Mexico's decision to delay auctions on new oil and gas development until at least 2021 will result in billions of dollars in revenue losses and significantly stymie new production over the next decade, a member of the country's National Hydrocarbon Commission said Tuesday.

"Every year you don't have a bidding, it's going to cost you $1 billion," said CNH Commissioner Hector Moreira Rodriguez during an event at the Wilson Center's Mexico Institute in Washington.

Moreira estimated that by delaying auctions, Mexico's oil output may reach roughly 2.7 million b/d within a decade, up more than 1 million b/d from current production levels, but roughly 300,000 b/d below where output could be if auctions were held as originally planned.

Delaying "has a cost," Moreira said. "Let's hope we can convince them to start earlier." Production growth could be further slowed if additional auctions are delayed, he said.

In December, new Mexican President Andres Manuel Lopez Obrador announced that Mexico would halt its hydrocarbon auction rounds by three years, a decision expected to complicate the president's pledge to boost oil production to 2.4 million b/d by 2024.

According to a transition report issued by the outgoing administration of Enrique Pena Nieto in December, a two-year delay in auctions would cause oil output to reach 2.46 million b/d by 2027, compared with 3.07 million b/d if the auctions were held as originally planned. Similarly, if auctions continue, Mexico would produce 7 Bcf/d of natural gas by 2028, 640 MMcf/d more than if the lease sales are shelved for two years, according to the report.

But even with auctions proceeding as planned, infrastructure constraints, declines in existing oil fields, mounting Pemex debt, concerns from investors and Lopez Obrador's push towards energy nationalism, panelists at Tuesday's event dismissed any forecast calling for significant oil output growth in Mexico.

"Breaking the 2 million b/d mark is unrealistic," said Duncan Wood, director of the Mexico Institute. Mexico's state Pemex forecasts Mexican oil output to climb to about 1.77 million b/d by the end of this year, up from about 1.62 million b/d in January. But Wood said even this estimate was likely an optimistic one.

"I don't see where those barrels are coming from," Wood said.

Instead, Wood said Pemex will be fortunate to hold production steady, averaging about 1.6 million b/d by the end of 2024, perhaps up to 1.8 million b/d if foreign investment increases.

Mexican oil output will likely be hindered by Lopez Obrador's push for energy sovereignty, with a focus on producing and refining all hydrocarbons within Mexico, eventually cutting off all energy exports and imports, including imports of US light oil and natural gas, Wood said.

Output will likely be hurt by the postponement of the oil and gas bidding rounds, as well as the cancellation of an electricity auction and ongoing fuel theft, which have all increased investor uncertainty in Mexico's energy sector, Wood said.

"There has been enormous turbulence in the Mexican energy sector, just in the last two months," he said. "People are more than a little bit freaked out, I would say, about what's happening in Mexico and what's happening in the energy sector."

In addition, Pemex remains the world's most indebted oil company with a cost structure that makes payments difficult, according to Leticia Abad, an associate professor of economics at Queens College of the City University of New York.

A Pemex rescue package unveiled by Lopez Obrador last month will likely do little to fix the company's estimated $20 billion in financial debt, panelists said Tuesday.

"It's like a band aid if you are having a heart attack," said Tania Rabasa, the head of deal structuring at CFEnergia.

-- Brian Scheid, brian.scheid@spglobal.com

-- Daniel Rodriguez, daniel.rodriguez@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com