Mexico’s federal government is taking measures to strengthen Petroleos Mexicanos’s (Pemex) financial position by providing a total liquidity of some US$4.2 billion (73.5 billion MXN), Mexico’s Secretariat of Finance and Public Credit (SHCP) announced today.
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“Pemex has historically been a key institution for the Mexican economy and public finances. However, adverse economic conditions through the hydrocarbon sector at international level and depletion of different sites have weakened the financial position of Pemex. In this context, the federal government has worked jointly with the company to define the most appropriate mechanisms to support it and strengthen its financial position,” SHCP said.
However, to receive this support, Pemex must reduce its current liabilities, and debt to suppliers and contractors in the same amount ($4.2 billion) including those generated for the remainder of the year. Pemex must also implement means to properly register and manage its liability.
Some of the funding will come from an equity contribution in the amount of $1.5 billion (26.5 billion MXN), using the Mexican government’s budget in February.
SHCP said it will also grant Pemex about $2.7 billion (47 billion MXN) for pensions and retirements during 2016.
Meanwhile, Pemex is expected to maintain its previously announced adjusted plan of $5.7 billion (100 billion MXN), the agency said.
“In the current context of low oil prices, the federal government will support Pemex using various instruments, which will affect a better operating result, capitalization of the company and more immediate liquidity,” SHCP said. “The support should help to align incentives for management improvements are the axis of strengthening Pemex.”
Earlier this year, Mexico’s President Enrique Peña Nieto turned head by appointing a new CEO at Pemex, knocking Emilio Lozoya Austin out of the position, and replacing him with Mexico’s director of the Social Security Institute (IMSS) José Antonio González Anaya.
Francisco J. Monaldi, a fellow in Latin American Energy Policy for the Baker Institute at Rice University, told OE in March that reforming Pemex is the biggest piece of the Mexican energy reform.
“[Mexico] has only opened very risky or relatively marginal oil fields for private investment and they have kept most of the best areas and proven reserves in the hands of Pemex,” Monaldi said in March. “But if Pemex does not reform, then they will have a very difficult time changing the sector and increasing production.”
Monaldi described the situation with Pemex as an “emergency.”
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