Mexican state oil company, Petróleos Mexicanos (PEMEX) is being forced to decrease its budget by US$4 billion, representing an 11.5% decrease from last year, in order to maintain financial balance due to falling oil prices.
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Image of Lozoya. From PEMEX. |
“Given the context of international oil prices described and budgetary arrangements for Petroleos Mexicanos, it is necessary to take measures to cut spending to meet the goal of financial balance established by congress,” PEMEX said in a statement. “In this regard, in order to maintain financial balance, the board of directors at its meeting on February 13 approved the plan of budget adjustment of US$4 billion presented by the CEO of PEMEX, representing a decrease of 11.5 percent from the programmable budget authorized by Congress.”
PEMEX referred to the world’s oil industry that has experienced significant price adjustments in the past eight months, noting that in 2014, the Mexican crude oil traded at record levels of more than $100 per barrel, with an average or $86 per barrel. Currently, the price per barrel stands at $49, reaching as low as $37 last month.
Since PEMEX’s budget originally had crude oil at $79 per barrel, the Mexican’s state oil company’s plan for fiscal year 2015 is to enforce a spending limit. Based on that price, the Mexican congress is now authorizing PEMEX to spend only $36.6 billion. One third of that will be used for pension obligations and the remaining two thirds, equivalent to $24.6 billion, for PEMEX’s business plan.
PEMEX is also renegotiating contracts with contractors to save money and stick to its new budget. The company’s statement also hinted at layoffs, stating that PEMEX CEO Emilio Lozoya “implement a major effort to lower the current expenditure, including those relating to human resources and personal services.”
In a Mexican radio interview, Lozoya said PEMEX is postponing some deepwater exploration projects.
"There are ... some exploration projects in deep waters, those that carry higher risks, well if we haven't started them then they will be delayed," Lozoya told local radio, according to Reuters.
In December, Mexico opened bidding for oil exploration rights in 14 areas of the Gulf of Mexico to domestic and international companies after Comision Nacional de Hidrobarburos (CNH) approved rules for the first part of Bid Round 1.
Bidding for shallow water areas will be first on the list for Bid Round 1, followed by extra heavy oil, Chicontepec and unconventional, onshore, and deepwater.
In November, PEMEX went through a restructure, reorganizing the company into two main units and five smaller subsidiaries. PEMEX announced plans for the reorganization in August, just days after Mexican President Enrique Pena Nieto signed the country's historic energy reforms’ secondary legislature into law. At that time, Lozoya also announced PEMEX’s new tax regime, to reduce its fees by $6.8 billion.
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