Tuesday, October 26

The pandemic exacerbates the Pemex crisis | Economy

Oil platform Abkatun-A2 of Petróleos Mexicanos, completed at the Mcdermott International Inc. manufacturing facilities in Altamira, Tamaulipas state.
Oil platform Abkatun-A2 of Petróleos Mexicanos, completed at the Mcdermott International Inc. manufacturing facilities in Altamira, Tamaulipas state.Luis Antonio Rojas / Bloomberg

The pandemic has exacerbated the Petróleos Mexicanos crisis. Despite attempts by the Andrés Manuel López Obrador Administration to halt the decline, the drop in production and sales has Pemex adrift. The decline in demand for hydrocarbons and the decline in reserves in its oil fields have put the oil company at operating minimums. During 2020, the company produced an average of 1.6 million barrels a day of crude, the lowest level recorded in four decades and far from the estimate in the oil company’s business plan that forecast an extraction of 1.8 million. In gasoline production, Pemex reported an average of 185,600 barrels per day last year, which represents 9.6% compared to the previous year and the lowest production since 1993.

The injection of capital that the López Obrador Administration and the increase in resources assigned to Pemex from the federal budget – for the following year it will have 544,598 million pesos – have been insufficient to stop the fall in oil extraction. Since 2004, when it registered a record 3.4 million barrels per day, the volume has only fallen.

This extractive debacle has now been accelerated by the coronavirus crisis. In April of last year, crude oil prices fell to their worst level in the history of the industry, and the Mexican mix traded at minus 2.3 dollars per unit, a situation that forced Pemex not to trade its barrels for a day . Faced with this scenario, Mexico agreed to cut a quarter of its daily production, about 100,000 barrels a day, during May and June to compensate for the slump in demand.

Rosanety Barrios, an independent energy analyst, points out that the pandemic accelerated this scenario, however, she warns that this crisis was going to occur due to the lack of resources to be able to invest in technology and exploration of new deposits. Pemex is the most indebted oil company in the world with a debt of more than 107,000 million dollars. “Pemex’s situation is serious because it cannot explore, the reserves are not being renewed and they will never be able to do so as long as it is a company that responds to the interests of any government.”

“The only way for Pemex to become technology without spending public money and learning new techniques was with partners and the route was the Energy Reform, but that is over, the reform is dead, so what you have now is a company that is alone, without being able to explore, without technology to lower costs, is the same as before, but the solution has already been killed ”, Barrios ditch.

Luis Miguel Labardini, a lawyer specializing in energy law at Marcos y Asociados, explains that the recent capital injections by the López Obrador government have mainly been used to pay for debt services and new investments or payment to suppliers have not been prioritized. “What we are seeing today is the result of the underinvestment that began to occur in the Peña Nieto government as of 2015 and that reached its lowest point in 2018,” he adds.

Fluvio Ruiz, a former Pemex director, assures that under these circumstances it is essential to review the fiscal regime of the oil company. “Pemex should produce what is profitable for it to produce, which is not necessarily equivalent to everything possible. As a country we are running out of cheap (oil) fields, we have to move to fields whose geological complexity implies a higher production cost, so it is urgent that there be a review of the fiscal regime ”.

Unlike other oil companies in the world, in Mexico the Ministry of Finance charges Pemex high taxes on its income and also charges it for rights in its fields. The Secretary of the Treasury, Arturo Herrera, has recently declared that mechanisms to lighten this tax burden are being analyzed. “When you look at the numbers coldly, your gross pre-tax result is better than many of your competitors. The problem begins when we begin to collect the taxes that we charge him and at the same time he has to pay his debt ”, admitted the official.

Oil revenues fall 38% in 2020

The fall in the price of crude oil, linked to the pandemic, and the decline in production have reduced the contribution of the oil company to the public coffers. The oil revenues reported in the Ministry of Finance closed last year with 605,842 million pesos in 2020, a figure that represents a collapse of 38.7% compared to the oil revenues of 2019.

During the presentation of the Report on Public Finance and Public Debt for the Fourth Quarter of 2020, this Friday, the Undersecretary of Finance, Gabriel Yorio, reported that the federal government has already received $ 2.38 billion for oil hedges, which has helped mitigate , in part, the drop in oil revenues. These hedges contracted by the Administration with international financial institutions function as an insurance that is activated when the price of a barrel is lower than that estimated by the Government. The official assured that these coverage will also be contracted this year.

At the start of his government, López Obrador assured that he would focus his energy policy on strengthening Pemex so that it could relaunch its production of crude oil, natural gas and refined products such as gasoline. The oil company’s business plan at the beginning of 2019 set a scenario of ascent in crude production that will culminate, according to this document, with an extraction of 2.7 million barrels per day of crude in 2024. However, now the turbulence of a market affected by the pandemic and the sum of internal problems at Pemex threaten to turn that goal into a chimera.


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