MEXICO CITY – Mexico’s President Andres Manuel Lopez Obrador said on Friday that most of the agreements covering investments this year in struggling state oil company Petroleos Mexicanos (Pemex) have already been signed.
“We’re now signing agreements, contracts. I can tell you that the contracts already signed on investment in Pemex account for around 80 percent of all of the investment this year,” Lopez Obrador said in his regular morning press conference.
He added that detailed information on the strides made to rescue Mexico’s energy sector would be provided on Monday but that a lot of good work was being carried out at Pemex.
The president did not indicate if the investment agreements signed thus far are the same ones the CNH oil regulator approved this week for the development of the Cardenas-Mora and Ogarrio onshore fields – in partnership with Egyptian oil company Cheiron and Germany’s DEA Deutsche Erdoel, respectively – in an amount exceeding $1.44 billion.
Those projects are the fruit of a landmark 2013 energy-sector overhaul that ended the state company’s production monopoly.
On Feb. 15, Mexico’s government announced a series of extraordinary measures to bolster the struggling state oil company. Including the savings expected from the government’s crackdown on fuel theft, the total aid package is to amount to 107 billion pesos ($5.56 billion) this year.
The measures include a 25-billion-peso injection of funds from this year’s budget, an advance 35-billion-peso transfer payment from the Finance Secretariat to Pemex to assist the company in covering its pension liabilities and an increase in Pemex’s tax relief through a greater allowance for deductions.
But a few days later, the credit rating agency Moody’s said in a report that the plan would adversely affect the country’s credit profile.
“The need to support Pemex is credit negative for the sovereign: not only will the additional tax relief for Pemex eat into government revenues, but more importantly, if market sentiment does not improve, Pemex will require additional sovereign support in 2020 and beyond, further eroding government finances,” the credit rating agency said.
Earlier this month, another big-three credit rating agency, Standard & Poor’s, changed its outlook for both Mexico’s and Pemex’s credit rating from stable to negative.
“The government’s financial support, in order to restore credit fundamentals, falls well short of the company’s multi-annual capital investment needs,” S&P said in a statement.
Pemex reported a net loss last year of $7.55 billion, although that was an improvement over the company’s $14.27 billion net loss in 2017.
The company, which holds around $106 billion in financial debt, is in a precarious situation due to, among other reasons, a steep drop in production to an average of just 1.71 million barrels per day in December (down from an average of 3.38 million bpd in 2004).
It also suffers from aging infrastructure, while budget cuts by the previous government slashed funds needed for oil exploration.