Mexico’s President Takes Steps to Ensure a Smooth Transition for National Oil Company Pemex
Support for Pemex
Mexico’s outgoing president has taken steps to promote a smooth hand-off for national oil company Pemex, three sources told Reuters. The latest moves, including a new tax break worth about $6.4 billion, are likely to postpone a day of reckoning for the world’s most heavily-indebted oil company. President Andres Manuel Lopez Obrador rolled out fresh support for Pemex last week, part of his longstanding goal to make Mexico self-sufficient in the production of motor fuels.
Financial Support and Debt Load
Since Lopez Obrador took office in late 2018, Mexico has provided Pemex with a whopping $90 billion in government support, including tax cuts and capital injections, most of it to service a crushing debt load of some $106 billion. The company’s distressed finances may fall to former Mexico City Mayor Claudia Sheinbaum, Lopez Obrador’s anointed successor and current front-runner in polls ahead of June’s election.
Plans for the Future
A Sheinbaum presidency would aim to cut Pemex’s dependence on government funds, using tax cuts to free up company spending elsewhere. She has also committed to pursuing Lopez Obrador’s goal of “energy sovereignty.” The latest round of support will be used to cover $17.2 billion in debts to service providers, such as Halliburton and Baker Hughes, according to a source close to Pemex.
Transition Strategy
“All this is part of a strategy of orderly transition aimed at a soft landing for the next administration,” said a high-ranking Pemex source, who spoke on condition of anonymity. Priorities that already enjoy Lopez Obrador’s “seal of approval,” however, could constrain his successor, the source added. The popular president declared victory on his Pemex policy earlier this week.
Challenges and Successes
Despite efforts to support Pemex, the company still faces significant debt pressures. Debt payments this year alone reach almost $11 billion, with additional debt maturities of some $35 billion between 2025 and 2030. Pemex’s crude output has continued to slide during Lopez Obrador’s term, despite his pledge to grow it. Domestic refining is up, but still far from his initial goal. Some progress has been made, but many problems remain unsolved.
