Mexico’s government will announce extra federal government support for Pemex in the coming weeks - in addition to an already announced 75bn peso ($4bn) capital injection - in order to boost cash flow and exploration and to reverse declining production at the state oil company.
Arturo Herrera, deputy finance minister, told the Financial Times the assistance would be “support for Pemex’s fiscal position … additional help from the federal government to boost cash flow and so they can use it for exploration and production to increase output”.
Speaking by telephone from Tokyo, he declined to give further details of what was planned but said it was part of a detailed strategy for the oil company.
Pemex's crude production has collapsed from a 2004 peak of 3.4m barrels per day to less than 1.8m. Mr Herrera was speaking after the new government successfully sold $2bn in bonds in its first debt issue, which was four times oversubscribed.
The company piggy-backed on the finance ministry’s investor roadshow in New York last week but left many participants underwhelmed, in part because the plans it discussed were only preliminary.
President Andrés Manuel López Obrador has made boosting Mexico's oil output a priority. But he has disappointed markets by effectively halting oil tenders, which had opened up the long closed sector to private investment, and by suggesting that oil exports could be halted in three years in order to refine domestically so that Mexico can become self-sufficient in fuel.
Mr López Obrador wants to give private companies three years to prove they are investing and producing but his refinery plan has been greeted with scepticism by the market. Investors see Pemex as the weakest link in government finances and some believe it could even lose its coveted investment grade status this year.
Mr Herrera, who was in Japan for a G20 deputy finance meeting, said the government had held preliminary talks with ratings agencies to outline strategy but declined to rule out the possibility of a downgrade. The Pemex rescue plan, part two, would be announced in “two to three weeks”, he added.
Mexico’s government has launched a crackdown on escalating fuel theft at Pemex, which despite market liberalisation still supplies 95 per cent of the fuel consumed in Mexico. The government has temporarily shut down key pipelines and used tankers to distribute fuel instead, leading to severe shortages in some parts of the country over the past ten days.
Distributing via tankers is also an estimated 14 times more expensive than using pipelines. Mr Herrera declined to say how much the fuel theft crackdown was costing Pemex but said the theft cost some $1.25bn a year. The government has previously put the figure at three times that amount.
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