Mexican government to absorb Pemex debt payments

Mexico’s President Andres Manuel Lopez Obrador stated that the country will absorb regular debt payments this year for state-owned oil company Petroleos Mexicanos (Pemex).

According to Reuters, those so-called debt amortization payments will total over $6 billion in 2021. The help to Pemex was announced by Lopez Obrador, as part of his efforts to prop up the heavily indebted oil firm, and chief executive officer of Pemex Octavio Romero.

Romero said on Thursday at an event in southern Mexico in the president’s home state Tabasco that the president of the republic offered, since the campaign, to rescue Pemex, and that he was demonstrating that with actions.

The two spoke at an event marking the anniversary of the 1938 expropriation of foreign oil assets. At the event, the two announced that Pemex made a new 500–600-million-barrel discovery in the Tabasco region and that the company hopes to close 2021 with production close to 2 million barrels per day (bpd).

Pemex said its financial debt stood at $113.2 billion at the end of 2020, despite several capital injections from the government to boost its weak finances.

Mexico’s fiscal deficit will widen to 4.1 per cent of gross domestic product this year, with ongoing support for Pemex driving up debt, ratings agency Moody’s said in late February. Moody’s also estimated that Pemex will need $14.7 billion in government support in 2020 alone.

Pemex has seen oil output slide for 16 straight years as its biggest – largely offshore – deposits have been extensively tapped.

Lopez Obrador said Pemex’s tax bill will be further reduced, without providing any details. He also announced a sharp reduction in the company’s oil output goal going forward to no higher than 2 million bpd, couching it as an environmental imperative.

“With this moderate production we will fulfil the commitment to replace, and that is the norm, 100 per cent of the proven reserves. That way we will avoid the excessive use of fossil fuels, we will continue to act responsibly, and we will not affect what future generations will inherit“, Lopez Obrador said.

It is worth noting that, Pemex was aiming to boost crude production in late 2018 to over 2.6 million bpd by the time the president’s six-year term ended in 2024.

The company currently pumps about 1.7 million bpd and sector analysts have generally been downbeat on the likelihood of any significant rapid uptick.