What next for Pemex?

2/9/2016 Forbes.com

By Duncan Wood, Director of the Mexico Institute

Pemex LogoThe news that Emilio Lozoya, CEO of Mexican National Oil Company Petroleos Mexicanos (Pemex) would be stepping down came as no great surprise to many observers of Mexican oil politics. The company has been in deep trouble for over a decade now and, although Lozoya only took over 3 years ago, he has been able to do little to stem the tide of bad news during his tenure at the top of the organization. From a high point in crude oil production in 2004 of 3.4 million barrels per day (bpd), Pemex now only produces around 2.2 million bpd, and that total is predicted to fall further in the coming months. Combined with the low oil price internationally, that means a lot less revenue for Pemex, but more importantly, less fiscal revenue for Lozoya’s political bosses in the government of President Enrique Peña Nieto. Mexico’s government has depended on oil for up to 35% of its revenue over the past decade, but with lower prices and lower production, that total has fallen closer to 20%, leaving a growing gap in the federal budget, that has been covered by cutting spending in infrastructure projects and government salaries and services.

The money problem afflicting Pemex has largely been caused by successive Mexican governments treating the NOC as a cash cow, and the truth is that the company has been milked to death. This year’s cuts in the Pemex budget and the calls for layoffs are only the latest manifestation of a long-running abuse of the company by the Mexican federal government. But the decline in Pemex and government revenues is only one part of the unholy trinity of problems that has been afflicting the NOC in recent years.

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Big Oil to Get Brazil-Like Terms in Plan to End Mexico Monopoly

Bloomberg, 12/3/2013

oil pipeline150Global oil majors from Exxon Mobil Corp. to Chevron Corp.  are about to get the clearest indication yet of how far Mexican lawmakers will go to lure them into the largest unexplored crude area after the Artic Circle.

Senate committees will begin debating a bill to end a seven-decade state oil monopoly as soon as today. On the agenda is a proposal by members of President Enrique Pena Nieto’s Institutional Revolutionary Party, or PRI, and the National Action Party, or PAN, to extend a profit-sharing model unveiled in August by also allowing production sharing or a license model used in Brazil, said two people with knowledge of the talks.

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The PRD Reform Proposal, Mexican Economy and Teachers’ protest – Weekly News Summary: August 23

coffee-by-flikr-user-samrevel1The Mexico Institute’s “Weekly News Summary,” released every Friday afternoon summarizes the week’s most prominent Mexico headlines published in the English-language press, as well as the most engaging opinion pieces by Mexican columnists.

What the English-language press had to say…

This week, the debate on the Energy reform continued and the PRD presented its reform proposal. Last Monday the PRD presented its own energy reform proposal, which did not include constitutional changes or a greater role for private companies. The Proposal seeks to loosen the government’s stranglehold over revenues from Pemex, where approximately 70 percent of profits go to fund the federal budget. The main speaker during the presentation was Cuauhtémoc Cardenas who said Pemex should be more independent by removing Cabinet secretaries and the oil workers union from the Pemex board seats they now hold. In the same regard, this week in an interview with The Wall Street Journal, Pemex’s CEO Emilio Lozoya announced the plans to set up a new company to explore and produce shale gas and deep-water oil in the U.S. as part of an ambitious strategy to turn around years of falling production. “The geology is similar and we can benefit from numerous areas of collaboration with international oil companies”, Lozoya said to the newspaper.

Continue reading “The PRD Reform Proposal, Mexican Economy and Teachers’ protest – Weekly News Summary: August 23”

Reform will boost oil investment by $10bn a year, says Pemex chief

energy -drilling_platform_in_seaFinancial Times, 8/15/2013

The head of Mexico’s state oil monopoly expects the energy reform announced this week to boost oil investment by $10bn a year, even though the foreign companies that it hopes to attract will not be able to book reserves.

While Enrique Peña Nieto, the president, is in charge of handling the delicate politics of the reform, Mr Lozoya is at the operational hard-end. It is a formidable task. Pemex, the world’s 10th-biggest oil producer, has over $127bn of revenues a year but also 160,000 employees, a powerful union, pays virtually all its profits to the government in taxes and has onerous pension obligations equivalent to 8 per cent of the Mexican gross domestic product.

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Weekly News Summary: March 1st

Coffee by Flikr user samrevel

The Mexico Institute’s “Weekly News Summary,” released every Friday afternoon summarizes the week’s most prominent Mexico headlines published in the English-language press, as well as the most engaging opinion pieces by Mexican columnists.

What the English-language press had to say…

This week, Elba Esther Gordillo, the powerful leader of the SNTE, Mexico’s teachers’ union was arrested for allegedly embezzling over $150 million in union funds to support her lavish lifestyle. The arrest shocked the nation and came only a day after President Enrique Peña Nieto signed into law a new education reform package. Many interpreted the move as an attempt by the Peña Nieto administration to reassert state authority over special interests, and as a warning to other industries (e.g. telecommunications and energy) that reform is on the way. NYT columnist Thomas Friedman gave much to talk about following two very optimistic pieces. He suggested Mexico will become a dominant economic power in the 21st century, and praised Mexico’s young ‘just do it’ generation of innovators and entrepreneurs. Pemex CEO Emilio Lozoya mirrored Mr. Friedman’s optimism by suggesting a reinvigorated energy sector will transform Mexico into the world’s “new Middle East.” Meanwhile, north of the border, looming automatic budget cuts prompted ICE to release several hundred low-risk immigrants from deportation centers across the country.

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Energy links seen boosting U.S. ties to Mexico

energy- oil pumps 2The Washington Times, 2/28/2013

A senior Obama administration official voiced optimism about the growing economic relationship between the U.S. and Mexico, stressing that energy sector ties between the two nations have “enormous potential for progress.” Assistant Secretary of State Roberta S. Jacobson told a congressional hearing Thursday that Washington’s overall approach to Latin American ties “is as much about seizing opportunities as it is about countering threats.”

Her remarks during a hearing of the House Committee on Foreign Affairs dovetailed with comments this week from a top Mexican official, who expressed optimism that the nation’s state-run oil monopoly, long managed as a closely held national asset, is on the verge of opening up to billions of dollars in foreign investment. Emilio Lozoya, the newly tapped chief of the monopoly — known as Pemex — told the Financial Times that he expects Mexican lawmakers to sign off as early as this summer on landmark changes to the sector proposed by recently elected Mexican President Enrique Pena Nieto.

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Pemex chief hails Mexico as ‘new Mideast’

energy - oil_rigFinancial Times, 2/27/2013

Emilio Lozoya jumps to his feet and marches over to a wall cabinet in his  44th floor office at Pemex’s headquarters in Mexico City. “You see this?” the fresh-faced 38-year-old Harvard graduate, asks, holding  up a glass vial with a pale liquid inside. “That’s pure gold. It’s as good as it  gets.”

Mr Lozoya’s optimism is infectious as he contemplates the high-grade oil  sample which he believes is emblematic of Mexico’s future. To ram home the  point, he produces an investment bank report which describes the hemisphere as  the world’s “new Middle East”. Shale gas production north of the border has already slashed energy costs in  the US, setting the stage for a manufacturing resurgence few imagined only five  years ago. Mr Lozoya believes the same is possible in Mexico.

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