By Duncan Wood, Director of the Mexico Institute
The 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.