News Article

AMLO’s Plan to Save, Transform PEMEX

Mon, 04/01/2019 - 17:15

The energy sector and rescuing PEMEX are two essential points on President López Obrador’s agenda. Although the administration says that all contracts agreed by the previous administration will be respected, there has been a surge of uncertainty regarding the fate of the Energy Reform and of investments already made from the private sector.
President López Obrador says that PEMEX is experiencing its worst production crisis in four decades. To address this, in March 2019, the president released his plans to rescue the national oil-producing company. “We are going to rescue the national oil industry,” he said. Part of his plan to give PEMEX new life is to inject fiscal resources to increase its production. The plan, however, has failed to win over international rating agencies like Fitch Ratings, which lowered PEMEX's credit score for the Mexican productive enterprise from BBB+ to BBB- in both national and foreign currencies. Fitch Ratings said the plan announced by the government is not enough to counteract the deterioration of the company’s credit profile.
According to Octavio Romero, Director General of PEMEX, the company’s crisis is the result of the Energy Reform. Romero says that as a result of the reform, the government reduced federal resources that were used for exploration and instead diverted them to seismic and deepwater perforation studies. AMLO’s strategy dictates the government will now divert a significant amount of resources to well drilling.
The president is determined to rescue PEMEX and has stated that this does not entail automatically canceling the exploration and production contracts that have already been assigned with international oil businesses. As a result of the Energy Reform, the private sector’s net production account is only 4,000b/d, which is “very marginal for the needs of the country,” says López Obrador. He added, however, that the federal administration will give the private sector the opportunity to compete in the Mexican market.