Budget Bets and the World’s Highest Death TollBy Peter Appleby | Thu, 09/10/2020 - 17:52
The 2021 Federal Budget has taken most of the headlines in Mexico this week. Among the many talking points is the increased backing of PEMEX. The NOC, however, is set for a difficult year and is now the company with the highest COVID-19 death toll in the world. Aside from this, Hokchi remains engaged in unification talks with the NOC.
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PEMEX is set to receive a 4 percent increase in fiscal backing according to the proposal of the 2021 Federal Budget presented by Finance Minister Arturo Herrera this week. The proposal, which still needs to passed before being approved, would increase financial support from the federal government to MX$544.6 billion (US$25.4 billion) from the MX$523.4 billion (US$24.4 billion) it received last year.
But PEMEX faces a difficult year ahead. Unfortunately for the company, extra cash is not going to fix the world economy. Demand remains well below pre-pandemic levels as nations reinstate lockdowns and restrictions on social mobility in the face of constant outbreaks. Hundreds of millions around the globe remain working from home and air travel will not recover for years. All of this represses prices, meaning that even if PEMEX was to produce more and quickly, revenues may still not meet the heights of earlier years when oil prices were much higher.
PEME has reported the deaths of 314 employees and seven contractors, making it the company with the highest COVID-19 death count in the world. In an investigative journalism piece, Amy Stillman of Bloomberg highlights the company’s shortcomings in dealing with the lingering COVID-19 crisis and the late response it had to the outbreak among its employees.
Offshore platforms were particularly lethal containers for the virus as the cloistered work and sleeping quarters enabled its quick spread. PEMEX hospitals are also highlighted as being unprepared to deal with such a quantity of patients, with basics like hand sanitizer and toilet paper missing from hospital restrooms. At a PEMEX hospital in Villahermosa, there was only enough drinking water for doctors and nurses.
Pan American Energy subsidiary Hokchi Energy and PEMEX began discussions last week over a potential unification agreement on the Itta reservoir that appears to stretch across the Hokchi field and PEMEX’s assignment in Mexico’s shallow waters. According to SENER, PEMEX’s Itta-1EXP well made clear the likelihood of the resource being shared. This means that unification talks will now happen and analysis on the exact nature of the reservoir must be undertaken.
This will be PEMEX’s second involvement with unification matters following the discussions with Talos Energy on the Zama reservoir, which stretches between Talos’ Block 7 and the adjacent PEMEX-operated field.