Difficult Times for Mexican Oil
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Difficult Times for Mexican Oil

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Perla Velasco By Perla Velasco | Journalist & Industry Analyst - Thu, 07/20/2023 - 10:00

PEMEX is facing significant challenges due to multiple accidents and the burden of debt maturities. Fitch Ratings downgraded the company's credit rating in response to issues related to debt and operational management. Additionally, PEMEX was associated with a substantial oil spill in the Gulf of Mexico. The company responded to the situation by contesting the size reported by NGOs.

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NGOs Alert About Oil Spill in the Gulf of Mexico

NGOs warned on July 17, 2023 of a large oil spill in the Gulf of Mexico. According to the organizations, this spill more than doubled the size of Guadalajara, covering approximately 400km2 as of July 12. The NGOs also reported that over the past two years, accidents involving PEMEX have increased 152% and the severity of these has increased 126%.

PEMEX Reports on Oil Spill

PEMEX released a statement addressing the oil spill reported in the Gulf of Mexico. The NOC states that the spill is not as big as NGOs reported and is unrelated to the fire that broke out at Cantarell days later. PEMEX said that it reported the incident to SEMARNAT and ASEA as soon as it was noticed.

The Impact of the Mexican Peso on PEMEX

The appreciation of the Mexican peso could be hurting PEMEX, as well as public finances as oil revenue is denominated in dollars. The average price of Mexican oil has been US$66.26. However, the Ministry of Finance’s 2023 budget projection set it at US$68.70. Nonetheless, according to experts, a lower price does not directly affect PEMEX’s oil income as it has a hedging strategy in place for such risks.

Fitch Ratings Downgrades PEMEX’s Credit Rating

Fitch Ratings downgraded PEMEX’s credit rating in light of weak operational performance and upcoming debt maturities. The NOC has suffered a series of accidents over 2023 which impacted the company’s operational performance and production. Debt maturities also pose a huge challenge for the company’s liquidity and cash flow.

Mexico Seeks Further Compensation in Lozoya Case

The government has increased the sum for compensation from Emilio Lozoya over the case regarding the purchase of the company Agronitrogenados. Lozoya has been trying to avoid jail time for this case as he is facing another case related to the Odebrecht scandal. This increase further delays the case once more. Meanwhile, Lozoya’s lawyer has requested to speed up an agreement due to Lozoya’s deteriorating health.

Photo by:   StreetOncamara_From_Twenty20

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