Government Grants PEMEX Extension for DUC

President Claudia Sheinbaum’s government issued a fiscal relief package for PEMEX to bolster the company's liquidity. This move, however, will reduce government revenues from oil rents. The decree, published in the Official Gazette (DOF), supports PEMEX on two fronts:

1. A deferment of the Shared Utility Right (DUC) payment for October 2024, now due on Nov. 27, 2024.

2. A 100% tax credit on updates and surcharges related to hydrocarbon extraction rights for August 2024, provided the payments are made in a single installment before Nov. 27.

This decree is Sheinbaum's first economic support plan for PEMEX, continuing the support policy from the previous administration. This policy included progressive reductions in the DUC rate (from 65% to 30% between 2019 and 2024), tax credits, and payment deferments. According to the Mexican Institute for Competitiveness (IMCO), between 2019 and 2023, these fiscal supports and DUC reductions resulted in a revenue loss of over MX$50 billion (US$1.031 billion) for the federal government.

These initiatives focus on increasing PEMEX's liquidity, allowing the company to address financial issues and enhance oil production. However, this has also reduced oil rent revenues to historically low levels, posing challenges for the country's public finances.

In recent weeks, Sheinbaum announced additional measures to strengthen PEMEX under her administration. These include a new fiscal regime with a single tax payment and an austerity plan projected to save MX$50 billion.

Under the new fiscal regime, PEMEX will pay a single tax, the Oil Right for Well-Being, at a general rate of 30%, replacing three separate dues: the Exploration Right, the Hydrocarbon Extraction Right, and the Shared Utility Right. For associated gas projects, the rate will be 11.63%.