PEMEX Creates New Subsidiary, Waits on US Security ReviewBy Cas Biekmann | Wed, 12/01/2021 - 17:14
Mexico’s state oil company PEMEX reported its board approved the formation of a new subsidiary, which aims to sell petroleum products, gas and petrochemical products to the domestic market. In other news, a US national security review is holding up Shell’s sale of the US-based Deer Park refinery to the NOC.
Alberto Velazquez, CFO, PEMEX, will spearhead the new PEMEX subsidiary. Following the move, Velazquez’ role will be taken on by Antonio López, the company’s current Deputy Director of Financial Risk Management and Insurance. “This proposal advances the structural changes that PEMEX's management has been implementing to strengthen the most important productive company in the country,” reads a statement by PEMEX. The company also explained it aims to obtain a larger share of the local market and that the creation of the subsidiary would not bring higher costs.
PEMEX’s data shows that it sold 1.06MMbpd of petroleum products as of Oct. 2021, a 1.1 percent drop compared to the same month in 2020. This, in turn, represented a steep decline from Oct. 2019, when the company sold 19.2 percent more compared to 2020. Despite the drop, the NOC’s profits have gone up as a result of crude oil prices rising amidst a global energy crunch, though PEMEX still suffered significant losses in 3Q2021 as a result of higher tax payments and drawbacks from a devaluating peso.
Weighed down by gargantuan debt, PEMEX struggles to improve its busines. Even with these challenges, President Andrés Manuel López Obrador has vowed to rescue the state company. His administration said it would assume the guarantee for PEMEX’s debt and would decrease its tax burden next year.
As part of the president’s aim to make Mexico self-sufficient in terms of energy, PEMEX acquired a 50 percent majority stake in Shell’s 302.8Mbpd refinery outside of Houston, Texas, for about US$596 million. Shell had hoped to finalize the sale this Wednesday but lacks the required approval by the Committee on Foreign Investment in the US (CFIUS). “While we were hopeful we could conclude the sale of the Deer Park refinery earlier in the CFIUS review process, we are still targeting late 2021 as a closing date for the transfer of Shell's interest in the refinery,” a Shell spokesperson told Reuters. A person close to PEMEX told the news agency something similar, though CFIUS declined to comment.
US representatives have tried to block the sale to PEMEX, arguing that the company lacks the expertise to safely operate in the US and highlighting that the Mexican government is “hostile” to US companies operating across the border, putting up barriers for private participation in the market. Earlier this year, Shell confirmed that much of the infrastructure surrounding operational safety would remain in place after the sale, at least for the time being.