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Roundtable

PEMEX & Repsol: a Turbulent History

Wed, 01/25/2012 - 11:53

When the shareholder agreement between Pemex and Sacyr was announced in late August 2011, the Spanish media described it as an assault on Repsol. In general, Pemex’s move to enter into a strategic alliance with Sacyr and nearly double its stake in Repsol to 9.5% provoked strong reactions in Spain, partly based on the fear of losing the Spanish origins of the company and the concern that Repsol’s business strategy could be influenced too strongly.

In Mexico, reactions were initially positive and rather antagonistic of Repsol’s attempt to stop the alliance. However, one of the most common criticisms of Pemex’s communication behaviour during the last months, both in Mexico and Spain, was that the deal was poorly explained to the public and so enflamed speculations and suppositions. The goal behind the agreement that forced Pemex to indebt itself to pay the US$1.6 billion for the additional shares was not made clear to many and this contributed to a move away from the initial positive reactions.

Sacyr later had to sell part of it shares back to Repsol, forced into it as the company was struggling to pay back its debt, thus calling o the agreement with Pemex. Sacyr kept 10% of its shares in Repsol, remaining the second largest stakeholder in the Spanish company. Repsol quickly resold part of the recently bought shares at a profit.

Repsol and Pemex agreed on an industrial strategic alliance in January 2012 that stated that Pemex resolved to own not more than 10% of the shares and not less than 5%. When the agreement was announced, the Spanish media wrote that the two companies had made peace – at least for ten years.

 

Juan Carlos del Río

Director General
IECESA

"To be honest, I don’t know what the strategy was behind Pemex’s acquisition of Repsol shares. I don’t understand it. If I would have had to choose, I would have invested in a project in Brazil, in order to learn more about deepwater, because I don’t believe that Spain can teach Mexico anything about the oil and gas industry. "

Eduardo Camero Godínez

Director General of Exploration and Exploitation
SENER

"Pemex’s investment in Repsol can firstly be seen as a financial investment. It is not the explicit mandate of Pemex to look for such investments, but it is not restricted in doing so. It can also be seen as a way to accelerate the adoption of technology. Repsol is already active in deepwater and Pemex stands to learn from this. Given the restrictions that Pemex has in terms of access to collaborations with companies that have deepwater experience, it could be a great benefit for the NOC to see how Repsol operates and takes decisions. Although there were certainly other companies Pemex could have done this with, the already-existing tight commercial relationship between the two companies made the decision a logical one."

Miriam Grunstein

Division of Legal Studies
CIDE

"The recent Pemex acquisition of Repsol shares shows that the NOC wants to become a strong partner with a company in order to start developing its expertise on deepwater projects, so it can acquire the know-how it cannot acquire on Mexican soil because of constitutional impediments. What Mexico needs to do is start becoming very active as an apprentice of state or international companies that have interesting projects of that kind. But it needs to do it now."

Duncan Wood

Director of the International Relations Programme
ITAM

"On a strictly financial basis it was a good idea, Pemex bought those shares at an incredibly low price, which shows good business sense. People have criticized the fact that Pemex used money that could have been invested into other things here in Mexico to make this deal, but as a corporate decision it was an intelligent one.

However, as a political decision, increasing Pemex’s stake in Repsol looks less good. There are two dimensions to that. One is that Pemex and the government clearly did not anticipate the reaction in Spain to the news, and secondly they did not fully anticipate the reaction in Mexico. Overall, the initial reaction here in Mexico has been positive. People from across the political spectrum have come out in favour of the deal. However, that initial position was subsequently weakened, and Pemex should have done a much better job at explaining to the Mexican and Spanish public and Repsol shareholders exactly what the purpose of the deal was, and to make it seem like a less threatening exercise.

Looking back, the handling of public relations was a nightmare; it was badly handled both in Spain and in Mexico. Everyone was asking themselves why Pemex was actually doing this, why they were spending billions of dollars to buy these shares. There was no thought about preparing the way. Repsol, on the other hand, has done a terrific job on the public relations front, raising this spectre of the Mexican NOC taking the company over, and Spain losing a national champion. While it wasn’t a bad idea, it turned out horrible"

David Enríquez

Partner
Goodrich, Riquelme y Asociados

"A very interesting example of Pemex’s recent development is the move to increase its stake in Repsol. There was definitely an economic rationale behind the move, which Pemex hopes will allow it to take control of an entity for ten times less the level of investment that would be needed for doing exactly the same with an equivalent company. In addition, the move will allow Pemex to acquire exactly the capabilities they need for deepwater exploration. They are also exercising some geopolitical muscle. I believe moves like this are indicative of the way that Pemex wants to develop. It is much more sophisticated than the Pemex of old, not simply thinking what is needed technically for each field, but planning in a very strategic manner."