Mexican state oil company Pemex risks getting little or no compensation for the billions it invested in fields now set aside for private competitors in a landmark energy reform, according to an energy ministry document seen by Reuters.
Already struggling with low oil prices and mounting debt, Pemex faces a bruising battle to recoup money from the government for its investments due to strained public finances.
The ministry document dated Feb. 29, which is not public, showed that Pemex might be denied any compensation at all if the government finds the company is liable for "environmental, social or infrastructure" damage from its work in those fields.
"The resolution issued by the ministry may recognize all or part of Pemex's investments, or deny the existence of any affected investment," the ministry states, without making mention of any potential cost from such liabilities.
Mexico's 2016 budget states that Pemex will be paid this year "at least fair economic value" for the investments it made in the fields it lost and that have been auctioned off so far.
But the ministry document shows it has only earmarked Pemex potential compensation of 4.6 billion pesos (US$238 million) for fields the company wanted to keep, but which it lost in an August 2014 carve-up known as Round Zero that kicked off the opening of Mexico's oil and gas resources to private investors.
That figure is less than 7 percent of the 70.6 billion pesos Pemex calculates it has invested in all the fields it had to cede in Round Zero, some of which are costly areas it will continue to operate temporarily.
Pemex's finances have been stretched by budget cuts and heavy losses, and an official at the company, speaking on condition of anonymity, said "every peso we get is like oxygen."
The differing estimates on what Pemex should receive in compensation reflect a tug-of-war between government officials on the company's board and Pemex's own board members, according to several officials familiar with the matter.
The language of the constitutional reform that in 2013 ended Pemex's monopoly on oil exploration and production to reverse years of flagging crude output, is somewhat ambiguous on the question of compensation.
The reform states that Pemex's investments "will be recognized in their fair economic value in the terms the energy ministry sets out for that purpose." The ministry referred back to this section when asked about its document.
Any payment to Pemex must be approved by Mexico's finance ministry, which has had to tighten its belt over the past couple of years as income from crude sales withered and bond investors became concerned about rising debt levels.
The ministry proposed further budget cuts in 2017 of nearly 240 billion pesos, or about 1.2 percent of GDP.
Pemex still hopes to get some compensation.
"Pemex is negotiating with the energy ministry to reach an appropriate and reasonable arrangement," Pemex Chief Executive José Antonio González Anaya said in an interview in late August. A company spokesman said this week talks are still ongoing.
Miriam Grunstein, a Mexico City-based energy analyst at Rice University, said the government's tough stance, as laid out in the energy ministry's document, reflected its "fiscal desperation," and was damaging Pemex's health.
Pemex suffered a 2015 budget cut of about 62 billion pesos and a fresh cut of some 100 billion pesos this year.
The Round Zero allocation provided Pemex with a slimmed-down portfolio of oil fields, or about 83 percent of Mexico's probable and possible oil reserves, to develop on its own or in joint ventures. The ones it gave up are being used to stock a series of first-ever oil auctions open to private oil companies.
A senior oil industry executive, speaking on condition of anonymity, expressed concern to Reuters about Pemex, saying the steady drip of budget cuts made it hard for the Mexican company to make firm commitments on joint ventures.
That, in turn, interfered with the private sector's ability to plan ahead on investing in Mexico, the executive said.
Pemex lost US$7.7 billion during the first half of 2016, and its total financial debt stands at US$96.2 billion.