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The Mexican state oil company Pemex had never before celebrated an anniversary under a left-wing administration. However, the company does not have much to celebrate in its 80th anniversary .
On the one hand, rating companies have little hope that the company can pay off its USD$148.43 billion debt , on the other, organized crime haunts Pemex pipelines and fuel theft has spiked in the past ten years, eroding the company’s profit. Furthermore, Pemex’s operational levels have reached an all-time low, which has made Mexico highly dependent on imports to meet its domestic demand for hydrocarbons.
In addition to its $148 billion debt , the company has registered a significant drop in their proven oil reserves, showing a 34.1% decrease between 2014 and 2018 .
This, added to the effect of oil prices, resulted in a USD$438.32 billion loss .
A report provided by the oil company via the National Transparency Platform revealed that Pemex’s balance sheet had been in the red in 60 out of the last 73 months, from 2012 to 2019 .
The company’s financial performance at the end of Enrique Peña Nieto’s administration (2012-2018) showed accumulated losses worth MXN$1.23 trillion , representing 60% of their total debt , which was estimated at MXN$2.82 trillion at the end of 2018 .
Said financial detriment is equivalent to what it would cost to build six new refineries the size of the one that Mexico’s new administration plans to build in Dos Bocas, Tabasco , with a cost of USD$8 billion.
The losses are mostly due to a heavy tax burden and growing imports of hydrocarbons, according to information provided by Pemex at the Mexican Stock Exchange .
In 2013, the company disbursed MXN$373.49 million. By 2018, this figure had risen to MXN$657.9 billion, representing a 76.2% increase.
Furthermore, the import of hydrocarbons such as gasoline, diesel, jet fuel, LP gas, and natural gas has increased gradually in the past few years, representing a significant expense . Last year, out of every peso the company gained from the sale of goods and services, 33 cents had to be used to pay for foreign purchases.
However, to said losses are added huge sums Pemex used to pay for debt interests. The report pointed to a disbursement of MXN$493.54 billion for said purpose during the past administration.
Pemex refineries are currently operating at 30% capacity
, which has caused gasoline, diesel, jet fuel, and LP gas imports to accumulate for almost 30 years.
The state company has also been importing natural gas and petrochemicals for 29 years, all of which has represented an outward transfer of resources worth more than USD$300 billion during said period.
Furthermore, Mexico’s National Security System has indicated that fuel theft from pipelines, as well as both land and maritime facilities, have cost the company an additional MXN$60 billion a year (USD$3.15 billion) .
A bond scheme alternative
Luis Miguel Labardini-Deveaux
, partner at the Marcos y Asociados firm , pointed out that, though the oil company had had some problems in the past, it wasn’t until 2015, during the administration of Enrique Peña Nieto, when the Mexican government attempted to solve the decline in oil prices by cutting exploration and production costs instead of reducing current primary expenditure, that the oil company started plummeting.
“Pemex had problems, but it showed a healthy cash flow that generated confidence among investors and rating companies,”
Labardini-Deveaux said.
The expert added that the company’s main problem is that “it requires appropriate investments that can allow it to allocate economic resources to profitable oil fields such as the ones in the Bay of Campeche , which may increase crude oil production in the short term. With a greater production comes a healthy cash flow and financial stability.”
Investment must be recovered in the short term and substantial efforts have been made by the administration of Andrés Manuel López Obrador for said purpose. Labardini-Deveaux even suggested the possibility of issuing Pemex bonds to boost production.
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