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Pemex in Times of Low Oil Prices

by Jed Bailey | February 27, 2015   [wpdm_package id=1245 template=”link-template-button.php”]

 

Pemex and the Mexican government are under pressure from falling oil production and low oil prices. Pemex’s estimated revenues in January, 2015 were more than 50 percent below 2012’s peak, with payments to the government similarly reduced. January’s budget cuts to Pemex and CFE were therefore not surprising. Even so, Pemex is now facing unprecedented financial strain—any further calls for it to shore up the government’s finances would severely undermine the energy reform’s intent for Pemex to operate like a private company.

Although mandated by the government, Pemex’s planned budget cuts could help accelerate the company’s transition to a more focused, business-oriented entity. Most important will be the impact on the company’s personnel structure, asset position, and future projects.

In turn, substantial changes at Pemex could influence the implementation of Mexico’s energy reforms and private companies’ strategies. Specifically, private participants may benefit from greater availability of qualified personnel and service providers, reduced competition from Pemex-supported projects, and a wider range of investment opportunities through Pemex partnerships or, potentially, asset divestitures.

 

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