The Weekly Brief: Mexico

EN Logo_new-300x150April 6, 2015 edition: Pemex platform fire, government budget woes, and robo-sumo wrestlers.



Blind Spots

Tragedy on Pemex offshore platform. A massive fire broke out (Spanish) (English) in Pemex’s Abkatun-A Permanente oil rig in the Bay of Campeche. The blaze killed four workers and injured 16 (Spanish) (English) including twelve from oil service companies.


The Road to Reform

Federal legislators aim to unlock law against “oil terrorism”. Members of the Senate and the Chamber of Deputies are negotiating major adjustments (Spanish) to the bill on oil-related sabotage. Legislators expect to reach an agreement before April 30 this year (Spanish), the last day of the current congressional session.

Mexico seeks a greener future. Beginning in 2018, large electricity users must acquire clean energy certificates equal to 5% of their consumption (Spanish) (English). This is in line with a targeted 35% renewables share in the energy mix by 2024 and a 22% cut in GHG emissions by 2030 (English).


Political Economy

Pemex taxes are 6x those of Mexico’s top 100 listed companies—combined. Pemex paid over MXN746bn in taxes last year. This figure was six times larger than that of 100 companies (Spanish) listed in the Mexican Stock Exchange, even though their cumulative revenue were 168% greater than Pemex’s.

The government’s oil revenue fell 46% in the first two months of 2015. The Mexican government reported a 46.3% y-o-y decrease in oil income (Spanish) after hitting the MXN107bn mark by the end of February. According to Hacienda, this loss was the main factor behind a fiscal deficit of almost MXN151bn during the same period.

Hacienda’s 2016 budget is built on deep cuts, moderate oil prices, and rising production. Facing a sharp decline in oil prices, the treasury expects to cut spending again in 2016—this time by MXN135bn (Spanish) (English). Hacienda’s preliminary outline sets an average Mexican crude export price of US$55 per barrel as well as a nearly 5% boost in national oil output.


Market Trends

Mexican crude is worth US$5.2bn less abroad. The country’s oil exports lost 53% of their value (Spanish) after falling to an average of US$44 per barrel during Q1 this year (from US$91.84 per barrel in Q1 2014). This decrease came despite an 8.2% y-o-y boost in exported volumes.


Strategy & Operations

Natural gas in, fuel oil out. CFE plans to cut fuel oil consumption for power generation by 174,510 barrels per day through 2017, a 90% decrease from 2012 levels (Spanish). Fuel oil-fired plants will be replaced with seven natural gas-fired facilities (English), helping reduce costs by over 61% at an average MXN780 per MWh.

Pemex carries on with debt financing strategy. The state oil firm has issued 28-day Stock Certificates for an amount of MXN2.5bn with an estimated 3.13% rate of return (Spanish). This strategy is part of a revolving short-term bond placement for MXN100bn (English), authorized by the National Banking and Securities Commission.


Pemex strikes landmark deal with US investment funds. BlackRock and First Reserve have agreed to invest US$900m for a combined 45% stake (Spanish) (English) in the Los Ramones II gas pipeline project. Expected to come onstream by late 2016, this 744-km pipeline will have a capacity of 1.4bn cubic feet per day of natural gas (English).


Hitting three birds with one stone. Pemex’s board has announced several executive appointments as well as the creation of new subsidiaries in line with the corporate restructuring plan approved in November last year (Spanish) (English). In addition, it has approved the Organic Statute (English) which establishes the company’s basic rules, structure, and organization. 


Lateral Thinking

Mexican robo-wrestlers take on the world. Students from Mexico’s National Polytechnic Institute (IPN) compete in the 2015 Robogames in San Mateo, California (Spanish). The IPN is well known for Pepe el Toro (Spanish), a micro-sumo champion that won its weight division in 2007 and 2008.


Quote of the Week

“En todo encuentro erótico hay un personaje invisible y siempre activo: la imaginación.”

“In any erotic encounter there is an invisible and always active character: imagination.”

  • Octavio Paz

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