Mexican President Andres Manuel Lopez Obrador last week announced that measures will be taken to restore the economic solvency of the country’s heavily indebted national oil company, PEMEX, while the CNH had its budget reduced.
The president unveiled his intention to reduce the tax burden on PEMEX so that further investment can be delivered to the company to meet future production goals.
Lopez Obrador, who in December suspended bidding rounds involving 37 onshore oil fields scheduled for this month, has promised to improve Mexico’s oil production to 2.4 Mb/d by 2024.
Last week, rating agency Fitch downgraded PEMEX’s credit rating to BBB- from BBB+ citing its US$107 billion debt, giving PEMEX the highest debt of any state oil company in Latin America. The company needs to make some US$5.3 billion in debt payments this May.
According to news agency Reuters, the president said that although the tax reduction “would mean fewer resources for the government,” he was sure that the sacrifice would be worthwhile.
Mexico’s Secretariat of Finance and Public Credit (SHCP) will implement a series of measures that will release an extra MX$11 billion pesos per year to PEMEX from 2019 to 2024. The SCHP reported that the fiscal support will be concentrated solely on exploration and production activities in order to reach the company’s 2024 target.
Meanwhile, the budget of the National Hydrocarbons Commissions (CNH) was cut, causing concerns of a bottleneck in ongoing roll-out of the 107 contracts already signed with private companies.
Experts raised concerns that fewer resources could mean a slowdown in the activities of the CNH whose regulatory role involves approval of development plans for oil fields.