May 7, 2015

Relevant Aspects and Current Situation of Pemex Following the Implementation of the Energy Reform

By Antonio Franck

In the midst of Mexico’s implementation of the energy reform, and the complicated situation
with the fall of oil prices, the internal restructure and the development of investment projects by
Petróleos Mexicanos (Pemex) remains at a halt. For the past several months, the private sector
has drawn up new strategies and alliances in search of opportunities for investments due to the
opening of the sector, while preparing to compete for the best technical tools and financial
strategies.
Pemex appears to be facing the competition alone and is also faced with converting itself into a
productive state entity. Its biggest challenges are the following: (i) a lack of clear investment
objectives; (ii) financial debt and employment liabilities such as pensions and retirements; (iii) a
high rate of income tax; and (iv) lack of a budget.
In the past months, the oil industry has radically changed following the worldwide drop in the
price of a barrel of oil. In addition, this past February, Mexico’s Department of Finance and
Public Credit requested that Pemex reduce its budget by 60 billion pesos, significantly affecting
its current expenses and potential capacity for investments.
Taking into consideration Pemex’s history, size and geographical conditions, it is apparent that
Pemex is fragmented by differing objectives and lacks clear goals. Pemex needs to reorganize its
subsidiaries and restructure itself as a business as soon as possible to reach its short, mid-term
and long term goals, raising not only Pemex’s expectations as a business, but also those of
potential investors in new projects and opportunities alike.


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Issue 130–May 2015