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

May 7, 2015
Relevant Aspects and Current Situation of Pemex Following the Implementation of the Energy Reform

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

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