Deputy finance minister says $2.5bn will instead be used to boost Pemex production.
The Mexican government has put a contentious refinery project on hold against a background of flagging economic growth and is preparing a fresh capital injection to boost production at Pemex, the debt-laden state energy company, the deputy finance minister has told the Financial Times.
Arturo Herrera said $2.5bn earmarked this year for the Dos Bocas refinery project would instead be channelled into turning around Pemex’s 15-year slide in production.
The cost of Dos Bocas has repeatedly been revised upwards and the decision on the project will be welcomed by investors, who feared it would be a burden that Pemex and Mexico could ill-afford as the economy slows. Rating agencies are turning increasingly negative on Mexico because of Pemex’s fragile finances.
“We will not
Many investors think that President Andrés Manuel López Obrador’s pledge to halt lucrative crude exports in three
“It’s almost a done deal that [the refinery] will be
Mr Herrera said the government was talking to the IMF and other multilateral organisations about structuring a fresh capital injection for Pemex. He said the discussions were technical and no borrowing was involved.
The government has already put forward a package of financial help for Pemex
“We know the size [of the planned additional
Finance minister Carlos Urzúa said last week that “other measures that will be a bit more significant” would be announced soon.
Analysts said Pemex needed $10bn to $15bn a year to start recovering production, which sank to 1.64m barrels per day on average in January, far from the 3.4m b/d peak in 2004 and the government’s goal of 2.4m b/d by 2024.
BBVA Bancomer has said a recent increase in a fuel excise tax could deliver a $2bn windfall this year, which could be
Nevertheless, the Mexican national champion has $106bn of debt and faces an onerous schedule of repayments. Its ability to make profits is curtailed by its tax burden: the company funds one-fifth of Mexico’s budget.
“Many management decisions could have been taken differently but that is not the main problem,” said
He said a draft business plan for the company would be presented in the next six weeks or so that would match “financial needs and conditions with a production plan”.
“If anything has to be adjusted, it won’t be the fiscal target,” he said.
Mr Herrera acknowledged the government needed to “communicate better” and “help market participants understand whether a tweet [from a politician] reflects a policy change or is the result of people spending too much time on social media”.
The Mazatlan Post