Peña Nieto and his financial team at Hacienda used this fiscal measure to give economic viability to the production of up to 150,000 barrels of crude oil per day.
In order to give a respite to Petróleos Mexicanos (Pemex), President Andrés Manuel López Obrador (AMLO) signed a decree to reduce its tax regime, but in reality it will only be an extension of what was proposed and implemented by the administration of Enrique Peña. Grandchild.
On May 13, Treasury Secretary Carlos Urzúa revealed that the decree will allow Pemex to migrate marginal allocations with an accumulated production of up to 250,000 barrels of oil per day on average, “along with 150,000 barrels that were previously available.”
The official refers to the decree published on August 18, 2017 in the Official Gazette of the Federation (DOF), signed by the exmandatario, by which fiscal benefits are granted for extraction activities in assignments with mature and / or marginal fields , which substantially increases the percentage of deduction of costs, expenses and investments to calculate the Shared Utility Right (DUC) that Pemex pays to the Treasury.
This change was implemented by the PRI government after the fall in international oil prices, which fell from $ 100 to $ 17 per barrel between September 2014 and January 2016, which caused some allocations to lose their profitability under the then fiscal regime. valid.
Peña Nieto and his financial team used this measure to give economic viability to a production of up to 150,000 barrels per day and 500,000 million BTU for the case of gas.
The National Hydrocarbons Commission (CNH), explained that the expansion of the fiscal benefit for marginal fields will be up to 400,000 barrels per day.
“Pemex produces 1.6 million barrels per day. 25% of everything Pemex produces is already a contract (migrated), “said commissioner Hector Moreira.
Pemex has made five migrations, four with a partner and one alone. The most notable example was the Ek-Balam contract, which currently produces 45,000 barrels per day since its contractual change. With this migration, the Treasury receives 70.5% of operating income, but it recognizes Pemex up to 60% of capital expenditures, while in an allocation scheme, Pemex only deducts 12.5% of the value extracted for each barrel.
The big fiscal difference is that the allocation deducts and pays taxes on oil sales, while in a migrated contract they pay for utilities, explains the representative of the oil regulator. But not only changes the tax rate, Pemex will have a series of rules that are summarized in two: invest and explore more.
“Nothing else is good in fiscal terms, but in terms of that extra money is going to have to invest Pemex. You have to prove that you will invest more and that you will make more reserves, “added Moreira.
During the presentation of the fiscal plan , Urzúa described as a “huge break” for Pemex especially in assignments that were not profitable because they were already old, almost closed because the DUC was very high, and now they can be exploited again.
The publication of the presidential decree in the DOF is still pending.
While there will be a respite for the Mexican oil company, the effect on public finances may be counterproductive for its administration.
“It will be an air for Pemex but it can be a double-edged sword for the federation,” warned the researcher of energy and public finances of the Economic and Budgetary Information Center (CIEP), Alejandro Limón.
Treasury provides savings for Pemex for 30,000 million pesos (mdp) with the reduction of the Shared Utility Right (DUC) established under the allocation scheme.
The measure is a risk for public finances if one considers that the DUC represented 80% of the oil revenues collected by the government during 2018, equivalent to more than 780,000 million pesos, which is equivalent to a little more than the budget of the Mexican Insurance Institute Social for 2019.
During the announcement, the company’s general director, Octavio Romero Oropeza, acknowledged that there will be a reduction in revenue from the Treasury from this new fiscal regime, but also the intention is to increase oil production and therefore, compensate the public coffers .
In the middle of this intention is the entire value chain of Pemex with its vices and virtues. For example, the risk of not finding oil or gas.
On the financial side, the State’s productive enterprise has the payment of all kinds of commitments, but mainly its contingent liability, that is, salaries and pensions.
“Not necessarily that Pemex saves a peso in DUC will result in a useful weight. The focus and attention should be on taking advantage of these savings in productive activities, “added Limón.
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