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Pemex defers oil exploration projects to slash spending

Published:Wednesday | March 2, 2016 | 12:00 AM

The state-run oil company, Petroleos Mexicanos, says it will slash spending by 22 per cent and cut unprofitable production about 100,000 barrels a day as it struggles with liquidity problems and past-due payments to suppliers.

The company, known as Pemex, said it will cut US$5.5 billion from its 2016 budget, delay deep-water exploration and decrease production of super-heavy crude because of low world oil prices.

Delaying production and exploration projects will account for about two-thirds of the US$5.5-billion spending cut.

Pemex still faces a serious issue: It owes suppliers almost US$7 billion, a debt that the company acknowledges is a problem.

"Pemex is facing liquidity problems, but not one of solvency," said company general director JosÈ Antonio Gonz·lez, who estimated that daily production will fall about 4.5 per cent from the current level of 2.23 million barrels a day to about 2.13 million by the end of the year.

He said Mexico's crude oil mix is selling for about half as much US$25 a barrel as the US$50 estimate included in last year's 2016 budget plan.

Gonz·lez refused to say how many jobs might be cut. He said some of the delayed projects could be revived if partners were found who could lower production or exploration costs.

It was the latest in a series of blows for Pemex, which is widely viewed as overstaffed, inefficient and deeply indebted.

Mexico's government depends on Pemex for about one-third of its revenue. In a report on Monday, Pemex said that after taxes and government fees, it lost US$432 billion in 2015.

The company said that crude production fell 6.7 per cent in 2015 as older fields ran out. Revenue dropped 28.3 per cent, mainly as a result of falling prices. Oil export revenue fell 35.4 per cent. Accidents increased 25 per cent from the previous year. Pemex also took a US$154 billion exchange rate loss as the peso plummeted against the dollar.

Pemex carries about US$76 billion in debt.

As of late 2015, ratings companies said that Pemex's pension liabilities amounted to about US$90 billion, though the company recently signed an agreement that could lessen that burden by raising some retirement ages and starting individual retirement accounts for new hires.

- AP