Just two weeks into his new job as CEO of Mexico’s state energy company Petroleos Mexicanos (PEMEX), Jose Antonio Gonzalez Anaya’s first priority is to “assume the new reality for PEMEX” of low oil prices. PEMEX’s budget was crafted with $50/barrel oil in mind; but with prices closer to $25/barrel, PEMEX, like many companies, needs to cut expenditures to account for lower income.
As he approaches his new, monumental job, Anaya is looking to cut corporate expenditures and finding efficiencies. Prioritizing investments to focus operating expenditures on the most profitable wells and fields also is a high priority on the agenda.
Two years ago, PEMEX would have been alone in these efforts. But energy reform now allows PEMEX to find partners who can help with investments such as deepwater, Anaya told attendees at the IHS CERAWeek Conference Tuesday in Houston.
“Energy reform will help, there’s no question,” Anaya said. Without energy reform, PEMEX would find it more difficult to adjust to the current market.
Anaya said he believes that Mexico has offered sufficient incentives for foreign investment. But he also sees the need for a timeline to be established to provide transparency and predictability for investors. Contracts also need to be migrated. Written prior to energy reform, the contracts were the best that could be managed without reform. Now that reform is in place, “we should have instruments that are easier to administer, offer more legal security and are easier for people to understand,” Anaya noted.
Anaya’s previous experience working in Mexico’s Ministry of Finance had him on the other side of the table in terms of budget cuts. He served on PEMEX’s board of directors as a representative of the ministry. He also worked in Mexico’s social security administration, an experience that should be handy as Anaya seeks to address PEMEX’s large pension liabilities. The details of this “very important burden” need to be ironed out.
Anaya also plans to work closely with the finance ministry to address the large arrears by PEMEX to service companies, which has impacted the viability of those companies and raised questions about how PEMEX can meet payment obligations. Anaya will seek to significantly diminish these arrears to debt service providers and change its invoicing so service companies don’t have to wait. Anaya wouldn’t say whether or not he would reorganize PEMEX, but said he would try and avoid a whole restructuring if possible. Given how traumatic and time-consuming reorganizations can be, Anaya said such a move would have to be carefully thought out.
In retrospect, it’s difficult to say whether Mexico’s production decline was solely due to lack of capital or technology, or to Mexico’s bureaucracy, Anaya noted. While PEMEX is facing short-term financial issues, the company’s long-term future is secure as it sits on acreage blocks that are undoubtedly very profitable.
While financial investment from outside investors is important, PEMEX is looking for more than that, Anaya noted. Ideally, partners also would help PEMEX learn to operate more efficiently.
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