New Tax Regime to Reduce Pemex's Debt in Coming Years

Mexican state oil company Pemex's available debt financing for investment projects will be reduced in the next few years by the same amount it saves under its new tax regime, a Pemex statement quoted corporative finance director Juan José Suárez Coppel as saying.

The new regime approved by Mexico's congress in November is expected to reduce Pemex's tax burden by 23.2bn pesos (US$2.14bn) in 2006.

The measure is designed to free up funds for Pemex to increase its production and restore its declining hydrocarbons reserves, the statement said.

Under the new regime all four of Pemex's subsidiaries - Pemex Refinación, Pemex Gas y Petroquímica Básica, Pemex Petroquímica, and Pemex corporate - will receive fiscal treatment similar to any company in Mexico, Suárez said at a meeting with the company's executives and workers.

Even so, Pemex's new tax regime includes ordinary income tax and a levy for the hydrocarbons price stabilization fund which is applied to total crude oil production when the Mexican crude oil basket is over US$22/b, the statement said.

Pemex will also pay 13.1% of the difference between the current basket price and the price fixed in the annual federal budget based on oil export volumes, the statement said.

The new tax regime represents a gradual transition to help maintain oil and gas exploration and production facilities since costs related to these activities are tax deductible, the statement said.

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