MEXICO CITY (Dow Jones Newswires), Sept. 8, 2009
Faced with plunging oil production during a severe recession, Mexican President Felipe Calderon on Monday replaced the politically astute head of the state oil company with a financial expert.
Outgoing Petroleos Mexicanos chief executive Jesus Reyes Heroles, a former energy minister and diplomat, helped push an energy reform through Congress last year, giving Pemex increased autonomy.
Calderon named Juan Jose Suarez Coppel, a University of Chicago-educated economist, to take over the reins at Pemex.
The appointment underscores the need to shore up oil production. Oil output has fallen faster than expected for the past four years and is nearly 25% off peak levels seen in 2004.
"I take on this responsibility with a realistic vision of the difficult situation the company is going through," said Suarez during a televised address. "Pemex is currently behind other oil companies in a wide range of efficiency indicators."
Reyes Heroles helped negotiate a modest energy reform with the country's main political parties last year.
"Reyes Heroles was much more political," said John Padilla, an analyst with IPD Latin America.
Suarez's appointment "really suggests concern on the financial side," said Padilla. "It's going to be really important to see what kind of a mandate he has and what the first steps he will take are."
Reyes Heroles had a hard time managing day-to-day operations at the oil giant. Output slid 7.6% during the first seven months of 2009, forcing the government to repeatedly revise down its targets.
The production drop is eroding a main source of government revenue at a time when the recession has reduced tax collection. Oil accounts for around a third of Mexican federal revenue.
Suarez was Pemex's chief financial officer under Calderon's predecessor,. Vicente Fox. He was most recently the vice president of administration and finance at brewing concern Grupo Modelo SAB (GPMCY). He had also worked at local Citibank unit Banamex, and media giant Grupo Televisa SAB (TV).
Suarez said he will work fast to implement aspects of the 2008 energy reform.
The reform authorized Pemex and the Energy Ministry to draft more flexible, incentive-based oil service contracts, and Pemex hopes to roll out details of new contracting models and launch new bidding rounds before the end of the year.
UBS Pactual said in a report that the switch at the helm of Pemex could mean that Calderon "wants a better relationship between the Ministry of Energy and the state-owned company."
Copyright (c) 2009 Dow Jones & Company, Inc.
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