Mexico says more Pemex aid in the works

Mexico is preparing more financial aid for state oil company Pemex on top of new credit lines and tax cuts that analysts said could help the company improve crude oil output.

On Monday, the government announced it had secured US$8bn in credit lines with major banks, with US$2.5bn set to be used to refinance debt.

“We are preparing a complementary package to attend to Pemex’s short-term problem and improve Pemex’s debt maturity profile,” deputy finance minister Arturo Herrera said at an insurance event in Mexico City, El Economista reported. He said the aid could be announced late this month, but he did not provide further details.

The government has previously said it could use part of a US$15bn oil income stabilization fund (FIEP) to help Pemex make debt payments.

Finance minister Carlos Urzúa said on Monday the government would lower taxes on some of the fields operated by Pemex to be in line with levies paid by private companies with oil contracts.

Analysts at BBVA said the tax relief plan would help Pemex allocate more resources to stabilizing a drop in oil output, but they called for the government to revive a farm-out program to invite private companies to work with the NOC.

“To solve the structural problem of the relative low levels of investment of Pemex in exploration and oil production, we suggest that the business model of farm-outs be reactivated as soon as possible,” BBVA analysts Arnulfo Rodríguez and Carlos Serrano wrote.

Mexico’s new government canceled further auctions of oil fields for private sector players, but oil regulator CNH is still set to offer seven blocks of farm-out partnerships with Pemex in October. However, the recent announcement that Pemex will offer service contracts to develop some of the same blocks has raised concerns the farm-outs could also be canceled.