Forbes reports that faced with declining international oil prices, company losses and high debt, Mexican President Enrique Peña Nieto removed Emilio Lozova as CEO of Mexico’s oil giant Petroleos Mexicanos (Pemex) on Monday Feb. 8.
Lozoya, who was named head of Pemex in 2012 to oversee the historic reform that ended Mexico’s 76 year long oil monopoly, was replaced by José Antonio González Anaya, a technocrat with a long career in Mexican finance.
Both Mexico’s Central Bank and the Ministry of Finance (known as the SHCP), had been raising concerns over Pemex’s finances and called on Peña Nieto to reorganize the company’s spending.
“It will be necessary to adjust the cost structure, revise the spending program and strengthen the investment processes, making use of the new joint venture and investment schemes provided by the energy reform,” he added.
But according to Duncan Wood, director of theWashington-based Woodrow Wilson Center’s Mexico Institute, no big changes should be expected. “I think we will see more of the same, except closer coordination with SHCP,” he told me. “Is it positive? Well, it resolves the question of Pemex leadership for now and offers the prospect of speeding up the company’s transition,” Wood said.
Wood, a longtime expert on Mexico’s energy industry, said González Anaya’s background of “effective administrator and technocrat” makes him an “interesting choice.” ”I expect that coordination with [Mexican Finance Minister] Videgaray will be eased by this move, but there will be some of the same issues that Lozoya had to deal with–he is not an ‘energy man’ and Pemex’s bureaucracy will likely resist his leadership,” he said.
Despite Mexico’s 2014 energy reform, which opened Pemex to private investment and was hailed by international investors as the most important reform in decades, Pemex has been going through one of its worst crises amid declining international oil prices and high debt.
Pemex’s image has also been tarnished by corruption-related scandals involving the trade union and accusations of fraud by private suppliers.
Under Lozoya, Pemex’s oil production dropped 12%, from 2.57 million barrels a day in 2012 to 2.26 million barrels a day as of January this year. Meanwhile, Pemex’s net debt went from $6.1 billion in 2012 to $15 billion in 2015.
The price of Mexico’s oil has dropped from $79 a barrel in 2015 to $49 per barrel, the price that Mexico has locked in for about half its crude exports this year through its annual hedging program. In January, the price of the Mexican mix was placed in $22.07 a barrel, slightly bellow the cost of production.
Mexican central bank governor Agustin Carstens said Monday that Mexico’s government should start preparing itself to face low oil prices in 2017 as well.
The government’s dependence on oil revenues has forced Pemex to operate at a loss for a long time. Even when high oil prices were high, Pemex was unable to invest in oil production projects and infrastructure.
The company, which funds much of the government’s budget through taxes and direct payments, reported a loss of $10.2 billion in the third quarter of 2015, nearly three times worse than the same period in 2014.
By Dolia Estevez for Forbes
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