IMCO: Mexico's Tax Regime May Not Cure Pemex's Financial Woes

Written by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--The Mexican Institute for Competitivity (IMCO) recently warned that the new fiscal regime for Petroleos Mexicanos (Pemex) (Mexico City, Mexico), aimed at reducing its duties and easing its taxes, will not guarantee financial or operational success for the state-run company.

Starting this year, the new Derecho Petrolero para el Bienestar (DPB) replaced previous tax regimes, applying variable tax rates between 26% and 33% for oil, and 10% to 13% for natural gas.

IMCO said the new tax regime could free funds, but better governance and use of the available funds would be the way to steer the company away from losses.

The institute warned that without policy change, the new funds could be destined for less profitable areas, such as refining.

Downstream development has been key for Pemex in recent years, a decision backed by the purchase of the 340,000-barrel-per-day (BBL/d) Deer Park Refinery in the U.S. and the construction of the 340,000-BBL/d Dos Bocas Olmeca Refinery in Mexico. Subscribers to Industrial Info's Global Market Intelligence (GMI) Refining Plant Database can click here for the Deer Park plant profile and click here for the Dos Bocas profile.

Based on IMCO's analysis, Pemex had a lower fiscal burden last year, yet the company still registered the biggest financial loss in 14 years.

Despite the positive financial results in 2022 and 2023, spurred by high oil prices due to the war in Ukraine, the Mexican company has reported financial losses in 11 of the past 14 years, according to IMCO.

The new tax regime was implemented by Claudia Sheinbaum's presidential administration.

As part of the new plan, Sheinbaum announced austerity measures through the vertical integration of the company and the end of Pemex's subsidiaries. The changes could save the company 50 billion Mexican pesos (about US$2.4 billion).

Besides the new fiscal system, Sheinbaum also ended new auctions of oil and gas fields for the private sector. However, she opened the door for public-private joint ventures to leverage private investments for the development of Pemex's assets. The state company would hold the majority stake in any of these developments.

Despite years of fiscal relief, Pemex remains one of the most indebted energy companies, with close to US$100 billion in debt.

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