Mexican Government Grants Pemex Tax Relief Following Credit Downgrades

---

Written by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--Mexico President Andres Manuel Lopez Obrador has granted a new financial stimulus to Petroleos Mexicanos (Pemex) (Mexico City) in the form of tax relief. The new package is equivalent to four months of taxes for October through January.

The announcement was published in Mexico's official newspaper on Tuesday. The aim of the government is to grant Pemex room to maneuver ahead of debt payments and investment plans. Since coming to power, Lopez Obrador's administration has placed Pemex at the heart of its agenda, coming to the company's rescue during times of financial concern and promoting its activities in the energy industry.

The tax exemption presented in the decree did not specify the amount waived, but according to Reuters, the relief package accounts for roughly US$6.4 billion.

The news of the financial stimulus follows Moody's Corporation's (NYSE:MCO) (New York, New York) announcement last week that it was downgrading Pemex's baseline credit assessment to ca from caa3 and its overall rating to B3. This impacts the company's bonds, placing them in junk status.

Among the reasons behind the downgrade are the company's debt and expansion of downstream capacity. Pemex has an overall debt of more than US$105 billion, according to the company's third-quarter results, with several payments maturing in the next two to three years, based on Moody's information.

The credit rating agency added that Pemex's downstream and upstream expansions could put further pressure on the company's finances.

Since coming to power, Lopez Obrador promised Mexicans energy independence by cutting imports, constructing a new refinery and refurbishing the country's other six downstream units.

In recent years, Pemex has been able to increase downstream refining throughput, though it has faced several construction and start-up delays with its new 340,000-barrel-per-day (BBL/d) Olmeca Dos Bocas refinery. In December, Industrial Info highlighted that the refinery will not start commercial operations before May 2024. Yet, Lopez Obrador said last month that the refinery would start up in January or February and reach a capacity of 240,000 BBL/d this year. For more information, see January 9, 2024, article - Pemex: New Olmeca Refinery will Process 243,000 BBL/d in 2024.

The company also is betting heavily on increasing oil production to supply its domestic market. Under Lopez Obrador's government, the company has invested to arrest the oil production decline seen for years, stabilizing it near the 1.8 million-BBL/d mark. However, Pemex has failed to meet the government's ambitious production plans set by the current administration.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).