Pemex plans to modernize and optimize its operations through 2023 as the government of Mexico also promises tax reform that help.
The chief executive officer of Mexico’s state oil company, Petróleos Mexicanos (Pemex) presented the company’s business plan for 2019-2023. CEO Octavio Romero Oropeza made the presentation with Mexican president Andrés Manuel López Obrador in attendance. The company’s Board of Directors approved the document unanimously.
The document lays the foundations for the modernization of the company, making it more competitive and guaranteeing its long-term financial viability. This consolidates Pemex as an engine of national development and guarantor of energy sovereignty. Officials in Mexico also hope the 2023 Pemex plan will rescue failed energy reform in Mexico.
At the conference at the National Palace, Mexico’s president said he supported the plan. He stated that it will rescue the country’s energy industry, after the resounding failure of the Energy Reform. He reiterated the support of the Government of Mexico for Petróleos Mexicanos, stating a gradual reduction of its fiscal burden, in such a way that it alleviates the necessary resources to invest in new projects in order to increase oil production.
Romero Oropeza explained that the objective for the Government is to support Pemex for the first three years of the administration, in what will be a transition stage to recover oil production, so that, in the second half of the administration, Pemex will support the Federal Government in financing Mexico’s development and economic growth.
He indicated that, in order to solve the problem of the high tax burden, the Federal Government plans to present a proposal to reform the Hydrocarbons Revenue Law in order to reduce the rate of the shared utility tax, through a gradual reduction scheme of 7% for 2020 and 4% by 2021. It should be noted that the current rate is 65%, meaning that the rate will reach 54% by 2021.
While reviewing the company’s recent performance, the CEO of Pemex recalled that in the last 14 years there was a considerable drop in oil production, as a result of decrease in investment.
He went on to mention that, like the case of upstream activities, investment in refineries as well registered significant decreases in recent years. This lack of investment even affected the availability of funds for maintenance, causing the fall of the processing levels of the National Refining System, bringing refined production to historical lows.
To increase the production of oil and gas, one of the fundamental cornerstones of the Business Plan is to accelerate the development of newly discovered reservoirs, as well as increasing the development activity in fields currently in operation, with new wells and with major repairs, confirmed the CEO of Pemex. At the same time, he said that the plan foresees a gradual recovery of refining capacity based on larger amounts of investment destined for the rehabilitation of the six refineries and the development of the new Dos Bocas refinery.
Romero Oropeza said that the goal is for Pemex to have resources to invest, which will allow the company at the beginning of next year, to increase its production levels throughout its value chain, generating the resources necessary to improve its financial balance.