Economics: The “new” Pemex Business Plan
Last April 6, Pemex presented its Business Plan for 2021–2025, an update of the one that was published in mid-2019. And while CEO Octavio Romero assures that its central purpose is to save the company and allow it to reassume its leadership role, what is still sorely lacking is any coherent approach for resolving its sagging financial health and operating performance.
Although the private sector could have had a role to play in a revival of the country’s petroleum sector, the plan reaffirms that there will only be very limited opportunities in that regard, a focus reinforced by a new version of the Hydrocarbon Law proposed last month by President López Obrador and approved in recent days by Congress.
On many fronts the new plan has proven much less ambitious. It significantly scales back crude output targets from the highly optimistic levels of the previous plan and now anticipates an ebbing of production starting in 2025. It also expects much less in the way of 3P reserves from new discoveries. It optimistically projects gas production will soar in 2021 on hopes of developing on its own the Quesqui e Ixachi field. However, rather than the sustained expansion it previously anticipated, it now says gas production will start trending lower by the very next year. Unfortunately, management hasn’t done a good job of explaining its reasoning for making these adjustments. Furthermore, while the company had initially expected to be posting strong enough earnings this year to begin paying down debt, it now expects such a turn of events before 2024.
National Refining System capacity is to experience two major expansions when the Dos Bocas refinery comes on line, supposedly in 2022, and a new refinery line starts up at La Cangrejera in 2024, just in time to help fulfill President López Obrador’s dream of assuring that one day all the country’s crude production is refined in Mexico. Pemex has yet to report on the implications of that strategy for its own finances, especially its cashflow generation possibilities.
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