Author: Peter Medved (38 Articles)

Peter works in the telecoms sector mostly on 3G networks for mobile operators. Interests cover Emerging Market economies, telecoms, tech & finance.

Last week Pemex, Mexico’s state run oil company posted a 3.69 billion pesos ($277Mn) loss for Q3 2009. Petroleos Mexicanos, which is the largest company in Mexico, currently ranks 11 in the top 50 oil producers globally.

The company stated that said results had improved due to lower taxes &cheaper fuel imports but these positive factors were partially offset by reduced volumes of crude oil exports. Mexican oil production has been trending lower due to the aging of the giant Cantarell field.

According to analysts, the Gulf of Mexico may hold roughly 30 billion barrels of oil in deep waters; accounting for nearly half of Mexico’s potential oil deposits. Such a large amount of oil would be the equivalent of supplying the U.S. with oil for four years. Pemex cites the lack of technology required to operate in deepwater drilling as the reason for its lack of involvement in new discoveries. At the same time, the country has failed to invest in those technologies that would bring the augmented profits so badly needed to boost the economy.

President Felipe Calderón himself has said, “It’s likely we have similar oil wealth, but we don’t have the technology or the organizational and operational capacity to do it by ourselves.”

Oil is at the heart of the Mexican economy. Profits on its extraction are the country number one revenue, accounting for approximately 40% of total state income. Last year, the drop in oil production cost the Mexican government an estimated US$20 billion in lost revenues. This year, as oil prices plummeted globally, oil export revenues have only been generating $1.25 billion per month, compared to an average of $1.44 billion per month in 2008.

However, in September, Mexico managed to post stable output & officials claim they are making headway against the problems at Cantarell that have seen production drop by near 25% since  peaking in 2004, at around 2.2 million barrels a day (mbd).

Pemex is now  aiming for capex spending to reach US$18bn-20bn in 2010, CFO Esteban Levín announced in a recent webcast. According to last weeks report, so far this year Pemex has implemented 165bn pesos ($12.5Bn) in capex spending, with net debt increasing by 154bn pesos to 504bn pesos ($38.2Bn) at the end of the third quarter

“We think that for 2010, our net debt will probably increase between US$3Bn-Bbn and not more than that. Given where the price of oil has been and where we believe our capex should be, we estimate a slight increase of our debt of around 7-10%,” commented Levín.

Pemex is hoping to draw on capital markets for $8Bn-$10Bn next year, though likely toward the lower end of that range, Levín added.