The News
Sunday 26 of May 2024

Plans For Pemex

Pedro Joaquín Coldwell, Energy Secretary, during the 2016-2021 Business Plan presentation for Petróleos Mexicanos,photo: Diego Simón Sánchez
Pedro Joaquín Coldwell, Energy Secretary, during the 2016-2021 Business Plan presentation for Petróleos Mexicanos,photo: Diego Simón Sánchez
Pedro Joaquín Coldwell only has President Peña Nieto to respond to

One thing was President Enrique Peña Nieto’s highly touted “Energy Reform,” and something else is the results both the Energy Secretary Pedro Joaquín Coldwell and associates are getting out of them.

Recently Coldwell and Petróleos Mexicanos’ (Pemex) current director José Antonio González Anaya presented their version of what they call the 2016-2021 Business Plan for the entire Energy Secretariat.

Political reality has it that these two government executives will be out by November 2018 — if they last until thenm given their meager results — and as a fall down option they have also figured out a way to get a “financial balance for Petróleos Mexicanos” through 55 new Gulf of Mexico projects that range between exploration and extraction through the farmouts association system.

A farmout is a term used in the gas and oil field to define an association in which the “farmor” provides the land to dig or exploit and the associate, known as the “farmee” provides the technology and knowhow to extract the fuel from the ground. (These two terms are remixes from the leasing terms “lessor” who provides the service and the “lessee” who buys it. It is mostly used in leasing commercial airplanes between manufacturers or agents and airlines but adopted by the oil and gas industry.)

In any case, in the usual empty promise these administrators are making regarding the nation’s oil company, González Anaya figured out ways to increase Pemex’s oil production and extraction by 15 percent only through six of these farmouts now underway.

But many other business plans will be made public next Dec. 5 and then Mexicans will know who the farmout partners are particularly in the deep sea Gulf of Mexico project known as “Trion,” in which Pemex is betting its few remaining chips.

As usual in their trigger happy hopeful accounting, Pemex’s González Anaya, foresees that by the end of the Peña Nieto Administration the company will manage to have a surplus production and manage to return to a financial balance between the years 2019-2020.

González Anaya also claims that with this fresh production it will be possible to “mitigate” the shortage produced by the overexploited “old” Cantarell Oil Field and even increase production by over two million barrels daily, as well as revert the losses of the National Refining System by 100 billion pesos ($4.8 billion) a year by 2021, when the plan ends.

Besides farmouts, Pemex will sign with still-to-be-named private industry parties service contracts through alliances and co-investments to put into practice jack-up technology for drilling in the Gulf’s Trion field.

Plus — Pemex is a huge company — there will be upgrading through the Pemex “Industrial Transformation” companies of the refineries located in Tula, Salamanca and Salina Cruz to produce low sulphur diesel plus “business opportunities” galore to all partners who want to participate in fertilizers, ethylene and logistics.

All in all, the 2016-2021 Business Plan promises that in five to 10 years Pemex will reduce its blatant financial losses it is undergoing at the moment, will make its operations more rational and will seek partners who will help it out carry out all works that are being undertaken.

As for the cherry on top, González Anaya says that in 10 years Pemex can aim at lowering “its losses” from 500 to 150 billion pesos and Pemex Industrial Transformation (refineries) will go from a 100 billion deficit a year to a surplus of 30 billion pesos by 2025.

To be brief, the Business Plan sounds not merely inoperable but a pot dream by people who don’t even smoke pot. This is all new for the still state-owned company, trekking new ground in the oil and gas industry, that is always full of pitfalls which Mexicans would not like to fall into. But when they do, these fly-by-night government administrators will be long gone.
Remodel only to lose money?

No way, says my dear friend and visionary economist Luis Enrique Mercado in last Monday’s column which he now publishes in daily Excelsior.

“Mexico can’t, must not, afford the luxury of having a state-owned company, even if it is Pemex, that loses 150 billion pesos annually nor wait for a decade to have one of its subsidiaries straighten up,” he said.

Surely Pedro Joaquín Coldwell only has President Peña Nieto to respond to, and Pemex director González Anaya to Energy Secretary Joaquín. But in the end, what all critics of the Energy Reform forecast is becoming a fulfilled prophesy: that with plans like this one, the path to the ruin of Pemex is made shorter, and faster.