January 30, 2019
By Anthony Esposito and David Alire Garcia
MEXICO CITY (Reuters) – Mexican President Andres Manuel Lopez Obrador brushed off a credit downgrade to state oil company Pemex, arguing on Wednesday that corruption is being eliminated from its ranks and the firm is stronger than it has been in 30 years.
Rating agency Fitch on Tuesday downgraded Petroleos Mexicanos, the official name of the state oil and gas producer, which holds some $106 billion in financial debt. [nL1N1ZU03M}
At a regular news conference, Lopez Obrador lashed out at the ratings agency, saying Fitch was hypocritical because in the past it gave the firm positive reviews despite its problems.
“They kept quiet and were complicit, and now that Pemex is recovering they come out with their recommendations and try to grade Pemex’s performance,” said the veteran leftist, who vowed to revive Pemex during his 2018 election campaign.
The Fitch downgrade sent the peso currency tumbling on Wednesday morning before it pared losses.
Pemex’s total debt load is the highest of any national oil company in Latin America, and a former executive said the downgrade would put pressure on the firm for now.
“Pemex will face higher financial costs and its projects will get a little more expensive,” Carlos Morales, who served as Pemex’s exploration and production chief for a decade through 2014, told an oil conference in Mexico City.
Lopez Obrador has promised to reverse Pemex’s dwindling output, and is pushing to stamp out rampant gasoline theft from the firm’s pipeline network that has caused significant losses.
His plan to raise output, currently at about 1.8 million barrels per day (bpd), is mostly built on plans to pump more government money into exploration and production.
Lopez Obrador also wants to build what would be Mexico’s biggest oil refinery on the southern Gulf coast.
He has not detailed how his government will finance the project that he has said will cost around $8 billion, and has been a staunch critic of a landmark 2013-14 energy reform that opened up the Mexican oil industry to private investment.
The reform ended Pemex’s decades-long monopoly by allowing private producers to operate projects on their own, as well as enter into partnerships with Pemex known as farmouts.
Alberto de la Fuente, Mexico country manager for Royal Dutch Shell, told the conference after the Fitch downgrade that Lopez Obrador should reconsider the role of private companies.
“If (Mexico) were carrying out more oil auction rounds, more (Pemex) farmouts, that could give positive signals to financial sector investors,” he said. “Pemex doesn’t have the means to do everything it wants to do and (private) capital could help.”
(Reporting by Anthony Esposito, David Alire Garcia and Lizbeth Diaz; Editing by Daniel Flynn and Marguerita Choy)