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Long-term viability of Mexico's Pemex is uncertain

Tuesday, March 3, 2015

Significance

The recent plunge in oil prices has set back the opening of the energy sector enacted by the government of President Enrique Pena Nieto, making investment in the industry less attractive. The blow has been particularly hard for Pemex, compromising even further its financial viability, given its huge capital needs and rigid labour force.

Impacts

  • Pemex's future challenges will be formidable given its finance- and workforce-related weaknesses.
  • Still-to-be-announced end-2014 figures for proven oil reserves could fall below 13 billion barrels, nearly half the 2000 peak.
  • Government absorption of unfunded Pemex pension commitments could increase public debt by some 10 percentage points of GDP.

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