New payment plan will allow indebted Pemex to retain more revenue

Mexico has announced a plan to simplify the tax payment system for state oil producer Pemex in a bid to shore up the company, whose heavy debt has weighed on the coffers.

During her news conference Wednesday morning, President Claudia Sheinbaum said her administration would consolidate Pemex’s tax demands by merging three existing taxes into one.

Sheinbaum said the move was aimed at “transparency” and giving the oil company more room for investment, according to the Reuters news agency. The plan was announced just two days before the government was due to submit its 2025 budget plans to Congress.

“We need to fix Pemex,” Sheinbaum said, explaining that the new plan “would seek to reduce inefficiencies, diversify energy sources and pay down debt while protecting production levels.”

The goal is for Pemex to increase estimated oil reserves, increase natural gas production to 5 billion cubic feet per day and maintain hydrocarbon production at 1.8 million barrels per day.

Company officials have also been accused of increasing storage capacity for refined products like gasoline and diesel.

To address the debt, new Pemex CEO Víctor Rodríguez has been put in charge of an austerity drive aimed at cutting 50 billion pesos ($2.44 billion) in costs. In part, the cuts will be aimed at administrative inefficiency, including the elimination of several of the more than 40 Pemex subsidiaries.

Rodríguez told reporters he did not expect Pemex to turn to international debt markets to shore up its financing as the company works to pay down its debt, although Sheinbaum did not rule out refinancing Pemex debt in the future.

According to Reuters, Pemex – which The Economist called last year “the world’s most indebted oil company.” — carries a financial debt of nearly $100 billion and a debt to service providers of about $20 billion.

The debt has been a drag on the company’s value for years. Per As of September 30, 2011, the company had a net worth of 118 billion pesos (US$5.8 billion). Thirteen years later in 2024, the figure has dropped to negative $1.74 trillion pesos (US $85.5 billion), according to Mexico Business News.

The new Pemex strategy was announced just two weeks after the oil company reported a net loss of 161.33 billion pesos ($8.04 billion) in the third quarter of 2024, mainly due to a decline in the value of the Mexican peso in relation to the US dollar.

Revenue for Mexico’s largest company in the July-September period fell nearly 8% year-on-year, primarily due to lower export sales of crude oil.

While the Sheinbaum administration was said to be considering a new business model for Pemex in hopes of attracting investment last month, Congress was working on constitutional reform.

The reform – passed on October 29 – returned the lead role in Mexico’s energy sector to Pemex and the Federal Electricity Commission (CFE), also a state-owned company.

It also converted Pemex and CFE into “public enterprises in the service of the state” instead of productive enterprises that prioritize revenue generation.

With reports from El Economista, El País, Reuters and Animal policy