Strategy Exclusives » Energy & Oil » The Fall of Mexican Oil Myths (3)

The Fall of Mexican Oil Myths (3)

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In this article we will finish our review about how President Enrique Peña’s energy reform and low oil prices contribute to demolish traditional views in Mexico.


Published, 2016

Myth 5: Pemex suffered an excessive tax regime. This myth is widely accepted. It departs from the idea that the evil Mexican government taxes Pemex excessively so there are no resources left for investment. Hence, Pemex is not competitive because the taxman takes too much and all profits disappear. This is false. Some years ago, Pemex financial statements have shown that once the firm had paid all special taxes related to the oil and gas activity, there were profits. In the year 2012 these “after special taxes” profits added up to around US$8.5 billion and belonged to the branch devoted to oil and gas production: PEP. However, the same year Pemex’s refining and petrochemical branches lost around US$7.3 billion. Hence, it is not the taxman but Pemex’s downstream activities the ones to blame. The Mexican government has disclosed that Pemex as a whole had a loss before paying any taxes equivalent to US$7.1 billion in 2015.

From this fact, we find that Pemex could improve its numbers if it closes all refining and petrochemical activities and focuses in oil and gas exploration and production, even with today’s low prices. Mr. González Anaya, the new Pemex CEO has to cut operation costs. The Mexican analyst, Macario Schettino, has stressed Pemex’s cost problem and he has shown that today’s emergency is not an oil price problem. Assuming 2013 oil prices in his exercise, for 2015 he has computed that Pemex’s profit would be 50% lower than the previous year, a conclusion that points to the firm’s growing operation costs as the disease. For example, pension contingent liabilities grew in 600% in the period 2000-2015.


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