Petroleos Mexicanos has been ordered to provide weekly updates on its spending to the head of the country’s tax authority, an effort by Mexican President Andres Manuel Lopez Obrador to rein in excesses at the state-owned oil producer.
The president imposed the condition last month amid growing tensions between Pemex and the Finance Ministry, according to people familiar with the matter. Ministry officials have grown increasingly frustrated with the company’s ever-expanding bill to cover its debt payments and fund its expansion into refining and exploration, said the people, who asked not to be identified discussing internal moves.
Finance officials are worried about growing expenses that will weigh on the next administration and Mexico’s credit rating, the people said, leading the president to call for the requirement of supervision as a condition for support, the people said. Most recently, the Finance Ministry provided 145 billion pesos ($8.2 billion) of additional funds in the 2024 budget while also lowering a profit-sharing duty, which lawmakers then cut even further.
That comes after some $77 billion in cash and tax breaks the company has received during Lopez Obrador’s administration, which have failed to reverse losses. Pemex’s debt reached $106 billion last month, according to Chief Executive Officer Octavio Romero, making the company the most indebted oil producer in the world. Since the reviews by tax officials began, the company has yet to show signs of improvement amid a pile of unpaid suppliers, said one of the people.
Read More: Pemex Losses Deepen, Complicating Debt-Reduction Effort
Spokespeople for Pemex, the tax authority SAT, and the president didn’t immediately reply to a request for comment.
In October, the company posted a net loss of 79.13 billion pesos ($4.4 billion), the worst result since the end of 2022. The loss signaled that government help for the state-owned oil producer hasn’t reversed the company’s financial decline. Pemex has around $700 million in bonds maturing through the end of the year, and plans to retire bonds maturing in 2024 with government support, the company said in its earnings release.
Oil output has been declining for most of the past 20 years and the company’s refineries are dangerous, money-losing operations. Pemex is running its six refineries in the country at less than half of capacity as impacts linger from a spate of fires in May, according to company data compiled by Bloomberg News.
The head of the tax authority is Antonio Martinez Dagnino, who stepped into the post in 2022.
--With assistance from Scott Squires.