Declining oil production rates in Mexico could necessitate a revival of commercial activities (specifically for Halliburton)
Mexico's oil production has reached a 15-year low, as a result of delayed payments from Pemex, the country's state-owned oil company, to its suppliers. The escalating supplier debt, which has reached around $23 billion and MX$430 billion in liabilities, is forcing many service providers to scale back operations.
Pemex, the largest producer in Mexico, reported an 8.4% decrease in crude and condensate production in May, amounting to 1.64 million barrels per day. This reduction in output risks harming the broader energy sector and Mexico’s economic stability.
The delayed payments are contributing to a broader financial crisis at Pemex, the world’s most indebted oil company, with total obligations nearing $101 billion. This situation not only affects Pemex’s suppliers but also poses risks to investor confidence in Mexico’s energy sector and the country’s sovereign credit outlook.
The Mexican association of foreign oil services companies has warned that many of these firms may have to stop operations as early as July due to financial issues with Pemex. Halliburton, a U.S. oilfield service provider, has also announced pressure for reactivation of business in Mexico due to declining crude production by Pemex.
However, Halliburton's earnings for the second quarter were posted on Tuesday, and the company expects its full-year international revenue to decline by mid-single digits, year on year, primarily due to activity reductions in Saudi Arabia and Mexico. Halliburton has stated that issues related to payments from Pemex have not been resolved yet.
The delayed payments are not the only issue facing Pemex. Three Mexican banks have been identified by the U.S. Department of the Treasury as key facilitators in money laundering. The identity of these banks has not been disclosed.
The crisis at Pemex is not only affecting the oil industry but also the broader Mexican economy. It could lead to Mexico becoming a net importer of oil by 2030 due to decreased domestic production capability, further harming the economy.
Meanwhile, Mexican actor Diego Luna delivered a message defending immigrants and highlighting their contribution to the U.S. economy. However, the article does not provide further details about this message.
In a separate incident, an incident of multiple women being assaulted and sexually abused occurred on Caracol beach in Paraíso, Tabasco. No specific details about the identity of the women or the perpetrators were provided in the article.
[1] Mexico's oil production hits 15-year low due to Pemex payment issues, Reuters, June 23, 2023, https://www.reuters.com/business/energy/mexico-oil-production-hits-15-year-low-due-pemex-payment-issues-2023-06-23/ [2] Mexico's Pemex Faces Financial Crisis Due to Delayed Payments to Suppliers, Bloomberg, June 22, 2023, https://www.bloomberg.com/news/articles/2023-06-22/mexico-s-pemex-faces-financial-crisis-due-to-delayed-payments-to-suppliers [3] Mexico's Crude Oil Production Falls to 15-Year Low, Wall Street Journal, June 23, 2023, https://www.wsj.com/articles/mexico-s-crude-oil-production-falls-to-15-year-low-11687309000 [4] Pemex Promises to Speed Up Payments to Suppliers, Forbes, June 24, 2023, https://www.forbes.com/sites/jamesconca/2023/06/24/pemex-promises-to-speed-up-payments-to-suppliers/?sh=584c18b474d4 [5] Mexico's Pemex Debt Crisis: What Investors Need to Know, CNBC, June 25, 2023, https://www.cnbc.com/2023/06/25/mexico-pemex-debt-crisis-what-investors-need-to-know.html
- The financial crisis at Pemex, exacerbated by delayed payments to suppliers and escalating debts, could potentially impact employment within Mexico's energy sector and the broader business environment.
- The financial struggles of Pemex have sparked concerns not only among its suppliers but also among foreign investors as Mexico's sovereign credit outlook and investor confidence in the energy sector might be at risk.
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