Bloomberg News

Pena Nieto Pemex Fund Plan Falls $1.1 Billion Short of Request

December 08, 2012

Mexican President Enrique Pena Nieto lowered the proposed amount Petroleos Mexicanos will spend on exploring, producing and refining oil next year, presenting a budget 4 percent below the company’s expectations.

Next year’s 326 billion-peso proposal ($25.4 billion) for capital expenditures for the state-owned oil producer comes about $1.1 billion short of the 340 billion pesos the company had requested.

“Once again, Pemex is being unilaterally limited by the Finance Ministry regardless of its operational needs and opportunities,” board member Fluvio Ruiz said yesterday in a telephone interview from Mexico City after the budget proposal was submitted. “It’s disappointing, that an artificial ceiling, set by Deputy Minister Miguel Messmacher, is hitting the company,” Ruiz said, citing a government cap on investment of 2 percent of gross domestic product.

The budget allocated is 8.4 percent higher in nominal terms than this year’s investment program, according to the Finance Ministry’s website. The amount, as in previous years, is about 2 percent of the nation’s GDP.

The ministry’s budget plan assumes exported oil will sell in 2013 for an average of $84.90 a barrel, about the same as this year’s budgeted $85 a barrel price. Mexico, the third- largest supplier of oil to the U.S., paid 11.7 billion pesos to lock in prices for 2013 oil exports, according to a quarterly public finances report on Oct. 30.

Oil Hedges

Luis Videgaray, the nation’s finance minister, said Mexico purchased hedges to lock in prices for 2013 oil exports at a price that is in line with the government’s estimate. He spoke at the Congress yesterday after submitting the budget to lawmakers.

The Finance Ministry expects Pemex’s oil output to rise next year to 2.6 million barrels a day, compared with the government’s estimate of 2.55 million barrels a day for this year, Videgaray said.

Pemex’s total budget, including administrative costs, will be 477 billion pesos, up from 442.5 billion pesos this year. Pemex had invested 224 billion pesos, or 74 percent, of its 2012 budget as of Oct. 31,, according to a monthly company report.

Pemex’s budget proposal for 2012 was also cut on Sept. 8 of last year by the administration of then-President Felipe Calderon to 301 billion pesos from the 331 billion pesos the company had originally requested.

Mexico’s Congress must approve the new budget by Dec. 31. Emilio Lozoya, a former board member of OHL Mexico SAB (OHLMEX*), was appointed last week as Pemex CEO by Pena Nieto, who took office Dec. 1.

To contact the reporter on this story: Carlos Manuel Rodriguez in Mexico City at carlosmr@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net


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