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Mexico’s oil major Pemex has begun suspending oilfield service contracts, effectively eliminating several thousand jobs, unnamed sources from the industry told Bloomberg.
The move, which aims to cut Pemex’s costs, has so far involved at least eight Mexican and international oilfield service providers and suppliers, according to the Bloomberg sources. Most of these were involved in offshore field servicing.
Like oil producers around the world, Pemex has been grappling with low demand and lower sales. On top of that, it has a debt pile of $105 billion, and last month, it reported a quarterly loss of $23.6 billion—one of the worst quarterly results in its history.
The company has been getting strong financial support from the government of Andres Manuel Lopez Obrador but even with it, it has been finding it hard to keep going. Earlier this year it even said it was looking for joint venture opportunities, despite President Lopez Obrador’s decision to suspend all new bidding rounds and review all contracts with foreign oil companies signed by the previous government.
According to the head of Mexico’s National Hydrocarbons Commission, Rogelio Hernandez, Pemex has a portfolio of more than 350 projects, and of these, some 100 could be farmed out to partners; if Pemex does not start developing them, the assets will revert to the state.
Now, however, is probably not a good time for anyone to enter into any new joint ventures that seek to increase production, as uncertainty remains about when or even if oil demand will rebound to pre-crisis levels.
Pemex has been battling declining oil production for years, but now this has worked to the advantage of OPEC+, which Mexico joined in its production cut efforts. In May, the country inadvertently overcomplied with its production quota, but now Mexico has decided to leave the club. Possibly, this means it has plans to try and boost production, but the news of contract suspension suggests otherwise.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.