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The Mexican government has approved a fiscal stimulus measure that could see Pemex raise oil production by as much as 400,000 bpd, S&P Global Platts reports, quoting the country’s Finance Minister, Carlos Urzua.
The legislation concerns a credit agreement with a group of lenders including HSBC, JP Morgan, and Mizuho Securities. Under the new terms, the maturity of a loan of US$5.5 billion will be extended by two years and some US$2.5 billion in existing debt will be refinanced, the official said.
The money will be used to boost oil production at ageing fields that are currently uneconomical to continue exploiting. To do this, the fields that the measure covers will be migrated from legacy assignment titles to production sharing agreements that were introduced by the previous Mexican government as part of a sweeping energy reform passed in 2014.
Mexico has been struggling to reverse a steady decline in its crude oil production resulting from insufficient investment and the consequent decline in much needed new discoveries. The previous government tried to solve the problem by removing Pemex’s monopoly position on the market and inviting foreign companies to explore for oil and gas on and offshore. The new government, however, has suspended all contracts signed by the previous administration and all new oil and gas auctions pending review.
At the same time, however, the new administration is just as eager as their predecessors to increase production: President Andres Manuel Lopez Obrador has promised that by the end of his term in office, Mexico will produce almost 2.5 million bpd of crude – a level close to the 2013 average of 2.522 million bpd.
The new government has also announced a lifeline for heavily indebted Pemex of US$3.6 billion, combining debt refinancing and tax cuts.
Pemex figures show the company’s crude oil production averaged 1.813 million bpd in 2018. To compare, production averaged 2.522 million bpd in 2013, falling to 1.948 million bpd in 2017.
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.