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Mexico’s State Oil Firm Fails To Pay Hundreds Of Workers

While Mexico’s leftist President Andrés Manuel López Obrador wants to make state oil firm Pemex the pillar of a turnaround in the country’s declining oil production, hundreds of Pemex workers haven’t been paid for months and haven’t had health insurance and vacation days covered, Quartz reported on Wednesday, citing former and current employees at the company.

The workers were hired as contractors for López Obrador’s flagship Pemex revival project—the construction of an US$8-billion Dos Bocas refinery in his home state of Tabasco. Pemex is the company working on the refinery project, a key campaign pledge of populist leftist President López Obrador who promised to reduce Mexico’s reliance on fuel and refined product imports, most of which come from the United States.  

López Obrador’s ‘Mexico First’ energy policy agenda turned last week’s OPEC+ meeting into a Mexican soap opera after Mexico, part of the non-OPEC producers in the OPEC+ group, disagreed with proposals that it should reduce its production by 400,000 bpd from its October 2018 baseline, offering only a 100,000-bpd cut.

The fact that Mexico’s oil hedge protects it from the oil price crash – which hurts other OPEC+ countries much more – was said to be one of the reasons why Mexico dug in its heels and refused to cut its production as much as its OPEC+ partners asked it to.

But while López Obrador touts a win at the OPEC+ negotiations, sources among ex Pemex employees and executives tell Quartz’s geopolitics reporter Max de Haldevang that the state oil firm had not paid some of its contract workers since December 2019.

“Unfortunately, the current administration’s attitude towards workers is not what I would have hoped from a leftist government,” a former Pemex board member told Quartz. Other current and former employees say that the firm hasn’t taken adequate steps to ensure social distancing and protective gear such as masks and gloves for workers on the sites.

Premium: There Is Still Hope For Oil Prices

In addition, Pemex is months behind in payments to contractor firms, including to those working on the Dos Bocas refinery project, David Enriquez, energy lawyer at law firm Goodrich, Riquelme y Associados told Quartz.

Pemex’s financial situation is difficult and is set to become even more difficult with the oil price crash, Fitch Ratings said earlier this month, downgrading the company deeper into junk territory.

The company’s stand-alone credit profile is deteriorating because of its “limited flexibility to navigate the downturn in the oil and gas industry given its elevated tax burden, high leverage, rising per barrel lifting costs and high investment needs to maintain production and replenish reserves,” the rating agency said.


“At the current Mexico's crude basket price of below $20/bbl, PEMEX's upstream business does not generate enough cash flow to cover operational and financial costs (half-cycle costs) of more than $25/bbl and the company will need extraordinary government support in the immediate future,” Fitch noted.

By Tsvetana Paraskova for Oilprice.com

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