Mexican state-owned petroleum company Pemex will receive a $4.2bn liquidity boost from the Mexican Finance Ministry to help the company face losses amid slump in oil prices.
The ministry is planning to provide capital injection of $1.5bn to Pemex as well as a credit facility of $2.7bn to reduce pension costs for 2016. It also includes tax breaks, allowing Pemex to reduce costs of its exploration and production projects.
The aid package, however, is conditional on the company’s reducing its liabilities and debt to suppliers and contractors by MXN73.5bn ($4.2bn).
The support follows the company’s decision announced in February 2016 to reduce $5.5bn from its budget by delaying costly projects.
According to the ministry, the oil producer has been fundamental to economy and public finances in the country.
Agence France-Presse cited the ministry as saying in a statement: "However, the unfavorable economic conditions that the hydrocarbon sector is going through at the international level and the depletion of various (oil) fields have weakened Pemex’s financial situation."
Mexico Deputy Finance Minister Miguel Messmacher told reporters that the support will help Pemex boost its financial position while allowing it to limit the need for additional debt.
In 2015, Pemex, which accounts to one-fifth of the government’s revenue, reduced its staff by more than 10,000 employees.
OE Digital reported Mexico Secretariat of Finance and Public Credit (SHCP) as saying in a statement: "In the current context of low oil prices, the federal government will support Pemex using various instruments, which will affect a better operating result, capitalization of the company and more immediate liquidity.
"The support should help to align incentives for management improvements are the axis of strengthening Pemex."
Image: Pemex’ office in Mexico. Photo: courtesy of JEDIKNIGHT1970/Wikipedia.