Sheinbaum seeks to make Pemex an ecological company, but is his plan viable? This is what experts say – El Financiero

A new direction for the troubled company could also transform Mexico, which recently overtook China as America’s largest trading partner amid a potential boom in nearshoring.

One of the realities that Sheinbaum faces is that The world’s big oil companies are reconsidering their green ambitions, as returns on renewable energy investments decline. Companies such as Shell Plc and BP Plc recently cut their emissions reduction targets, citing “uncertainty in the pace of change in the energy transition.”

However, unlike other major oil companies, Pemex does not have much financial margin to undertake a change towards a greener future. The company faces billions in late payments to service providers and its infrastructure is crumbling after years of underinvestment, leading to a series of accidents, oil spills and methane leaks in recent years.

What is Claudia Sheinbaum’s plan for Petróleos Mexicanos?

Sheinbaum, an environmental engineer and former Mexico City mayor who appears poised to replace López Obrador, first outlined her energy strategy last month on a national holiday commemorating the expropriation of foreign oil assets in 1938.

His plan would limit crude oil production Pemex in the coming years to around 1.8 million barrels per day (up from 1.5 million barrels today) as the Government focuses on boosting green energy growth. It would do so by expanding Pemex’s reach to include technologies such as lithium extraction and infrastructure for electric vehicles, and would empower the state electric company, Compañía Federal de Electricidad (Federal Electricity Commission)CFE), to invest in renewable resources and reinforce electrical transmission networks.

Sheinbaum would spend close to 13.6 billion dollars on new projects to promote the use of renewable energy in Mexico while continuing to add power plants that use fossil fuels. It would also increase wind and solar power generation, modernize hydroelectric plants and add about 3,850 kilometers of transmission lines.

Their project also reflects a sustainability plan recently published by Pemex to attract ESG investors by reducing their greenhouse gas emissions.

There are those who criticize Sheinbaum’s objective of keeping state entities with financial difficulties at the center of Mexico’s energy sector, leaving aside private companies. It is a strategy that AMLO, as the current president is known, relied on to promote the “energy sovereignty”. Since the beginning of his six-year term in 2018, the current president has reversed the pro-market reforms of his predecessor and invested billions in increasing the internal capacity of fuel refining from Mexico.

“Sheinbaum’s recent statements have deviated from the promises he made regarding a more private-sector approach in the run-up to the campaign,” said Alejandro Schtulman, research director at Ciudad de Mexico-based political consultancy EMPRA. Mexico.

Sheinbaum said Friday that clear rules must be established for private sector investment in Mexico’s energy sector, and that Public sector investments in Pemex would take time to “bear fruit”. A Pemex spokesperson did not respond to a request for comment.

The panorama that awaits Sheinbaum

Pemex’s oil and gas production has also fallen to less than half of what it was two decades ago. Drastically cutting debt is a key factor to improve the company’s finances, as money that could be spent repairing outdated equipment is instead used to cover unpaid invoices and interest payments.

The company has lately relied on tax breaks and cash injections from the government to stem the financial hemorrhaging. AMLO has lavished his support on Pemex, granting it up to 1.37 billion pesos throughout his Governmentwhich has not reversed the company’s decline.

While investors hope support will continue under Sheinbaum’s administration, she has said little about what she would do to address Pemex’s financial problems in the long term.

It will also face strained public finances. Mexico faces its largest budget deficit since the 1980s as AMLO ramps up spending at the end of his presidential term, according to Oscar Ocampo, an energy analyst at IMCO, a nonprofit that focuses on competitiveness.

“AMLO had a much more positive situation, regarding public finances, than Sheinbaum will inherit,” said Ocampo.

Without a doubt, Sheinbaum is still campaigning. The surveys They place her more than 20 percentage points above her opposition rival. Xochitl Galvezwhich proposes a corporate restructuring of Pemex that would include the sale of assets and the closure of refineries, as well as the opening of the energy sector to private investment.

The front-runner has not strayed from AMLO’s stance of keeping state-owned companies at the helm of Mexico’s energy sector, but that strategy could change if she wins on June 2, said Luis Maizel, senior managing director at LM Capital Group in San Diego, who owns around $18.5 million in Pemex bonds.

“We will see Sheinbaum grow when he takes office,” Maizel said. “Mexico needs more energy and does not have enough money. You will have to rely on the private sector”.