Pemex suppliers face ‘critical moment’ as Mexican oil group’s payments go unpaid | USAEMALL.com

Hello and welcome back to Energy Source, which comes to you from New York and Mexico City today.

The critical importance of power grid stability was highlighted on Monday when a mystery power outage in Spain and Portugal paralysed transport networks and disrupted mobile communications. An investigation has begun into the cause of the blackouts which sparked a state of emergency in Spain, with authorities highlighting a failure of the grid interconnection between Spain and France.

Elsewhere in the FT, Shell, BP and Equinor have announced big cuts to low-carbon spending, as shareholders press them to focus on their profitable oil and gas businesses. But not all oil majors are cutting back. In a change of tact, ExxonMobil, which previously derided its European rivals’ clean energy investments as a “beauty contest”, is poised to overtake the trio in low-carbon spending. But the future of its hydrogen, carbon capture and lithium projects depend on Congress blunting Donald Trump’s efforts to repeal tax breaks From Joe Biden’s Inflation Reduction Act.

And as the quarterly results season gets into full swing, my Energy Source colleague Malcolm Moore reports on how oil companies are braced for their toughest year since the pandemic. Falling crude prices are squeezing Big Oil’s profits and Trump’s trade war is shaking investor confidence in what is forecast to be the third consecutive 12-month period of falling profits.

Our main item today comes from Mexico, where suppliers to the world’s most indebted oil company are feeling the squeeze.

Thanks for reading, Jamie

Supplier debt balloons at Mexico’s Pemex

Mexico’s state-owned Petróleos Mexicanos, known as Pemex, has long held the title of the most indebted oil group in the world, with an explosion in financial debt over the past decade that is now hovering at about $100bn. But as the government has tried to address that problem, another parallel ill has got a lot worse: supplier debt.

Pemex owed its suppliers $25bn at the end of 2024, up from $7.6bn at the end of 2018. That figure represents more than 10 per cent of the company’s total liabilities. Cities such as Ciudad del Carmen and Coatzacoalcos on the Gulf of Mexico that depend heavily on Pemex’s spending are seeing ripple effects across the entire local economy, with reports of lay-offs and closures of smaller suppliers in the region.

President Claudia Sheinbaum’s government has put in place a special scheme for paying off the suppliers; in March she said 147bn pesos ($7.5bn) had been paid.

“Its ongoing, there have been delays and now it’s being resolved,” Sheinbaum said in early April.

The company — one of Mexico’s largest employers — is in a dire financial and operation situation. As supplier debt mounts, production is near its lowest levels in decades while Pemex regularly reports huge quarterly losses and is increasingly becoming a drag on the sovereign after decades as a net contributor.

Left-wing nationalist Sheinbaum has talked relatively little about Pemex, with her “100-point” government plan saying only that she will “strengthen” the state company and that it will prioritise national consumption. Her government has pushed new investment rules that open mixed public-private investments in the oil sector, and the Financial Times reported it has been considering stepping up fracking.

But she put a life-long academic with no executive experience in charge of the company, who has outlined only broad ideas. No clear path exists for how it plans to stem the losses that reached 190.5bn pesos ($9.7bn) in the last three months of 2024.

For the past few years, the company has leaned on its suppliers to help it stay afloat, with many smaller, more specialised businesses having few options but to wait for payment to come in.

“Pemex can’t stop paying its banks, but it can stop paying its suppliers,” said Oscar Ocampo, co-ordinator for economic development at the Mexican Institute for Competitiveness, a think-tank. “[The suppliers] are in a critical moment . . . they are on the verge of becoming unviable.”

“Pemex may not let them go bankrupt, because at the end of the day without suppliers Pemex has a big operational problem, but they’re living month to month.”

There is a lot of uncertainty about how much supplier debt there is yet to be recognised, with observers fearing the liabilities could grow.

“I think at this point no one’s really sure how much is going to be repaid,” one bondholder who requested anonymity said. “It’s not really clear what’s happening in the numbers,” they said of the company’s broader situation.

Pemex did not immediately respond to a request for comment. The company is due to report its first-quarter results this week, with analysts keen to learn if the negative trends seen at the end of last year continued.

The backdrop for trying to resolve the issue is the legacy left by previous president Andrés Manuel López Obrador. His aggressive policies to protect state companies led to a collapse in new private investment in the energy sector. He was focused on trying to reduce the debt at Pemex, but his policy of “energy sovereignty” while spending $20bn on a new oil refinery that is still unfinished and well over budget aggravated its existing operational issues.

Companies and economists say beyond a necessary financial engineering to reduce the debt, the only way out of Pemex’s quagmire is for it to be more proactive in attracting private investment into the sector to increase production. So far there isn’t a clear break with the previous government in terms of company strategy.

“I want to think that we haven’t seen it all yet and that right now plans are being cooked up,” Ocampo said. “Around July we should start seeing announcements of at least some mixed investments, which is what I think is most urgent for Pemex.” (Christine Murray)

Power Points

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• LNG companies have warned the Trump administration they cannot comply with new rules forcing them to use US-built vessels.

• Germany’s chancellor-in-waiting Friedrich Merz has picked an Eon energy executive as economy minister as the country battles high energy prices and other challenges.

Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at [email protected] and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.