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Mexico sticks to USD7B tax cut in Pemex plan, vows refinery support

July 17/2019

MOSCOW (MRC) -- Mexico will reduce the tax burden of heavily indebted Pemex by some USD7 billion over the next two years and inject government capital to build a new refinery and raise output from onshore and shallow water fields, the company said, as per Hydrocarbonprocessing.

Presenting the outline of a business plan watched closely by investors, Pemex Chief Executive Octavio Romero said an onerous profit-sharing tax that hands much of the companys income to the federal government made the company financially unsound.

He reiterated that the tax will be reduced 11 percentage points to 54% by 2021. The company has previously said that reduction would save the company USD7.1 billion in 2020 and 2021.

With few new details, the outline of the plan failed to excite markets, and Mexicos peso weakened slightly against the dollar during the presentation. Pemex is the worlds most indebted company, and its credit was downgraded to junk by Fitch this year. Moodys and S&P have the company, Mexicos biggest, on negative outwatch.

High on ratings agencies list of concerns is the governments plan to build a new USD8 billion refinery at Dos Bocas. Former Finance Minister Carlos Urzua cited his opposition to the refinery after he resigned last week, saying experts believed it would cost far more.

A more detailed, 200-page version of the plan would be unveiled later on Tuesday, Romero said. Focusing on easy to access on shore and shallow water fields, Romero vowed to raise Pemex production within three years, and to reach 2.7 million barrels per day (bpd) of oil by the end of the government of President Andres Manuel Lopez Obrador in 2024, from a current 1.8 million barrels a day.

Sticking to the governments position since it took office in December, Romero said it made more sense to invest in these fields to rapidly increase output, rather than the deepwater area of the Gulf of Mexico which the last government wanted to tap.
Author:Anna Larionova
Tags:petroleum products, petrochemistry, Pemex Petrochemicals.
Category:General News
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