Higher Oil Prices Let Mexico Pull Back Billions in Pemex Support
Mexico’s government is slashing financial assistance for the state energy major by as much as 70% despite Pemex’s continued struggle to pay down debt and boost production. The decision rests on expectations that the company will benefit from the oil and gas price rally spurred by the U.S. and Israeli war against Iran. Per a Bloomberg report from this week, the government of Mexico sees Pemex…
Mexico's government is drastically reducing financial aid for the state energy giant Pemex by up to 70%, despite the oil and gas price increase triggered by the U.S.-Israeli conflict with Iran. Oilprice.com reports that the government anticipates Pemex to record a rare cash surplus of approximately 95 billion pesos, or around $5.63 billion, due to the price surge.
Consequently, the Scheinbaum administration allocated only 81 billion pesos, or about $4.8 billion, for Pemex's budget next year, a 70% drop from this year. President Sheinbaum previously stated that by 2027, support for Pemex would be minimal, and the company's own finances will sustain its growth. The Mexican energy major holds the title of the world's most indebted company, carrying a debt load of approximately $105 billion as of mid-2025, with around $20 billion in unpaid supplier bills.
Pemex managed to lower this debt to around $79 billion by the end of the first quarter of the year, marking its lowest debt level since 2014. However, refining output expansion has proven challenging, and issues with crude quality, such as high water content, have alienated significant buyers over the past couple of years. The previous Mexican administration focused on supporting Pemex by making it the sole player in the energy market.
In contrast, the current Scheinbaum government is promoting competition by launching a new contract framework for joint ventures, known as mixed contracts. Nevertheless, Pemex continues to rely heavily on government assistance, as highlighted by Moody's, which maintained the company's rating unchanged, citing expectations of ongoing government financial support.
For the first quarter of the year, Pemex reported an actual loss, amounting to 45.99 billion pesos or $2.6 billion, marking the worst first quarter since 2020. This loss was 6.2% higher than the previous year's first quarter and was attributed to lower sales, increased costs, and higher depreciation of fixed assets. Despite the higher oil prices, Pemex still struggled, with the second-quarter profit being 69.7% lower than the same period in 2025.
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