Page 5 - LatAmOil Week 47 2019

LatAmOil COMMENTARY LatAmOil
 These worries are not exactly misplaced, given Pemex’s shaky financial position. The NOC is carrying a heavy debt load, and its oil produc- tion has been declining for some time.
That trend has continued in recent months. Reuters reported earlier this week that the com- pany had seen output levels decline again in the month of October, sinking to about 1.66mn barrels per day (bpd). This represents a drop of nearly 3% on the September figure and is down by 5.5% on the figure posted in October 2018, the news agency noted.
Oil export volumes have also declined, Reu- ters said. It noted that Pemex had exported some 963,000 bpd of crude in October, marking a fall of more than 6% year on year. This was the low- est monthly export figure recorded since the start of 2019, it added.
Overdue bills
Under these circumstances, the S&P analysts’ comments are probably reassuring for Mexican authorities.
Nevertheless, Pemex’s contractors still appear to be worried – especially since a num- ber of them are not being paid on time. Earlier this week, Bloomberg reported that the NOC was not up to date on all of its obligations, with some contractors going as long as seven months without being compensated for their services.
Pemex began delaying payments earlier this year in response to pressure from the gov- ernment to reduce its spending, the agency explained. It quoted anonymous sources famil- iar with the matter as saying that this pressure stemmed from Lopez Obrador’s pledge to end the year with a budget surplus.
Presumably the president launched this
campaign in the hope of scoring a public rela- tions coup in the form of praise for his gov- ernment’s financial discipline. But Pemex’s contractors are not necessarily sympathetic.
Knock-on effects
For example, Sergio Suarez Toriello, director of strategy for the marine services provider Marinsa de Mexico, told Bloomberg earlier this week that his company was now having trouble purchasing goods and services because Pemex was not paying its bills on time or at predictable intervals. The payment delays have also made it more difficult for Marinsa de Mexico to secure financing from commercial creditors, he said.
“Investors and credit ratings agencies don’t have confidence in what Pemex is doing in the sector,” he added. “So this is the biggest risk for suppliers: getting access to resources and financ- ing for working capital and investment.”
Suarez Toriello went on to say that conditions had been deteriorating for some time. Pemex has become a less reliable customer since 2016, when it began laying off workers and reduc- ing contract awards in light of the persistent downturn in world crude oil prices, he said. “It’s not good or normal, but it’s a dynamic we’ve been living with for the past two years,” he told Bloomberg.
The head of a Texas-based investment firm that trades in Pemex securities spoke a bit more bluntly. Responding to questions from Bloomb- erg, Wilbur Matthews, the founder of Vaquero Global Investment, said: “It’s an absolute train wreck, and they can’t get out of their own way to make a change that’s going to improve upon it. At some point, people are just going to realise that they are a terrible client.”. ™
The NOC is “
carrying a heavy debt load, and its oil production has been declining for some time
TRINIDAD AND TOBAGO
BPTT comments on prospects for directing gas from BHP fields to Atlantic LNG
BP Trinidad & Tobago (BPTT) has expressed interest in the possibility of working with BHP (Australia) to find new sources of feedstock for Atlantic LNG. The company, which is a joint venture between BP (UK) and Repsol (Spain), is a shareholder in the 14.8mn tonne per year (tpy) LNG plant.
Claire Fitzpatrick, the regional president of BPTT, said earlier this week that Atlantic LNG might start looking for new suppliers of natural gas once its current contracts expired. She was responding to a statement from Geraldine Slat- tery, BHP’s president of petroleum operations, about the prospects for using the facility to pro- cess output from the Northern licence area off- shore Trinidad and Tobago.
Atlantic LNG actually has an incentive to explore this option, Fitzpatrick said. “BHP does
not have [a stake] in Atlantic, but if you think about it from [the] Atlantic owner’s perspec- tive, fields decline, contracts roll off,” she told the Business Guardian. “If you have invested in the infrastructure, it is in your best interest to have that capacity as full as possible. So there will be no incentive for Atlantic shareholders to not want gas through those facilities. For any of these ventures around the world, that’s the natu- ral way things would happen.”
She stressed, though, that it was too early to say what might happen with future production streams from the Northern block.
BHP has said it does not expect the licence area to begin yielding gas until 2026 or 2027, and Atlantic LNG’s shareholders are taking steps to optimise yields from its own assets in the interim, she explained.
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