Mexico raises refining output, eyes more tax aid for Pemex

Mexican officials are touting the success of initial efforts to increase refining output and said that more tax relief is on the way for state oil company Pemex.

At an event at the Salamanca refinery in Guanajuato state, Pemex CEO Octavio Romero said that the government had increased the amount of crude oil processed by 14% since December, while fuel output rose 18% over the same period. He did not specify the cut-off date for his calculation, but the increase was in line with available data that runs through April. 

Pemex is investing US$150-US$200mn at each of its six refineries in a bid to raise refining capacity, which was 34% in the first quarter, to above 65% within two years. The government has also launched a plan to build a new US$8bn refinery in the port of Dos Bocas in the state of Tabasco.

Romero said output at Salamanca had fallen to 50,000b/d in December, but that initial efforts had already lifted fuel production by more than 20% to 61,000b/d. Energy minister Rocío Nahle said further efforts would increase production to 180,000b/d by December.

President Andrés Manuel López Obrador (AMLO) commended efforts to increase refining output. He said that there would be no layoffs at Pemex amid his wider cost-cutting measures to trim public spending across the bureaucracy in order to fund social spending and increased investment in Pemex. Critics have long held that Pemex’s workforce is bloated by a powerful union.

AMLO also said that the government would soon make further efforts to lower taxes on Pemex in order to allow the company to invest more in production and refining. 

“We are encouraged and will continue to support Pemex, because I am about to sign a decree in which we will remove the tax burden on Pemex, we will reduce its taxes, because the treasury, with all due respect, was engaged in squeezing Pemex. So, now we are going to leave the resources to Pemex,” AMLO said, without providing further details.

The government has already issued a series of decrees to reduce taxes on Pemex. Last week, Bloomberg reported that the government would seek to change tax laws on Pemex in 2020 and 2021 that would amount to more than US$7bn in savings, citing a document that said the measures would be submitted with next year’s budget. Pemex has not confirmed the plan.