Pemex’s Next CEO Is Mexico’s $100 Billion Question

(Bloomberg) -- Mexico’s president-elect has named key officials who will take on some of the nation’s toughest jobs — fighting surging organized crime, reining in overspending, revamping an aging electrical network and negotiating trade disputes with the US. But there’s one prominent role yet to be filled — a thankless position that has ended many a career.

Somebody is going to have to be the chief executive of Petroleos Mexicanos. 

Whoever takes the job will be in an unenviable position of turning around production that has slumped to about half its peak 20 years ago. The company’s debt burden stands at almost $100 billion, making it the world’s most indebted oil producer. It’s been saddled with accidents, oil spills and methane leaks in recent years as its infrastructure crumbles. And, it relies heavily on government handouts to stay afloat.

President-elect Claudia Sheinbaum said Thursday she will name her pick Aug. 26. Speculation over her decision has been rampant. 

Some early contenders circulated in local press reports included Treasury Undersecretary Gabriel Yorio and Jorge Islas, an academic and energy adviser to Sheinbaum. At least one potential pick, Lazaro Cardenas Batel, turned down the role after a detailed review of Pemex’s finances, according to local media. He instead opted to be chief of staff. Outgoing President Andres Manuel Lopez Obrador is said to favor keeping in place Pemex’s current chief executive, Octavio Romero Oropeza, according to press reports. 

Representatives of Pemex, Mexico’s Treasury and the Presidency declined to comment, as did Jorge Islas.

Chatter recently has congealed around academic Victor Rodriguez Padilla. After pursuing physics and engineering degrees at National Autonomous University of Mexico, he received a doctorate in energy economics from Pierre Mendès-France University and co-authored a paper with Sheinbaum in 2009 on Mexico’s energy policies and sustainable development.

Rodriguez is being considered for the role, according to one person with direct knowledge of the matter who asked not to be identified because it was a private conversation. Rodriguez didn’t respond to multiple messages and phone calls requesting comment. 

To be sure, local media has been wrong before, and Sheinbaum’s team has kept its cabinet picks closely guarded. After weeks of speculation over who would head Mexico’s state utility Comision Federal de Electricidad, Sheinbaum surprised almost everyone by announcing Emilia Esther Calleja, an electrical engineer relatively unknown outside of CFE to implement the president-elect’s plan to boost Mexico’s electrical grid and usher in a green energy transition.

Regardless of who is tapped to lead Pemex, returning the drilling and refining behemoth to profitability will be a gargantuan task. Last quarter, the company posted its worst loss since the global pandemic emerged more than four years ago. 

Sheinbaum has mentioned the need for Pemex to refinance its debt, and has outlined a plan to expand its scope to include new ventures, such as amping up petrochemical production, lithium mining and electric vehicle infrastructure.

The new Pemex boss also will need to forge a good working relationship with the Finance Ministry because government support will be essential to keep the company afloat. AMLO, as the president is known, has lavished support on Pemex, granting as much as $80 billion in capital injections and tax breaks since taking office. Relations between Romero and the ministry were said to be fraught.

Analysts see the need for collaboration between Pemex and the private sector, such as the company’s recent deal to farm out some of its offshore production to private drillers. But Sheinbaum has vowed to keep state-owned enterprises at the center of Mexico’s energy sector, echoing a position taken by AMLO. Rodriguez is expected to do the same.

Rodriguez “has been a strong advocate for state-owned enterprises and has opposed private competition for over 25 years,” Alejandro Schtulmann, an analyst at Empra in Mexico City wrote in a note last week to clients. “This, coupled with the strong possibility of further state-centric, regulatory changes in the sector, could have worrisome consequences for private sector participants involved in projects with Pemex.”

(Updates fourth paragraph with details on the announcement.)

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