Mexico: Pemex Suspends Contracts with Suppliers Causing Job Loss

Petróleos Mexicanos (Pemex) is suspending contracts with suppliers and service providers, causing the loss of thousands of jobs, people with direct knowledge of the situation.

In recent weeks, Pemex has suspended its contracts with at least eight local and international oil service providers and providers to cut costs, said the people, who asked not to be identified because they were not authorized to speak publicly about the matter.

Most of the cancellations are for offshore platform maintenance work in shallow waters, such as Ciudad del Carmen in Campeche state, two of the people said.

A spokeswoman for the Mexican oil company declined to comment, noting that the information did not come from the company.

Faced with the consequences of COVID-19 and the volatility of oil prices, Pemex has been forced to reverse its ambitious plans to increase capital spending and expand drilling to reverse 15 years of declining oil production. .

President Andrés Manuel López Obrador has made Pemex the centerpiece of his administration’s efforts to be self-sufficient in power generation.

The national oil company is not expected to resume suspended work until at least January of next year, one of the people said.

Unemployment is rising in the global oil industry after oil prices fell to record lows in April. In just two months, the industry has cut nearly half the number of jobs lost during the last oil collapse from 2014 to 2016.

Pemex is struggling with a debt burden of more than $ 100 billion and the first quarter saw losses record $ 23 billion. Its offshore activity has been severely affected by the pandemic. On Tuesday afternoon, the company reported that 112 employees and 3 contractors had died from the virus.

Pemex is forecasting a budget deficit of 30 billion pesos ($ 1.4 billion) this year, it reported in a presentation to the U.S. Securities and Exchange Commission last month.

The company requested the approval of the board to reduce operating expenses by some 5 billion pesos and production capital expenses by 40.5 billion pesos this year, according to the document.

It is not the first time that Pemex suppliers have been affected. During the previous price drop, around 10,000 oil industry service contractors in Mexico lost their jobs as Pemex was forced to cut billions of dollars in expenses and freeze exploration and production contracts. PWKD15062020