Lost in its own drama, state-run oil firm Petróleos Mexicanos (Pemex) remains unconnected from trends in the global oil industry and is becoming anachronic. Just look at what other national oil companies are doing.
In Saudi Arabia, state-owned Aramco operates with strict business criteria ever since it made the biggest stock-exchange debut in history. It recently made a deal with U.S., Chinese and Arab companies to spin off 49 per cent of its oil-pipeline affiliate company in exchange for US $12.4 billion in investment and it is seeking a similar arrangement for its gas-pipeline system. It expects to fetch US $20 billion in fresh capital by selling minority asset holdings or issuing asset-backed bonds.
Kuwait, Qatar, Oman and the United Arab Emirates have adopted similar strategies, taking advantage of the recovery in oil prices. ADNOC, the Abu Dhabi oil firm, is readying a public offering for its affiliate drilling company, which is the biggest of its kind in the Middle East, with over 100 drilling rigs. It will make another such offering for its fertilizer affiliate. In 2017, it sold stock in ADNOC Distribution on the local stock exchange and received almost a billion dollars to strengthen the subsidiary’s operations.
In Brazil, Petroleo Brasileiro (Petrobras) has just sold two refineries to private investors for almost US $2 billion. Ideally, it seeks to divest from eight refineries and also from its gas distribution business. Petrobras went public in the 1990s in an opening to investors that helped it overcome later episodes of political corruption. Today, with its deepwater oilfields, it expects to soon overtake Pemex and Norway’s Equinor to be the leading global producer from offshore fields.
The new government in Ecuador proposes restructuring its oil industry in 100 days. It has announced reforms to its hydrocarbons law to delegate to private and foreign firms the production on oilfields that are currently operated by state-run Petroecuador and it will migrate service contracts to production-sharing contacts with a view to doubling output in five years.
The new law says, in Article Two, that the hydrocarbons sector should be ”efficient, competitive, sustainable, environmentally responsible, based on innovation, promoting private and foreign investment and exports”. Indeed, even the government of Venezuela proposes reopening its collapsed industry to investors, but so far it is lacking in credibility.
In China, both state-run firms PetroChina and Sinopec are open to joint ventures. PetroChina admits privately-owned stock in its capital structure and put its affiliate companies onto the stock market a while ago. Sinopec recently announced reforms and will sell up to 49 percent of its gas pipeline business, as part of Beijing government policy of promoting investments in cleaner fuels.
Nigeria, the top producer in Africa, is also promoting plans to re-organize and offer stock in its national oil company NNPC, which until now has been strictly controlled by the government and is notorious for its corruption. It assures that it will sell stock in an open, competitive and transparent process. The second producing country, Angola, will also sell shares in state-run Sonangol.
For lack of space, we will not go into detail on topics such as new technologies, digitalization, decarbonization, and production and use of hydrogen, in which mostly private-sector oil firms are providing leadership. When will Pemex get involved in these kinds of progressive proposals and global trends, instead of doing exactly the opposite? When will it understand the value of joint ventures, of market capitalization and of not polluting? If it does not take such initiatives, it will likely find that its access to debt markets will get shut off. The discourse of sovereignty over oil is not the way to rescue Pemex, nor make it modern and successful.
* David Shields is an energy industry analyst. His e-mail: david.shields@energiaadebate.com A Spanish version of this Op-Ed appeared first in Reforma’s newspaper print edition.
