Pemex slated to get new boss as budget cuts bite

OREANDA-NEWS. February 10, 2016. Mexico's state-run Pemex chief executive Emilio Lozoya was replaced today with a politically connected industry outsider who takes over a company reeling from a prolonged oil price slump.

At a brief press conference this afternoon, president Enrique Pe?a Nieto named Jos? Antonio Gonz?lez, former head of the Mexican social security institute (IMMS), to replace Lozoya.

Gonzalez appears to have been named for his managerial and political acumen rather than any technical industry-related skills.

"I have instructed [Gonzalez] to prioritize the efficiency and profitability of all of the processes at Petr?leos Mexicanos," Pe?a Nieto said.

Gonzalez takes the helm at a difficult time for Pemex, which reported a historic \\$10bn loss in third quarter 2015. Fourth quarter earnings are scheduled to be released on 26 February.

He comes on board on the eve of a long-awaited tender for deepwater Gulf of Mexico acreage coveted by major oil companies.

A close ally of Mexico's president Enrique Pe?a Nieto, Lozoya oversaw the implementation of a sweeping energy reform enacted in 2014, ending Pemex?s 75-year monopoly and encouraging the entry of private-sector investment.

Mexico's finance secretary Luis Videgary Caso confirmed today that the government slashed 73bn pesos (\\$3.9bn) from Pemex's 2016 budget, and about 16,000 Pemex employees will be let go.

On the recommendation of Mexican central bank president Agust?n Carstens Carstens, the government will make yet another adjustment to this year's budget, "starting with Pemex," Videgary said.

"The adjustment will have to be accompanied by a preventive adjustment for 2017, given the oil price environment, which will generate fewer resources for federal spending," Videgary said.

The size of the cutback must be agreed upon by the members of Pemex's board.

Videgaray said public spending for 2016 is protected by a \\$49/bl hedging program negotiated last year at a total cost of \\$1.09bn.

He confirmed that Mexico will seek to reach a similar agreement for 2017.

Gonzalez was named a day after a Pemex offshore platform caught fire, killing three people. This is the third fire on the unit in less than a year. It is not clear if production has been impacted by the latest incident.