Monday, June 17, 2024

Thousands of oil sector jobs lost as Pemex suspends contracts

Thousands of oil sector workers are losing their jobs as a result of Pemex’s suspension of contracts with service providers and suppliers, reports the Bloomberg news agency.

A report based on conversations with “people with direct knowledge of the situation” said the state oil company has suspended contracts with at least eight Mexican and international oil-service providers and suppliers in recent weeks in order to save money.

Most of the canceled contracts were for offshore maintenance work in shallow-water Gulf of Mexico fields, two sources said.

The newspaper Reforma also reported this week that as many as 8,000 workers had lost their jobs as the result of budget cuts at Pemex that led to the cancelation of 45 contracts worth approximately US $160 million.

However, a director at the parent company of one the suppliers, Marinsa de México, said that “at the moment everything is normal” and there have been no layoffs.

Marinsa is “working hand-in-hand with Pemex,” said Greta Alcantara, director of institutional relations for Grupo Cemza.

A Pemex spokeswoman declined to comment on the reported budget cuts and contract suspensions, Bloomberg said.

The news agency reported that that the state oil company has been forced to rethink its plans to increase spending and expand drilling due to the coronavirus pandemic and the resultant oil price volatility.

Mexico has been affected by the collapse in crude prices even though it has a huge hedging program to protect itself from fluctuations. The price of Mexico’s export crude even fell into negative territory in April as demand for oil plummeted as a result of coronavirus mitigation measures.

Oil prices have rebounded – a barrel of Mexican crude was selling for $34.43 at the close of trading on Wednesday – but are still well below the levels seen in January, two months before the World Health Organization declared the new coronavirus outbreak a global pandemic.

But even though prices have recovered from the lows seen in April, Pemex is unlikely to restart the work it has suspended before next January, an unnamed source told Bloomberg.

The state-owned company’s already precarious financial position was exacerbated in the first quarter of 2020 with losses of 562.25 billion pesos ($25 billion at today’s exchange rate) reported. Pemex has total debt in excess of $100 billion and a “junk status” credit rating with two of the three major ratings agencies.

Covid-19 has not just taken a toll on the company’s finances but also its workers, with at least 112 employees and three contractors having lost their lives to the disease, according to a Pemex report published on Tuesday.

Source: Bloomberg (en)

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