The Impact Of Covid-19 On Pemex Oilfield

The impact of Covid-19 has been felt over the past several weeks in the oil industry. The latest impact is for Mexico’s state oil Pemex. Pemex has suspended contracts with service providers and suppliers, triggering thousands of job losses, people with direct knowledge of the situation stated.

Pemex has suspended contracts with at least eight local and international oil-service providers and suppliers to cut spending like other companies have been doing in response of the pandemic situation we are currently facing.

This decision and oil price volatility, Pemex has been forced to backtrack on its ambitious plans to increase capital expenditure and expand drilling in order to reverse 15 years of oil output declines. Mexican President Andres Manuel Lopez Obrador has made Pemex the centerpiece of his administration’s efforts to become self-sufficient in energy generation.

Brent crude, the global benchmark, plunged close to $15 a barrel in April as pandemic-related lockdowns obliterated demand for fuel. Though prices have rebounded to about $40 as economies reopen and the OPEC+ alliance has renewed its commitment to production cuts, they’re still down 37% for the year.

Pemex is not expected to restart the suspended work until at least January next year, one of the people said

Earlier this week, national newspaper Reforma reported that as many as 8,000 workers had lost their jobs due to budget cuts at Pemex that resulted in the cancellation of 45 contracts worth about $160 million with offshore service providers such as Marinsa de Mexico and Cotemar.

“At the moment everything is normal,” said Greta Alcantara, Director of Institutional Relations for Grupo Cemza, the parent company of Marinsa. There have been no layoffs, and Marinsa is “working hand-in-hand with Pemex,” Alcantara said. Cotemar declined to comment.

It’s not the first time that Pemex’s suppliers have felt the pinch. During the previous price crash, about 10,000 oil-industry service contractors in Mexico lost their jobs as Pemex was forced to slash billions of dollars in spending and freeze exploration and production contracts.