Pemex likely to be denied request for oil field contract change

Two of the sources said Mexico's government would reject the request because of the heavy impact it would have on its tax take.
The logo of Mexican petroleum company Pemex is seen on a tank gas at a gas station in Mexico City, Mexico, January 2, 2017. (REUTERS/Edgard Garrido)
Mexico City
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Mexico's cash-strapped state oil company Pemex has requested authorities allow it to place its top oil field Ku Maloob Zaap (KMZ) under an exploration and extraction contract to lower its taxes, but the request will likely be denied, sources said.

Ku Maloob Zaap, located in the shallow waters of the southern Gulf of Mexico, produces 40 percent of Pemex´s current crude output.

Under Mexico's 2013 energy reform, Pemex can change the status of its oil fields to exploration and extraction contracts, usually to partner with a private company. In this case the state-run company requested the change with no partner, four sources involved in the process told Reuters.

"Pemex is asking for the migration to a contract with the goal of reducing its fiscal burden," one of the sources told Reuters. Another of the sources also said the aim was to lower taxes.

Such changes need to be approved by the Energy Ministry after the energy regulator, the National Hydrocarbons Commission gives an opinion.

Two of the sources said Mexico's government, also suffering from a weak economy buffeted by the election of U.S. President-elect Donald Trump, would reject the request because of the heavy impact it would have on its tax take.

"The finance ministry does not want to lower its collection because KMZ gives a third of its hydrocarbon production income," one of the sources said.

Pemex calculates it would pay between 5 and 15 percent less taxes on its output from KMZ if the migration were approved, the source said. Currently the oil field is operated by Pemex under a pre-reform arrangement known as an assignment.

Pemex did not immediately respond to a request for comment.

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