Mexico Slashes Pemex Support by 70% on Oil Price Rally

Mexico's government is cutting financial support for state energy company Pemex by 70% in next year's budget. The decision is based on expectations that the company will post a cash surplus of about 95 billion pesos, or $5.63 billion, due to an oil price rally linked to the U.S. And Israeli war against Iran.

President Claudia Sheinbaum confirmed the sharp reduction in government aid this week. "We said that by 2027, support for Pemex would be very limited, and that's indeed the case," she told media. "Pemex now receives very little support from the Mexican government, and its own finances will sustain its development." According to a Bloomberg report, the budget stipulates just 81 billion pesos, or $4.8 billion, in financial help for Pemex for the coming year.

Pemex's Debt and Production Challenges

Pemex remains the world's most indebted company, though it has made recent progress. Its debt load stood at approximately $105 billion as of mid-2025, with about $20 billion of that in unpaid supplier bills. By the end of the first quarter of this year, the company had reduced its total debt to around $79 billion, which it said was the lowest level since 2014.

Despite this debt reduction, the company faces significant operational hurdles. Efforts to boost refining output have proven difficult. Problems with crude quality, including high water content, have driven away key buyers over the past two years.

A Shift in Energy Policy

The government's approach to Pemex marks a shift from the previous administration's strategy. The prior government sought to support Pemex by reinstating its monopoly position in Mexico's energy market. In contrast, the Sheinbaum government has moved to open the oil industry to more private participation.

This new policy is centered on a framework for joint ventures known as mixed contracts. Under these mixed development allocations, Pemex can enter into agreements with one or more private firms.

Continued Dependence on Government Support

Analysts note that Pemex's health is still tightly linked to government backing. In May of this year, ratings agency Moody's kept Pemex's rating unchanged, citing expectations of continued state support. Moody's stated it expects "the Government of Mexico will continue to provide very high and timely support to the company, as clearly demonstrated in 2025 and embedded in our forward-looking assumptions under the current administration." This assessment was made when oil prices were already rising due to the war. The agency's view shows the persistent tension between Pemex's stated financial independence and its historical reliance on public funds.