Mariachis, Tacos, $100 Billion Oil Debt as Pemex Opens in Texasby and
Pemex plans to open five gas stations in Houston this month
Gasoline prices in Mexico 44% greater than at U.S. stations
The opening of Petroleos Mexicanos’s first-ever gasoline station in Houston featured several cultural reminders of the company’s origins. There were mariachis dressed in traditional Charro suits, trumpet-heavy Mexican music and, of course, tacos.
Quite a show for one of the world’s most indebted oil companies.
Pemex, as the world’s eighth-largest oil company is known, opened the station Dec. 3 and plans to inaugurate four more this month as part of a U.S. expansion strategy. The stations are the company’s first in the U.S. and Houston was chosen for them all because of its large Latino and “specifically Mexican” population, Pemex said in a statement.
The unexpected announcement of expansion into the U.S. market comes at a curious time. Pemex had its credit rating downgraded by Moody’s Investor Service on Nov. 24, is delaying payments to service providers and reported a record $10 billion loss in the third quarter. Its current debt of $87 billion makes it one of the most leveraged oil companies in the world.
Let’s hope they paid the mariachis upfront.
“When you are racking up losses like that, I think scrutiny for projects like these is justified,” Tim Samples, a law professor and Mexican-energy analyst at the University of Georgia in Athens, said in a phone interview. “They are spending time and resources on this venture and I wonder whether the economics are justifiable.”
The Pemex gas station in south Houston is branded with flags in Mexico’s traditional green, white and red colors on the awning over the pumps. The station’s store features Mexican specialties like Pinguinos chocolate cakes, Conchitas corn chips and Manzanita Sol soda pop.
Javier Saldana filled his maroon Ford Windstar minivan last week with $1.599-a-gallon regular unleaded fuel. It was the first time he filled up at a Pemex station since he left Monterrey, Mexico, to move to Houston several years ago.
“I like that there’s a little part of Mexico here,” he said.
Back home, the Houston station has rankled Pemex’s domestic customers. Prices at the pump in Mexico are an average 44 percent higher than those in those in the U.S. for unleaded gasoline. Edgar Rangel, a member of the National Hydrocarbons Commission, tweeted a picture of the new station on Dec. 3 with the comment, “Many things are wrong when a Pemex gas station sells gasoline in Houston at exactly half the price it sells it in Mexico.”
Competition to Come
Pemex is the only option for drivers in Mexico, and the government has set fuel prices that aren’t tied to the recent decline in crude prices, said Jose Angel Garcia, president of the Mexican Gas Station Workers Union. New retail operators will be permitted next year as part of the country’s market reforms, with competitive pricing to begin in 2018, he said. Mexican gasoline costs include higher taxes than in the U.S., about $1.25 a gallon compared with 38.4 cents a gallon in Texas.
The average price of U.S. regular gasoline slipped to $2.01 a gallon on Dec. 9, the lowest since March 2009, and was at $2.013 on Monday, according to Heathrow, Florida-based AAA, a national federation of motor clubs.
Expanding Pemex gas stations into Houston brings the company’s "much-recognized, much-loved” brand to the large population of Mexican residents in one of the world’s most important oil hubs, Jose Manuel Carrera, Pemex’s chief of new business, said in a Dec. 7 interview with Radio Formula. The investment was funded by third parties, and will be evaluated in six months, he said.
In the meantime, Pemex’s financial troubles are expected to deepen, with more borrowing raising its debt burden to more than $100 billion in 2016, according to a Dec. 2 investor presentation posted on the company’s website.
“You wonder if this is the best use of Pemex’s limited bandwith,” Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington, said in a phone interview. “It’s a political statement as much as anything. They’re carrying the flag for the country.”