At Pemex, a New CEO Confronts Painful Reckoning for Oil Bust

  • Debt, budget constraints to test Harvard-educated economist
  • Gonzalez Anaya must also generate investment, form alliances

For nearly 80 years, Pemex has ruled Mexico’s oil industry like a nation unto itself. Few dared challenge the state-owned monopoly, a pillar of government revenue with powerful political allies.

Now, a Harvard-educated economist is about to try.

Like a thunderclap, the arrival of Jose Antonio Gonzalez Anaya at Petroleos Mexicanos is sending shock waves across the global oil industry.

Jose Antonio Gonzalez Anaya

Photographer: Susana Gonzalez/Bloomberg

His appointment as Pemex chief executive last week underscores a stark new reality for Mexico and its largest corporation: after decades of heady growth, Pemex must shrink drastically in the face of collapsing oil prices.

The overarching question -- for Pemex, its 145,000 employees, millions of ordinary Mexicans -- is whether this new CEO can move quickly enough to avert a full-blown crisis.

Gonzalez Anaya, 47, has scant experience in the oil industry, but he’s no stranger to Pemex. In fact, his ties to the company run deep. His grandfather was one of the first people to go to work for Pemex after the company was created in 1938, when Mexico nationalized its oil industry. Gonzalez Anaya was born in Coatzacoalcos, a Pemex hub in the state of Veracruz. And, as a former finance undersecretary, he served on the company’s board for three years.

But now Gonzalez Anaya is taking up what many consider the toughest assignment in corporate Mexico, and one that will determine the future of Pemex and, by extension, the nation’s entire economy.

“It is an enormous challenge. It is an almost impossible situation,” said Adrian Lajous, former Pemex CEO, in a phone interview in Mexico City. “It is one of the most difficult moments” in the history of the company, he said.

Short Honeymoon

For Gonzalez Anaya, the honeymoon ended before it began. On Wednesday, nine days after his appointment, Finance Minister Luis Videgaray, announced the government would cut spending by 132.3 billion pesos ($7.2 billion) this year. About 100 billion pesos of that will come out of Pemex.

With every drop in oil prices, the challenges multiply. Special interests, like unions and private contractors, are bound to stand in the new CEO’s way. Gonzalez Anaya must cut deeply enough to ensure Pemex can shoulder a debt burden that is set to exceed $100 billion. He must also make good on $7 billion in payments to various Pemex contractors. And, perhaps most difficult of all, he must find new sources of money through partnerships or asset sales amid low oil prices. 

Gonzalez Anaya declined to be interviewed for this article. But people familiar with his thinking say he has no illusions about just how difficult this job will be.

Political Elite

In many ways, Gonzalez Anaya cuts a figure in keeping with leaner times. Informal and practical, he projects little of the imperial aloofness of his predecessor, Emilio Lozoya Austin, who spent three years trying to squeeze efficiencies from the giant company, only to be undone by plunging oil.

On the surface, the two men seem markedly different. Known to friends as Pepe Tono, a common nickname for Jose Antonio, Gonzalez Anaya lacks his predecessor’s corporate polish and punctuates conversations with the occasional expletive.

But make no mistake: Gonzalez Anaya, like most of his predecessors at Pemex, has deep ties to Mexico’s political elite. His wife, Gabriela Gerard, is the sister of the wife of Carlos Salinas de Gortari, Mexico’s president from 1988 to 1994. Gonzalez Anaya also has strong ties to the Mexican state of Veracruz, a key battle ground for President Enrique Pena Nieto’s PRI party in June gubernatorial elections.

Powerful Union

Pena Nieto is counting on Gonzalez Anaya to cut deadwood. But with job losses already mounting in Mexico’s oil patch, the president is also depending on him to smooth relations with the Pemex union.

“It’s an incredibly difficult job,” said Marcelo Mereles, a former Pemex executive who’s now a partner at EnergeA, an energy consulting firm in Mexico City. He said the new CEO’s understanding of the Finance Ministry -- effectively Pemex’s new boss -- would be an asset.

In New York, London and beyond, bondholders will be watching. Pemex, which had its budget cut $4 billion by the government last year, needs to raise about $23 billion in 2016 to cover all spending, including maturing debt, according to a Feb. 10 report from Moody’s Investors Service. At current oil prices, Pemex’s credit rating could be imperiled this year without drastic spending cuts, according to Moody’s.

In addition to resolving outstanding payments owed to Mexican oil service providers, Gonzalez Anaya will have to form alliances with private companies in mature oil fields to generate investment and boost output. Formation of the joint ventures, said to generate as much as $33 billion in new investment, was delayed last year amid the crude price slump.

“The challenge for Gonzalez Anaya is: Can you deliver Pemex to the next administration in the state that it is now?” Mereles, the former Pemex executive, said. “Or will Pemex keep sliding down the slope?”

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