November 27, 2018 / 4:16 PM / 14 days ago

Pemex would have to reassign funds for refinery: incoming official

A digital LED price sign of state-owned company Petroleos Mexicanos (PEMEX) shows their gasoline prices at a gas station in Monterrey, Mexico, August 8, 2018. REUTERS/Daniel Becerril

MEXICO CITY (Reuters) - Mexican state oil company Petroleos Mexicanos would have to reassign funds to finance a refinery planned by the next government because of its heavy indebtedness, incoming Deputy Finance Minister Arturo Herrera said on Tuesday.

Pemex, as the company is known, held total financial debt of $106 billion as of Sept. 30, with nearly 86 percent of it denominated in currencies other than the Mexican peso, mainly in U.S. dollars, according to its last quarterly results.

President-elect Andres Manuel Lopez Obrador, who takes office on Saturday, plans to build a refinery in the Gulf of Mexico. But financial market analysts are concerned that having Pemex pay for it could be highly risky because of its debt.

Questioned during an interview with Mexican broadcaster Televisa about the plan in light of the company’s financial liabilities, Herrera said Pemex would have to adjust its spending plans to pay for such a project.

“Pemex has financial restrictions and within these financial restrictions it can assign its funds to the projects it considers most profitable for the company,” he said. “But it can’t take on more. Any of these things can’t be additional.”

Asked what the company would have to do without in order to build the refinery, Herrera said that would be up to Pemex, and noted that the outgoing government’s overhaul of the energy sector had given it more room to make its own decisions.

“Pemex has an operating autonomy in that sense, but the finance ministry does have the privilege of telling it what its financial room for maneuver is,” he said.

Separately, Herrera told the broadcaster that the Mexican economy would likely grow by just over 2 percent in 2019 and the peso would trade at around 20 pesos per dollar.

The 2019 budget, due to be presented by the middle of next month, was nearly ready, he also said.

Reporting by Dave Graham and Michael O'Boyle; Editing by Steve Orlofsky

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