Mexico’s struggling state oil firm Pemex will receive a huge financial boost to the tune of $4.2bn the country’s Finance Ministry announced on Wednesday, according to Reuters and Bloomberg.
The liquidity package will comprise elements of capital investment ($1.5bn) and a credit facility ($2.7bn).
There will also be extra tax breaks that will allow the company to deduct more of its exploration and production costs (those breaks will be worth around $2.9bn).
Pemex is $87bn in debt. Its oil output has declined over 11 years and the crash in oil prices over the past two years has hurt it badly.
One condition of the package is that Pemex must reduce its liabilities by $4.2bn.
Earlier this year, in February, the government cut Pemex’s budget by $5.6bn and the firm has been slashing its workforce by thousands. In March, Moody’s Investor Services downgraded Pemex’s credit rating by two notches.
The first part of the investment package, worth $1.5bn, should be paid to Pemex by Friday (April 15).
Since 2013 Pemex has been in the process of surrendering its 75-year near-monopoly position in Mexico’s oil industry as the government tries to reform the energy sector by inviting in private and foreign players. But the response to drill site lease auctions has been lukewarm so far.