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Mexico's Pemex chief, a close ally of Sheinbaum is under threat as the woes increase

According to four sources with knowledge of the situation, the future of Pemex CEO Victor Rodriguez is becoming increasingly uncertain. The longtime ally to President Claudia Sheinbaum is struggling to turn around Mexico’s troubled state oil company. The first 18-months of Victor Rodriguez's tenure at Pemex were marked by worsening divisions within the company, a major oil spill and a fatal refinery accident. The company's production is only 1.6 million barrels per day, short of its 1.8 million barrels per day?target.

Sheinbaum has meanwhile pushed Rodriguez to the sidelines, and has become increasingly involved in the operations that are aimed at putting the oil giant back on a firmer foundation, according to sources who spoke under condition of anonymity. Two sources claim that the 69-year old former academic resigned twice last year. Sheinbaum convinced him to stay on each occasion. Sheinbaum's increasing involvement, including her intervention in key appointments that are normally reserved for the chief executive, has created rival centers of loyalty within Pemex. This makes it even harder for Rodriguez to turn things around, sources say.

One person said, "Claudia is aware that she can control Pemex by keeping Victor." "She's driven by fear of losing control, but what she doesn’t see is that everyone is pulling in their own directions."

Pemex and the Presidency did not respond to requests for comments. Pemex struggles under $79 billion of debt, and $20.8 billion is owed to contractors and suppliers. It lost $2.6 billion in the first quarter, despite oil prices reaching more than $100 per barrel.

RODRIGUEZ IS STILL THE MAN FOR NOW

Sources said that speculation about Rodriguez's successor has been circulating in the government and business circles. Lazaro Batel is a name that has been floated. He was Sheinbaum's "chief of staff" and the grandson of the Mexican president who nationalized Mexico's oil industry back in 1938. He declined the position when offered to him at the start of Sheinbaum’s term, according to sources.

Sources claim that key decisions and senior appointments, such as top positions in the exploration division, trading department, and legal department, are increasingly made outside of Rodriguez's control.

Diana Martinez, a close associate of Secretary of Energy Luz Gonzalez, replaced Rosa Bello as interim director of the Legal Department. Sheinbaum and Secretary of Security Omar Garcia Harfuch appointed Israel Benitez as the logistics director. They also replaced Marcela Villegas, director of administration.

No one from the offices of Garcia Harfuch or Gonzalez responded to my question.

The sources stated that it is not unusual for the president or key ministers of the government to have some say in the appointment of senior Pemex officials, but they said the extent to which the decisions were made without Rodriguez's involvement was very uncommon. They said that some'senior executives' are reporting to the energy or finance ministries, instead of Rodriguez.

Miriam Grunstein is a well-known consultant and analyst who works in the Mexican energy industry. She said that the CEO of Pemex has been "unable to improve or change the course" because he's caught between a number of political forces. "He's a CEO who I would describe as defenseless."

EFFORTS ?TO ATTRACT FOREIGN CAPITAL

Sheinbaum is caught between wanting to attract foreign investment and satisfying energy nationalists who want Pemex's tight control over Mexico's oil sector, according to the sources. Sheinbaum owes part of her 2024 victory to Andres Lopez Obrador, her nationalist mentor and predecessor.

Three sources claim that Sheinbaum, Rodriguez and others have attempted to increase private investment and partnerships, but the interest has been low, partly because of Pemex's "debt burden" and the unsatisfactory conditions pushed by certain government officials. Rodriguez, according to a source, warned that Pemex's economic and tax conditions?wouldn't be attractive to private investment. Pemex had announced that it would sign 11 contracts of this type, but has only signed nine so far due to a lower than expected interest from smaller companies. According to sources, demand is low due to smaller oilfields as well as uncertainty about Pemex's ability pay suppliers.

Sheinbaum also has to deal with the ongoing problems at the Olmeca Refinery, which is a favorite of Lopez Obrador. It began operations in 2024's second half after delays that pushed its price to more than twice its original budget of $21 billion. Five people were killed in a fire that broke out near the refinery on March 9th. Another fire at a storage facility for coke was started ten days later.

Sheinbaum, according to three sources, is personally reviewing Pemex's media coverage nearly daily.

One person said, "She's upset and frustrated by everything." (Reporting and editing by Stephen Eisenhammer, David Gaffen and Adriana Barrera in Mexico City).

(source: Reuters)