The Mexican government is mulling over additional tax relief measures for state energy giant Pemex to help it reduce the biggest debt load in the global oil industry, a deputy finance minister told Reuters.

“Changing the tax burden is a structural change that Pemex needs, but we have to do it gradually,” Gabriel Yorio said in an interview with the news agency, adding that the goal was to make Pemex start paying taxes like other companies in Mexico. The transformation will take three years, Yorio also said.

Pemex has a debt burden of about $100 billion, and the Andres Manuel Lopez Obrador government has been hard at work to help it reduce it to strengthen the company, which President Lopez Obrador has made a priority for his administration.

In addition to its swollen debt pile, Pemex has also been fighting a steady production decline that most recently forced it to revise down its output projections for 2021. In September, the country’s finance ministry said it expected Pemex to produce 1.857 million bpd on average next year, down from a previous forecast for 2.027 million bpd.

This decline in production has been difficult to tackle given that the Lopex Obrador administration has basically cut off foreign companies from Mexico’s oil and gas fields while it reviews contracts signed by the previous government for signs of corruption. On its own, Pemex is unable to reverse the decline and reduce its debt burden.

In its efforts to help, the government earlier this year reduced Pemex’s shared utility tax rate from 65 percent to 58 percent and, according to Yorio, next year it could be cut further to 54 percent.

“Pemex has two great structural problems with its cash flow: its debt burden and its tax burden,” the official told Reuters. “Right now, it seems in 2021 we’ll keep (the shared utility tax) at 54%.”

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

• Pandemic Crushes U.S. Refining Capacity
  
• Oil Market Hopeful As Vaccinations Begin
  
• Finding A Way Around The World's Largest Oil Chokepoint