Mexico: PMI Appointed State Marketer Following USD 2 Billion Financial Guarantee From Parent Pemex

According with the current oil & gas regulatory framework, the Mexican Government must have a marketer that carries out the commercialization of hydrocarbons that correspond to it under the contracts for the exploration and extraction of hydrocarbons executed through the National Hydrocarbons Commission (CNH). For this purpose, CNH, at the request of the Mexican Petroleum Fund for Stabilization and Development (Petroleum Fund), must contract a marketer through a public tender process. The Petroleum Fund must provide the minimum terms it requires for the correct provision of such marketing services, including the maximum acceptable price.

Considering that the contract for the commercialization of liquid hydrocarbons executed between the Mexican Government and Trafigura México, S.A. de C.V. was terminated on October 22, 2020 (before its expiration), and the contract for the commercialization of gaseous hydrocarbons with the same company concluded on October 23, 2020, it was imperative for the Mexican Government to have a new hydrocarbons marketer.

Accordingly, through official writs dated January 30, April 30 and August 17 of 2020, the Petroleum Fund requested CNH to carry out the required tender process. Some of the most relevant features determined by the Petroleum Fund were the following:

1. Maximum price: $0.25/b liquid hydrocarbon sales and USD $2.92/b with logistics (USD $4.95/b for the cost of the freight of the oil tanker if sold on the Gulf of Mexico US side);
2. Term of 5 years; and
3. Reception at the "Point of Delivery" and assumption of material and legal responsibility of the marketer up to the "Point of Sale".

CNH began the tender process by carrying out a market investigation in which it considered the following 12 industry players, although only 2 submitted a tentative proposal to perform the services in the required terms:

Since Gunvor S.A. did not comply with the required technical specifications and did not include the commercialization of gaseous hydrocarbons in its proposal, CNH concluded in late October that the only company in a position to effectively provide the services under the required terms was PMI Comercio Internacional, S.A. de C.V. As a result, CNH issued an opinion justifying the exception to the public tender process in order to contract PMI through a direct award.

The above becomes relevant and matches the latest resolution of the Board of Directors of Petróleos Mexicanos (Pemex), the Mexican national oil company, which on October 28, 2020 approved that Pemex serve as guarantor under a USD 2 billion revolving credit facility granted by a group of banks to P.M.I. Trading Designated Activity Company (PMI Ireland), an affiliate of PMI. The purpose of the credit facility is to refinance debt from previous years, as well as to finance current and future operations (predictably including the commercialization services to be provided to the Mexican State through PMI). The guarantee is unconditional, irrevocable and obliges Pemex to jointly respond with PMI Ireland for the principal and accessories under the credit.

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