Pemex Names New Chief of Trading Arm PMI After Mass Exodus

(Bloomberg) -- Petroleos Mexicanos has replaced the head of its trading arm PMI with Ulises Hernandez, formerly an executive of Pemex Exploration and Production, after a mass exodus by former management.

Hernandez, previously the head of resources, reserves and partnerships at Pemex, will replace Raul Enrique Galicia, according to a statement released Friday. PMI’s crude trading division will also have new management, as Armando Mejia Sanchez replaces Victor Briones as head of crude trading.

The appointments come after Briones, along with vice president of crude trading Carlos Islas and vice president of crude analysis Alfonso Mendoza left Pemex, according to people familiar with the matter. The exodus was sparked by a disagreement within the company over an external review of new formulas created to price oil sales to refiners in the U.S. and elsewhere, the people said. Pemex Chief Executive Officer Octavio Romero raised questions about the marketing of Mexico’s crude by PMI’s management team, two people said.

Briones didn’t respond to calls and emails, while Islas declined to comment and Mendoza didn’t respond to emails.

The review has caused delays in presenting the pricing to customers. The new formulas for pricing the nation’s crude seek to eliminate fuel oil as a result of new regulations issue by the International Maritime Organization, known as IMO 2020, that require ships to burn cleaner fuels from January of next year. It is expected to push down prices by reducing the demand for fuel oil.

READ: Refiners Are Still Waiting to See How Mexico Will Price Its Oil

The formulas underpin not only all physical crude sales made by Pemex, but also Mexico’s annual sovereign hedge, the largest of its kind. The delay in finalizing the formula could complicate banks’ efforts to mitigate their risk from the hedge, as they need to use a combination of liquid oil futures and options.

Other changes include Emilio Sampayo Trujillo replacing Islas and Celina Torres Uribe replacing Mendoza. Six more appointments will occur over the course of October, according to the statement.

Mexico’s President Andres Manuel Lopez Obrador has staunchly opposed his predecessor’s policies and suspended competitive oil auctions and joint-venture agreements with Pemex in its oil fields. His more nationalistic energy policy seeks to make Mexico self-sufficient in fuel production and reduce the influence of global oil markets.

The country, which has been struggling to turn around an extended decline in oil production, exported 1.08 million barrels a day of crude in August, government data show. Oil revenue accounted for about 16% of federal government income in the second quarter, according to Finance Ministry data. That’s down from more than 30% at the start of the presidency of AMLO’s predecessor, Enrique Pena Nieto, before a tax overhaul and an acceleration in the output drop.

To contact the reporters on this story: Amy Stillman in Mexico City at astillman7@bloomberg.net;Eric Martin in Mexico City at emartin21@bloomberg.net;Lucia Kassai in Houston at lkassai@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Catherine Traywick

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