Throughout 2016, Cotemar, Mexico’s largest petroleum services company, was faced with a number of unpleasant decisions. After Pemex, Cotemar’s sole client, reneged on a number of lucrative contracts, Cotemar was left reeling. It was eventually forced to lay off 2,300 employees or face imminent insolvency.
This unfortunate chain of events has come after over a decade of steep declines in the national petroleum industry. This period has starkly highlighted the many potentially fatal shortcomings of Mexico’s nationalized oil industry. But starting in 2013, President Nieto changed the laws, allowing for eventual privatization and widespread infusion of outside capital into Mexico’s ailing petroleum sector. Cotemar believes that this new era of massive foreign capital and global firms being able to participate will smooth the rough patches that have become part of life for all those who make their livelihoods from the extraction of Mexican crude oil. Having multiple clients and a large diversity of contracts and income streams will serve as a buffer against the downturns and economic hardships experienced by a single state player. Whereas Cotemars fortunes were previously all tied to those of its sole client, now they may be reliant on five or ten different international firms with the financial strength to easily ride out temporary dips in the market.
A rough ride for Campechanos
Cotemar is headquartered in the state of Campeche. More than any other Mexican state, the Gulf-side, picturesque district is almost exclusively reliant on revenues from the Mexican oil sector. With an estimated 80% of all economic activity in the state deriving straight from the petroleum business, Campeche’s residents are in near total thrall to the gods of the global petroleum market.
Unfortunately, since 2004, those gods have been merciless. It was that year that Mexican wells in the Gulf hit their peak and subsequently entered into a sharp terminal decline in production. This was bad enough. But then the bringing online of the North American shale and tar sand deposits caused a global depression in oil prices from which the markets have not yet recovered.
All this has led to extreme hardships in the state of Campeche. With so many families dependent on breadwinners who work in the oil sector, many families have been forced to make difficult decisions, choices like that between sending their kids to school or putting food on the table.
But Cotemar sees this as coming to an end with privatization. Not only will the new system be good for corporations, it will be good for all those who rely on the Mexican petroleum industry.