By Juan Montes
MEXICO CITY--State-owned Petróleos Mexicanos is in advanced
talks with Mexico's powerful oil workers union to lower labor costs
via a pension overhaul and for more flexible work rules to secure
its future in a newly competitive environment, according to people
familiar with the negotiations.
Success in renegotiating the collective bargaining agreement at
Mexico's biggest company by sales and staff could determine how
well Pemex performs now that oil prices are low and the former
energy monopoly faces private-sector competition for the first
time, analysts say.
Moreover, the Mexican government has said it would assume a
significant portion of Pemex's $100 billion in unfunded pension
liabilities if the current system is successfully changed.
"If they finally agree on these changes, it would be the most
important step Pemex can take to guarantee it remains a dominant
and competitive player in the long run," said Leo Zuckermann,
political analyst at the CIDE university.
Pensions have become a financial headache for Pemex. Heavy
pension-related debt, almost equal to the company's sales of $108
billion last year, has raised concern among ratings firms because
it could hamper Pemex's ability to obtain financing at low rates
for investment.
The goal is to strengthen Pemex as it prepares to compete with
private companies for Mexican oil blocks being tendered under new
energy laws passed last year and to guarantee it can develop blocks
already assigned to it. Pemex could lose existing blocks if it
doesn't have enough resources to develop them.
While Pemex's crude oil production has fallen 12% since 2010,
its staffing has increased 4%, denting productivity. Last year,
Pemex produced 16 barrels of crude oil per worker a day, compared
with 33 barrels at Brazilian state company Petrobras and 25 at BP
PLC.
The oil company and the union are nearing agreement to gradually
increase the retirement age for oil workers to 65 years from the
current 55, according to two officials from Pemex and the oil
workers union with knowledge of the talks. Some disagreement
remains over the pace of the adjustments, the people said, but
added they were optimistic a deal will be struck.
Negotiations are expected to conclude in late July, with the new
contract coming into force on Aug. 1.
Discussions include lowering the amount retirees would receive.
Currently, a retired worker receives at least 80% of the average
salary during the past year worked. Workers who have already
retired wouldn't be affected, the people said.
Individual pension accounts under a defined contribution plan
for new employees would be created, instead of the current system
in which Pemex pays the pensions, the people said. Benefits to
surviving dependents of retired workers when they die will also be
limited, the people said.
"We're optimistic that a reasonable deal can be reached," said a
senior Energy Ministry official who asked not to be named. "With
oil prices so low, the current collective agreement is not
sustainable and the union knows it."
A Pemex spokesman said negotiations are entering a decisive
stage and that the company is confident of reaching a "good deal."
A spokesman for the oil workers union didn't return calls seeking
comment.
In a bid to force a deal, Mexico's Congress passed a law last
year under which the government would assume a portion of Pemex's
pension-related debt equivalent to the savings the company and the
union agree on in the new contract.
Discussions also include early retirement with compensation for
"several thousand workers," the people said. One person said
negotiators have discussed layoffs in some administrative areas,
but a spokesman for Pemex said layoffs aren't foreseen.
Pemex aims to gradually lower the number of employees to around
100,000 in coming years from the current 153,000, the people said.
Around 122,000 current workers are unionized.
Labor flexibility is also on the table to ease the complicated
and slow process for relocating staff. At the moment, any such
decision requires agreement with the union.
Since Pemex was founded in 1938, oil workers and their union
leaders have been accumulating labor benefits that most Mexican
workers don't have, in exchange for ensuring labor peace. To date,
the oil workers union hasn't gone on strike.
Pemex's unionized workers with more than 10 years in service
have 30 days of paid holidays a year, and receive almost triple pay
for those days as a vacation bonus. The firm also has to make
workers loans at preferential interest rates to buy a home, with up
to two loans per worker. Health coverage includes cosmetic surgery
for employees and their relatives, among other benefits.
Write to Juan Montes at juan.montes@wsj.com
Access Investor Kit for Petróleo Brasileiro SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=BRPETRACNOR9
Access Investor Kit for Petróleo Brasileiro SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=BRPETRACNPR6
Access Investor Kit for Petróleo Brasileiro SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US71654V4086