“too little, too late”
Petróleos Mexicanos (Pemex) is the state-owned petroleum company of Mexico. In its prime, Pemex had assets worth $415 billion. It was also the world’s second-largest non-publicly listed company in 2005.
Today, Pemex is the world’s most indebted oil company with $176 billion of debts and liabilities. The Mexican government announced a $5 billion bailout for the company this year. However analysts say it needs to invest at least $10-$13 billion a year.
How did that happened over less than 15 years? Well, in short, years of disregard and non-maintenance. This is similar to managing a condo. Take for example the following chain of events:
- Deferring small fixes & key maintenance
- Failure to track deferred maintenance, resulting in further damages
- Further damages lead to multiple part failures, eventually requiring a full replacement
- Costs snowballed beyond the sinking fund provisions
(I will post a cost analysis of the various condo facilities in the coming weeks.)
At this stage, owners either increase their monthly contributions or lose a facility. On hindsight, it is easy to act. Yet, often we see Council members opting to defer tough decisions in good times. And resigning to fate in bad times.
See the PwC excerpt below on why too little, too late will cost you an arm and leg.
“…constraining the global oil production system is deferred maintenance. Some operators have put off noncritical spending in recent years to reduce costs. In the UK Continental Shelf… average number of person-hours in backlog per installation for corrective and deferred safety critical maintenance rose 25% … Although important everywhere, maintenance is critical in basins with aging asset infrastructure.” PwC, Oil & gas trends 2018-2019