Sources say AMLO plans to name Ruiz Alarcon as the next Pemex E&P chief

MEXICO CITY (Bloomberg) -- Mexico President-elect Andres Manuel Lopez Obrador will name Fluvio Ruiz Alarcon as Petroleos Mexicanos’s next exploration and production chief, according to two people with knowledge of the plans.

Ruiz Alarcon, a former independent adviser to Pemex, will take over on Dec. 1, when Lopez Obrador takes office. He’ll replace the current exploration and production director Juan Javier Hinojosa Puebla.

A board member, committee president and independent adviser to Pemex during two presidential administrations, Ruiz Alarcon is well-versed on the inner workings of the state energy giant. Born in Coatzacoalcos, Veracruz, a major oil hub, he is also close to Lopez Obrador’s pick for energy minister Rocio Nahle, who once worked at Pemex’s petrochemicals complex there.

A physicist and petroleum engineer, Ruiz Alarcon is critical of Pemex’s income being tapped to fund the government. If Pemex is subject to high taxes and budgetary controls, the company will struggle to reverse its flagging production, he said on Friday in an interview with national newspaper El Universal.

A spokesman for Lopez Obrador declined to comment.

Ruiz Alarcon did not respond to requests for comment. Last year Pemex’s tax contributions accounted for about 20% of the federal budget, down from about 40% a year ago.

New President

The interaction between Pemex’s finances and those of the government -– and how sharply they are distinguished -- is an important question for investors following the arrival of a new president that has said he will expand oil and fuel output by spending more.

Lopez Obrador, who swept into power in a landslide July 1 election victory, has pledged to spend an additional 75 billion pesos ($4 billion) on exploration and production, with the aim of boosting output by one-third over two years. Last month, Lopez Obrador named his longtime political ally Octavio Romero Oropeza, who has no oil background, as the next Pemex CEO.

Lopez Obrador is in the process of reviewing more than 100 contracts already awarded to private companies under the country’s landmark 2014 energy reforms.

Ruiz Alarcon has his work cut out for him. Pemex produced 1.866 MMbopd during the second quarter, its 13th consecutive year-over-year decline. Its reserves have shrunk by more than half over the past six years.