Mexico’s national oil company won’t get a cash infusion from the country’s rainy-day fund, even as crude output declines and refineries idle.

“I don’t want to create any reason for instability,” said Mexico President Andres Manuel Lopez Obrador in an interview with Bloomberg’s Editor-In-Chief John Micklethwait on Monday. “If we use that fund, it may seem like there’s a crisis.”

The finance ministry had previously proposed transferring about $7 billion from the Oil Revenue Stabilization Fund, known as FEIP, to Petroleos Mexicanos to shore up its finances. While Lopez Obrador is planning a $7.4 billion cash injection for Pemex over the next three years, more than half will go to his planned new refinery, according to Pemex’s five-year business plan.

Investors fear that the Dos Bocas refinery could distract Pemex from its core job of drilling as oil production has halved from a 2004 peak and its debt has risen to $104.4 billion, the highest of any oil company in the world.

As problems mount for Pemex, Mexico’s economy is under the gun. The taxes and fees that Pemex pays make up 20% of the budget in a country that is teetering on the brink of recession.

Without help from the private sector, investors fear that Mexico and Pemex are on track for another downgrade after Fitch Ratings Inc. cut both sovereign and Pemex bond ratings last month. The government of Lopez Obrador has dialed back 2014 energy reforms that opened the doors to private investment and permitted competitive oil auctions and joint-venture deals with Pemex.

Lopez Obrador reiterated that Mexico’s oil auctions could be restarted only if private companies show results. “If they produce and comply, then we’ll see if we continue delivering contracts,” he said during the interview.

Source: www.worldoil.com