Greensill boasted of deal with Mexican oil company PEMEX

Three years before striking a supply chain financing deal with Bluestone Resources, Greensill struck a similar arrangement with Mexican oil company PEMEX.

A PEMEX oil rig in the Gulf of Mexico. The company’s former chief executive admitted taking bribes. Picture: AFP

Three years before striking a supply chain financing deal with US coal miner Bluestone Resources, Greensill struck a similar arrangement with Mexican state-owned oil company PEMEX under the leadership of disgraced former chief executive Emilio Lozoya.

Greensill began servicing all of PEMEX’s US dollar-denominated contracts in 2015, during the reign of Mr Lozoya, who later admitted to being embroiled in Latin America’s biggest corruption scandal involving Brazilian construction firm Odebrecht.

Odebrecht paid hundreds of millions of dollars in bribes around Latin America and elsewhere to get lucrative government contracts, and Mr Lozoya — who resigned from PEMEX in early 2016 — admitted to being bribed by Odebrecht, with the money going to buy luxury homes in Mexico City and elsewhere.

But in June 2016, Greensill Capital’s then US managing director, Roland Hartley-Urquhart, cited Greensill’s partnership with PEMEX as an example of how supply chain financing could combat a collapse in oil prices and preserve capital for oil companies in an opinion piece published on Energy Vice.

The Australian is not making any suggestion that Greensill or Mr Hartley-Urquhart had any knowledge of the Latin America corruption scandal or Mr Lozoya taking bribes, only that PEMEX was a Greensill customer.

In the opinion piece, Mr Hartley-Urquhart — who is now listed as a defendant in US coal miner Bluestone Resources lawsuit against Greensill — said higher financing costs and falling prices” had led to the “super majors” cutting operating costs and postponing exploration activities — something which supply chain finance could help combat. “We entered into an agreement with the company in 2015 to service all US dollar-denominated contracts with suppliers,” Mr Hartley-Uquhart said.

“PEMEX determines which suppliers are eligible for the supply chain finance program and we then offer suppliers the opportunity to be paid immediately at a small discount if they wish, providing them with the option of managing their working capital at a much lower cost than traditional bank finance.

“This financing solution enables PEMEX to preserve its own capital, reduce its borrowing needs, and maintain a healthy, resilient supply chain. This reduces the scale of the capex cuts it needs to make, supporting future growth and leaving it well-positioned to respond to opportunities. Suppliers benefit from an increased ability to accelerate cashflow and reduce reliance on bank lines.”

Mr Hartley-Uquhart said energy giants knew they needed a “healthy supplier base if they are to take full advantage of the upturn, when it eventually comes”.

“It’s a real dilemma and one that needs a rapid solution if companies are to preserve their capital,” he said.

“Although forecasts for the energy sector in 2016 remain pessimistic, oil companies are already positioning themselves for a market rebound by seeking additional ways to preserve their capital position.

“For the large company buyers, supply chain finance provides access to previously unavailable sources of capital and minimises the risk of disruption to the supply chain while also reducing costs — and this in turn reduces the need for borrowing or capex cuts.”

Fast forward five years, and Greensill’s $US7bn empire, largely built on supply chain financing, was declared insolvent.