MEXICO CITY—Mexico is easing the tax burden for Pemex, the state oil company, to free up more cash to boost flagging production, the government says.

Noting the company’s high tax burden, President Andrés Manuel López Obrador told his Jan. 29 morning news conference the move would allow Pemex to have “more to invest” in its operations.

The finance ministry late on Jan. 28 announced a plan to free up some $580 million a year for Pemex by increasing the limit for deducting costs relating to exploration and production projects.

The finance ministry said it would achieve that by bringing deductions into line with the terms of auction rounds held by Mexico from 2015 to 2018. “The finance ministry estimates that this mechanism will free up about 11 billion pesos (US$577 million) for Pemex every year to reach a total of 66 billion available to invest in 2024,” it said. The cash would have to be spent on capex, it added.

The ministry said Pemex would also get a special tax regime for secondary and tertiary recovery—the practice of squeezing more hydrocarbons out of mature fields.

Changes to Pemex’s tax regime were notably absent from the 2019 budget but the ministry said it would fund them by boosting the fight against tax evasion.