(Pietro D. Pitts, Energy Analytics Institute, 3.Dec.2024) — In a significant announcement aimed at securing Mexico’s energy future and adapting to the global energy transition, Petróleos Mexicanos (Pemex) general director or CEO Víctor Rodríguez Padilla recently unveiled the Mexico City-based company’s strategic vision for 2024-2030.
The announcement, made during President Dr. Claudia Sheinbaum Pardo’s “mañanera” or morning briefing, highlighted Pemex’ roadmap over the next six year. Rodríguez Padilla emphasized Pemex’ dual focus on strengthening Mexico’s energy sovereignty and aligning with global sustainability goals. He also underscored Pemex’ role as a cornerstone of Mexico’s energy independence, a driver of economic development, and a guarantor of accessible energy prices for citizens.
Central to this vision is the integration of Pemex’ subsidiaries into a single, unified entity to streamline operations, reduce costs by 50bn Mexican pesos ($2.7bn), and enhance resilience and sustainability.
I might highlight some key points to consider as they regard to the six-year plan.
Focus on financial strength and operational efficiency
Pemex plans to adopt a new fiscal framework, the Oil Duties Welfare, to improve financial stability, reduce debt, and allocate funds for strategic investments. Also, in collaboration with Mexico’s Treasury Department, Pemex looks to implement rigorous measures to meet supplier obligations and optimize debt repayments.
While its long-term debt is finally below $100bn again, Pemex is still the most indebted company in the worldwide oil and gas sector.
Expanding E&P with sustainability in mind
Pemex plans to deploy advanced exploration techniques in shallow waters and onshore fields to secure a 10-year reserve supply (or reserve life or R/P ratio) while maintaining liquids (including condensates) production at 1.8 million barrels per day (MMb/d).
Key developments include the prioritization of strategic fields like Zama (led by Pemex and partners from the US’ Talos Energy, the UK’s Harbour Energy which absorbed holdings in Mexico held by Germany’s Wintershall Dea, to Mexico’s Grupo Carso) and Trion (led by Australia’s Woodside Energy, which is partnered with Pemex) and mixed-project collaborations to bolster reserves.
The key here is that Zama could add 180,000 b/d while Trion could add 100,000 b/d. However, currently the overall trend observed over recent years has been a downward sloping production curve. These new developments will likely at most just offset natural production declines at mature fields.
Natural gas production is expected to rise to 5 billion cubic feet per day (Bcf/d), with significant investments in infrastructure modernization aimed at reducing gas flaring and methane emissions. Offshore projects of note include Piklis, Kunah, and Lakach. These are pivotal to Pemex’ strategy to harness cleaner and more sustainable energy resources.
Any rise in gas production would be welcome but as small as that rise is expected to be it will be far from allowing Mexico to wean itself off piped-gas imports from the US, which are averaging around 6 Bcf/d.
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Refining for energy independence
Pemex is targeting a 34% increase in fuel production by 2030 to achieve self-sufficiency. New and upgraded facilities, including the Olmeca Refinery, think Dos Bocas, and coking plants at Tula and Salina Cruz, will contribute to this goal. Operations at the Houston-based Deer Park Refinery (100% owned by Pemex) will also support this production surge while enhancing profitability Pemex is eyeing across its national refining system in Mexico. Currently that includes 6 refineries, but will increase to 7 once Dos Bocas is finished.
Important here is that the Pemex domestic refining system is currently operating at less than 60% of its capacity. Monies destined to Dos Bocas could have been used to increase processing capacities, which could have been equal to or potentially more than the new capacity to come from Dos Bocas.
Petrochemical growth and fertilizer production
Plans to revitalize Mexico’s petrochemical industry include reactivating the Cangreera complex and expanding ethane production capacity to 520,000 tons per year (t/y). Fertilizer production will also see a dramatic increase, with a goal of producing 2.2 million tons (Mt) of ammonia annually and 1.6 Mt of urea by 2030.
Advancing the energy transition
Pemex is also expected to more openly embrace renewable energy initiatives, including wind, geothermal, green hydrogen, and ammonia projects in collaboration with state-owned Federal Electricity Commission (CFE) as well as private partners. Environmental commitments feature carbon-neutral strategies, soil restoration, and emission reductions, with a particular focus on sustainable water use through treated water systems.
Opportunities v headwinds
Why investors should take note
Pemex’ strategy represents a robust opportunity for foreign investors seeking exposure to Mexico’s evolving energy sector. With clear objectives for financial efficiency, production growth, and sustainability, the plan aligns somewhat with global energy trends and looks to reinforce Mexico’s pivotal role in North American energy security.
Pemex’ commitment to modernization and sustainable development positions it as a key player in the region’s energy transition, offering potential for long-term returns in a rapidly transforming sector. This comprehensive vision underscores Pemex’ determination to balance energy independence with environmental stewardship, making it an attractive prospect for investors looking to support and profit from the future of energy in Mexico.
But, this is all just on paper.
Why investors need to be worried
The main headwinds investors have to face during the Sheinbaum “sexenio” or 6 year period (2024-2030) include the same ones they experienced under former president Andrés Manuel López Obrador, also known as AMLO, during his recently ended “sexenio” (2018-2024). That said, the energy reform of Enrique Peña Nieto (2012-2018), which spiked investor interest in Mexico, is still off the table even though Sheinbaum has said the private sector is “bienvenido” or welcomed.
Headwinds also surround all forms of nearshoring opportunities as they relate to water scarcity, unreliable energy supply and electricity inputs, human capital development and availability, and rule of law. The nearshoring headwind will be tempered by a potential 25% tariff recently announced by US president-elect Donald Trump and pressures around Chinese investments in Mexico as they relate to a review of the USMCA, formerly NAFTA, in 2026.
These headwinds come on top of ongoing headwinds related to organized crime, and not only in the northern regions of Mexico that share borders with the US, as well as financial headwinds around the Mexican peso and inflation, which are relatively small compared to other regions across Latin America and the Caribbean.
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By Pietro D. Pitts reporting from Houston. © Energy Analytics Institute (EAI). All Rights Reserved.
