Mexico’s Peso Falls To Lowest Level In 5 Weeks On Pemex Outlook

(Reuters, 19.Oct.2018) — Mexico’s peso currency reversed gains on Friday to fall 1 percent, hitting its lowest level in five weeks after a report by ratings agency Fitch on national oil company Pemex.

Following the decision by Fitch to revise the company’s outlook rating to negative from stable, the peso currency weakened to 19.34 pesos per dollar. (Reporting by Miguel Angel Gutierrez)



Petrofac Completes Sale Of 49% Interest In Mexican Operations

(Petrofac Limited, 19.Oct.2018) — Petrofac Limited announces that it has completed the sale of 49% of the company’s operations in Mexico to Perenco (Oil & Gas) International Limited, following approval from the Federal Competition Commission of Mexico (COFECE).

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Petrofac Introduces Partner In Mexico



Gas Shortages In Southern Mexico To Reach Critical Levels In November

(S&P Global Platts, 18.Oct.2018) — Gas shortages in southern Mexico will reach a critical point in November as Pemex natural gas production continues declining and users lack access to LNG terminals, industrial users in southern Mexico told S&P Global Platts on Thursday.

Pemex is not nominating gas for several industrial users in southern Mexico as a result of decreasing production, Cleantho de Paiva Leite, director for new businesses with Braskem Idesa, told Platts on the sidelines of the Mexican National Petrochemical Forum.

“The situation could lead to a complete stoppage of the industrial activity in southern Mexico,” said de Paiva Leite, whose company operates the most polyethylene capacity in Mexico.

Pemex is allocating its diminishing gas output to fulfill the needs of its subsidiaries and power generators, a second petrochemical company in southern Mexico told Platts at the forum.


Gas shortages in southern Mexico have become more acute due to infrastructure constraints on gas flows into Coatzacoalcos, Veracruz, one of Mexico’s largest petchem and industrial hubs, Paiva said.

This situation will be eased once the Mexican government completes the reconfiguration of the Cempoala compressor station in the state of Veracruz, which is expected to be completed in Q1 2019, according to Mexico’s Energy Secretariat (SENER).

The only options for users in this situation is to shut down operations or consume gas without a nomination being sent to Pemex, which would result in steep penalties, Miguel Benedetto, general director of the Mexican Association of the Petrochemical Industry (ANIQ), told Platts on the sidelines of the forum.

However, consuming gas under or above the nominated level leads to natural gas imbalances in the network that is addressed by system operator Cenagas via LNG injections, Benedetto said.

A large steelmaker in northern Mexico told Platts that some industrials with access to declining Pemex gas fields in northern Mexico also are resorting to taking gas from the system without nominations and incurring imbalance penalties.

Earlier this month, Mexico’s business coordinating council, or CCE, told Platts that Pemex also is not delivering all the gas that is being nominated.

“It isn’t a good signal. We are having gas supply problems,” Roger Gonzalez, president of CCE’s energy commission, told Platts. “The reduction has been limited, but this is decreasing system pressure and affecting industrial users’ operations.”


Cenagas charges for LNG at spot prices with a 50% penalty, which is hugely uncompetitive, he added. “So, choose how you want to die: by shutting down operations or paying $21/MMBtu gas,” Benedetto said. LNG prices in Mexico are three to four times more expensive than continental gas imports.

Pemex, Braskem Idesa and INAQ told Platts that to address the current gas shortage the Mexican government must stop targeted LNG penalties to shippers and end-users and reverse deregulation to a situation in which all users share LNG costs.

Benedetto said the government needs to intervene because the imbalances on the system are a result of gas shortages due to declining Pemex production.

“Before when unbalances happened, LNG expenses were shared by everyone in Mexico, pushing gas prices to $4-$5/MMBtu. Now, we in the south pay gas at $20/MMBtu due to the new balancing regulation,” Paiva said.

Recent data from SENER shows the gas demand in the petchem sector has been in free fall, reaching 214 MMcf/d in 2016 from 697 MMcf/d in 2013.

Pemex didn’t immediately respond to requests for more information on the southern supply shortages. However, Carlos Trevino, Pemex’s CEO, previously told Platts the country is facing irregularities in its gas supply. “Without a doubt, there is not enough gas to supply all the market demand including Pemex and its subsidiaries,” Trevino said in an interview at the Mexican Petroleum Congress in Acapulco at the end of September.


Benedetto said ANIQ wants Mexico’s Energy Regulatory Commission (CRE) to reverse the liberalization of wholesale gas prices, known as first-hand gas sales or VPM.

CRE previously set the maximum price for gas to be sold by Pemex using a formula based on US prices. VPM prices were regulated under this formula at two hubs, Reynosa on the Mexico-Texas border and Ciudad Pemex in southern Mexico. The switch to free-market conditions was expected to provide Pemex and other independent producers the revenue to reverse the country’s production declines.

Pemex’s gas production has declined from more than 6 Bcf/d at the beginning of the decade to an average of 3.9 Bcf/d in 2018, SENER’s data shows.

Benedetto said no open-market conditions exist today in southern Mexico, adding that lack of infrastructure to move gas south prevents new shippers from servicing users in this region, leaving a captive market under Pemex.

Pemex also isn’t reacting to market incentives to boost production in southern Mexico although industrial users are being curtailed or are having to pay LNG gas prices, he added. The regulations anticipated a “competitive market that doesn’t exist,” Benedetto said.

Braskem Idesa’s Paiva said that Mexico can’t change overnight from a state monopoly to a free market without ensuring there is enough infrastructure and interconnections in the system. “This has to be an organized transition with the coordination of CRE, Cenagas, Pemex, and SENER,” he added.



Moody’s: Mexican Government’s Plan To End Oil Exports Raises Risks

(Kallanish Energy, 18.Oct.2018) — The incoming Mexican government’s announcement to end oil exports is credit negative to both Petroleos Mexicanos (Pemex) and to the government’s credit quality, says Moody’s investors Service, in a new report.

The oil company’s operating cash flow would decline and become more volatile under the new refining-focused business model, Moody’s believes.

“Pemex would be exposed to greater foreign exchange volatility, since its income from fuel sales would be in Mexican pesos, while 87% of its $104 billion debt as of June 2018 is in U.S. dollars or other hard currencies.” said Moody’s senior vice president Nymia Almeida.

“The new plan could also force Pemex to import crude, which would add to its cash-flow and foreign-exchange risk.”

The oil company’s credit quality would weaken depending on how much crude it needs to import to feed its refining capacity, Kallanish Energy understands.

Moody’s believes the risk of Pemex posting lower operating cash flow within the next three years is even greater considering the upward momentum on crude prices, and the new government’s stated intention to not increase domestic fuel prices.

Although the federal government has decreased its reliance on oil revenue since its 2013 tax reform, the loss of oil revenue from a loss-generating Pemex could substantially widen Mexico’s fiscal deficit.

Plans to halt oil exports would deprive the government of nearly 2% of GDP (Gross Domestic Product) in revenue, forcing it to raise taxes or abandon its pledge of fiscal discipline.



Pemex Has Registered 40,000 Illicit Connections Since 2012

Pemex’s Carlos Treviño. Source: Pemex

(Energy Analytics Institute, Piero Stewart, 17.Oct.2018) — Petróleos Mexicanos (Pemex) has registered 40,000 clandestine pipeline connections in the last six years, announced company General Director Carlos Treviño during a speech to the Chamber of Deputies.

“Pemex is most concerned about this problem as it damages a company of Mexican citizens,” reported the daily El Financiero, citing Treviño.

Illicit pipeline connections continue to rise due to increased participation of organized groups mainly in states such as Puebla, Hidalgo, Guanajuato, Veracruz and Jalisco, reported the daily, citing data from 2008.

The municipalities most affected include: San Martin Texmelucan, Atlacomulco de Zuniga Jalisco, Cuautepec de Hinojosa, Gonzalez Tamaulipas and Tula de Allende, said the official.



Pemex Sells $2 Bln Bonds To Fund Investment And Refinance Debt

(Offshore Technology, 17.Oct.2018) — Mexican state-owned petroleum company Pemex has reportedly sold $2bn of its bonds.

The sale of the ten-year Pemex bonds is said to have generated about 6.5% in a move, which is aimed at funding the company’s investment, as well as refinance debt.

A Pemex spokesperson said in a statement: “With this deal, our cash level for the end of 2018 has been strengthened and we guarantee the company’s liquidity for the start of 2019.”

Starting on 1 December, President-elect Andrés Manuel López Obrador will manage the company. Octavio Romero will serve as the head of the company.

HSBC, JPMorgan Chase, Scotiabank, and UBS handled the issue, which was oversubscribed 5.9 times, and involved the participation of investors from the US, Europe, the Middle East, Asia, and Mexico.

According to the Financial Times, an undisclosed Pemex investor said that the sale of Pemex bonds is required to pre-fund needs for next year.

The investor did not reveal details on whether tenders of oil assets will continue or not.

Pemex, which is struggling with a production fall for 14 years, announced discoveries of seven reservoirs in two new wells in Mexico’s Southeast Basin, last week.

With the new wells Manik-101A and Mulach-1, the company will be able to incorporate more than 180 million barrels of oil equivalent of 3P reserves.

Pemex said that the new shallow water discoveries will become part of its portfolio of fields that are under development and have been discovered in recent years.

The company is currently evaluating and developing six fields, which are expected to have combined peak production of up to 210,000 barrels of oil per day and 350 million cubic feet per day of natural gas.



Mexico’s Next Government Faces Bind In Pemex Ethane Deal

(Reuters, Diego Oré, 17.Oct.2018) — Mexico’s incoming government will soon inherit a costly dilemma over an ethane supply contract between national oil company Pemex and a consortium led by a unit of Brazilian builder Odebrecht.

Under the contract’s terms, Pemex has had to supply ethane well below current market prices.

A hydrocarbon that comes from natural gas, ethane is used to make ethylene, which in turn is used to make the common plastic polyethylene at the Braskem-Idesa plant near the Gulf coast port of Coatzacoalcos.

The plant is operated by the consortium in which Odebrecht’s unit Braskem has a 70 percent stake and Mexico’s Grupo Idesa holds the remainder.

Energy aides to President-elect Andres Manuel Lopez, who takes office Dec. 1, have said the contract is problematic, but have not yet said what the new government will do about it.

“The contract with Braskem is very damaging to Mexico’s interests,” Sen. Armando Guadiana, of Lopez Obrador’s Morena party and heads the Senate energy commission, told Reuters last week. Pemex is fully owned by the government.

The Braskem-Idesa consortium told Reuters last week it has no plans to void the contract.

If President-elect Lopez Obrador were to direct Pemex to cancel the contract, it would be forced to purchase from the consortium the sprawling Etileno XXI petrochemical facility currently valued at $1.26 billion (£956.43 million), according to a contract annex seen by Reuters.

Neither Pemex or Braskem responded to questions about the valuation.

Conversely, if the new government opted to stick to the deal, it could only hope for more favourable ethane prices that might reduce its losses.


Under the terms of the 20-year-long contract, Pemex committed to selling ethane to Braskem-Idesa for 16 cents per gallon. When the contract was signed in 2010 market prices for ethane were three times that, at 50 cents per gallon.

Current ethane prices hover around 40 cents per gallon.

A Pemex spokesman said the contract, which took effect in 2016, “responded to the market conditions of that time.”

Before the facility began operations in 2016, Pemex produced more ethane than it needed, forcing it to inject excess supply back into its natural gas pipelines.

Pemex’s production of ethane this year averages 88,000 bpd, but this is now insufficient to supply its own Morelos and Cangrejera petrochemical facilities that require a combined 66,900 bpd, plus the Baskem-Idesa contract obligation of 66,000 bpd.

As a result Pemex was forced to turn to ethane imports this year for the first time as domestic oil and gas production continues to fall, costing Pemex some $50 million during the first half of 2018, according to Reuters calculations, due to the cost of imported ethane at market rates compared to the cheaper fixed price in the contract with the Braskem-Idesa consortium.

If Pemex is left without enough ethane, it would have to shut down the so-called cracking plants at its two petrochemical facilities, and the cost of re-starting them after being idled one week would be some $2.6 million, according to comments from the head of Pemex’s ethylene unit, Alejandro Cruz, at a board meeting in December.

In June, pricing agency Platts reported that Pemex entered into a $237.6 million contract with Swiss commodities trader Vitol to supply 720,000 tonnes of ethane to Pemex through 2020.

Both Pemex and Vitol declined to confirm the deal.

In 2016, Mexico’s federal auditor determined that Pemex ethane exports during a 10-month stretch of that year could have yielded the company more than $100 million had it not been for the Braskem-Idesa contract.

Using official data, Reuters calculated a similar $100 million opportunity cost in 2017.

Both Pemex and Braskem declined to comment on the calculations.

Braskem said the contract was mutually beneficial, arguing that it helps cut Mexico’s reliance on foreign plastics.

“We are not planning on undoing a positive contractual relationship that we’ve been building with Pemex and that brings benefits to all,” said Sergio Plata, head of institutional relations for the Braskem-Idesa consortium.

Rocio Nahle, Lopez Obrador’s pick to be Mexico’s new energy minister, has said the incoming government will review the Braskem-Idesa contract for possible signs of corruption, part of a broader energy contract review.

The consortium’s Plata said he was confident the contract will not be modified.

According to a transcript of a recent session of the board of directors of Pemex’s ethane unit, acting director Rodulfo Figueroa, admitted that supplying the gas is “the most serious problem” it faces.

Lopez Obrador’s incoming transportation minister, Javier Jimenez Espriu, is an alternate member of the Grupo Idesa board of directors but told Reuters the contract was reviewed by the separate board of the Braskem-Idesa joint venture.

Luis Miguel Labardini, a Mexico City-based energy consultant, said an even bigger problem for Pemex lies with whoever agreed to the contract’s terms in the first place.

“We should give the benefit of the doubt to whoever negotiated this contract that they didn’t act in bad faith,” he said. “But they were negligent.”



Mexico’s Salina Cruz Refinery Normal After Electrical Accident: Pemex

(Reuters, 17.Oct.2018) — Mexico’s Salina Cruz oil refinery is operating normally after three people were injured in an electrical accident, a spokesman for state oil company Pemex said on Wednesday.

The 330,000 barrel-per-day capacity facility, Pemex’s largest, had a short-circuit on Tuesday evening that sparked flames, the spokesman said.



Pemex Seeks Up To 2.1 MMbbls Of U.S. Bakken Crude -Traders

(Reuters, 17.Oct.2018) — Mexico’s state-run oil company Pemex received bids this week for up to six 350,000-barrel cargoes of U.S. Bakken crude it wants to import from November through December, according to traders with knowledge of the tender.

This is Pemex’s second attempt to import U.S. light oil mostly for its Salina Cruz refinery. A previous tender launched earlier this month to buy U.S. Light Louisiana Sweet (LLS) crude was not awarded due to lack of bids.



Pemex Places $2 Billion Bond In International Markets

Pemex CEO Carlos Treviño Medina. Source: Pemex

(Pemex, 16.Oct.2018) — Petróleos Mexicanos in September disclosed the application of a series of operating and marketing measures could generate an improvement of 30 billion pesos on the 2018 balance sheet, placing the company at an approximate deficit of 49.414 billion pesos, instead of the deficit for 79.414 billion pesos that was originally approved by the Congress.

In line with the above, Pemex is reducing its debt outlook for 2018, this will focus exclusively on financing the updated deficit of 49.414 billion pesos. In the framework of the financing program authorized for 2018, today the company placed a bond in the international debt markets:

— The total amount of the bond is 2 billion American dollars, with a 10-year maturity.

— This placement’s maturity date is due on January 2029 and yields an interest rate of approximately 6.5 per cent for the investor.

The resources from this emission will be used to comply with Pemex’s investment program, as well as to liquidate or refinance debt to its favor. This operation strengthens the cash level for the end of 2018 and guarantees the company’s liquidity for the beginning of 2019.

The placements performed throughout the year are directed towards the appropriate functioning of the company in compliance with its Business Plan. During the issuance process, talks were held with the transition team for the new Federal Administration.

Investors, mainly from United States, Europe, Middle East, Asia, and Mexico participated in this transaction, which had a demand of 5.9 times the amount placed. Placement agents for this bond were HSBC, J.P. Morgan, Scotiabank and UBS.



Mexico’s AMLO Presses Big Oil To Start Pumping From Recent Finds

(, Tsvetana Paraskova, 16.Oct.2018) — Mexico wants Big Oil to start producing from the recently discovered oil fields in Mexico as soon as possible, incoming President Andrés Manuel López Obrador told foreign executives at a recent meeting, Reuters reported on Tuesday, quoting sources and executives who attended the meeting.

In this first meeting with major international oil companies operating in Mexico, however, the president-elect didn’t give any indication whether new oil blocks will be offered and oil tenders held, according to attendees who spoke to Reuters.

Outgoing Mexican President Enrique Peña Nieto opened up the energy sector to foreign investment in 2013, ending 70 years of state monopoly. Since then, Mexico has held several successful auctions that have attracted oil majors to its oil and gas exploration industry.

However, incoming president López Obrador, who takes office in December, has been critical of the energy reform and has vowed to review the contracts that foreign firms have already signed with Mexico.

In July, Mexico’s energy regulator postponed two oil auctions that were set for September and October to February 2019, after López Obrador takes office this December. Then in August, reports emerged that the incoming administration was thinking of indefinitely halting competitive tenders for oil and gas in Mexico.

Last month, the incoming administration began the review process for a contract with a consortium led by U.S. Talos Energy.

Talos Energy’s chief executive Tim Duncan was one of the executives who met with López Obrador at the first meeting with foreign oil firms at the end of September.
“We know we have to exceed expectations and we’re trying to make sure we do that,” Duncan told Reuters.

López Obrador wants to reverse a decline in Mexico’s oil production as many oil fields are maturing. Mexico’s current oil production stands at about 1.84 million bpd, of which 60 percent is exported.

López Obrador signaled at the meeting that he would put around 20 currently idle drilling rigs of Mexican oil service firms to work for state energy firm Pemex, three executives who attended the meeting told Reuters.

The incoming president still needs to show that he is on board with foreign investments and still needs to hold tenders if he is to meet his goal of reversing the slide in production.



Mexico And Brazil’s Crude Politics

(Foreign Policy, Lisa Viscidi, .16.Oct.2018) — A potential return to resource nationalism could set both countries back.

Until this year, resource nationalism—when a government asserts its control over a country’s natural resources—seemed to be on the wane in Latin America. With oil prices low, state oil companies were struggling, and market-friendly governments had started opening their energy industries to private investment.

In the coming months, though, the region’s two largest economies may both have new leaders who came to power on promises of a return to the old days. In Mexico, President-elect Andrés Manuel López Obrador’s vow to restore Mexico’s state energy companies to their glory days and his emphasis on energy independence from the United States were central to his campaign. Similarly, Brazilian presidential candidate Fernando Haddad (who is polling well behind his rival, Jair Bolsonaro, but could still eke out a win later this month) wants to reassert state oil and power companies’ dominant positions in Brazilian energy markets. Both López Obrador and Haddad have argued that the current Mexican and Brazilian governments, in trying to open energy sectors to private investment, have effectively handed over state assets to foreign companies.

This is not the first time Latin American countries have flip-flopped on resource nationalism. The idea was initially championed in the 1950s and ’60s by Juan Pablo Pérez Alfonzo, the Venezuelan oil minister who helped found OPEC, and Getúlio Vargas, the Brazilian president who created the state oil company Petrobras in 1953. The slogan he gave it: “O petróleo é nosso,” or “The oil is ours.”

In the 1990s, historically low oil prices pushed Latin America’s energy sectors toward privatization. Petrobras shares were floated on the São Paulo and New York stock exchanges. Argentina’s state oil company, YPF, was sold off to private investors entirely. Then, in the early 2000s, as oil prices rose again, governments across the region began expropriating energy assets. A wave of recent reforms, again tied to low prices, encouraged private investment once more. In Mexico and Brazil, however, these reforms were never popular. And so, in both countries, the idea of energy sovereignty, part of a broader economic nationalist and protectionist approach, is again taking root.

For his part, López Obrador has long criticized the energy reform that the current president, Enrique Peña Nieto, signed into law in December 2013. That reform revised the constitution to open the oil and power sectors to greater private investment, creating competition for state monopolies. As a presidential candidate, López Obrador condemned the opening as putting the country’s riches into foreign rather than Mexican hands. Now, he wants to strengthen the state oil company, Pemex. He has vowed to increase Pemex’s investment budget to boost oil production, which has plummeted to 1.8 million barrels per day from a peak of 3.4 million barrels per day in 2004. His goal of 2.6 million barrels per day by the end of his term in 2024 is ambitious.

In order to end imports of gasoline from the United States by 2022, another of the president-elect’s goals, López Obrador plans to build a new refinery in his home state of Tabasco and upgrade six existing refineries, which would add over 1 million barrels per day in output if all existing refineries ran at full capacity. Mexico produces mostly heavy crude oil, much of which it ships to the United States for refining. It then imports about 1.3 million barrels per day of refined products back from the United States for domestic consumption. At the same time, López Obrador has promised Mexican voters a decrease in gasoline prices. The Peña Nieto government had cut gasoline subsidies just as international oil prices started to rise again, causing a 20 percent bump in fuel prices.

In the power sector, López Obrador plans to strengthen the state utility company and expand hydroelectric capacity in Mexico to slash imports of natural gas. In recent years, Mexico has become a critical market for U.S. shale gas as the pipeline infrastructure between the two countries has been beefed up. Cheap U.S. natural gas has also lowered the cost of electricity generation in Mexico, so tapering off the imports could hurt on both sides of the border.

In Brazil, the polarizing right-wing candidate Bolsonaro, who won 46 percent of the vote in the country’s first-round presidential election on Oct. 7, will face Haddad, a left-wing candidate from the Workers’ Party, in a second round later this month.

Bolsonaro has said that he is open to foreign investment, privatizing state companies, and creating more competition in oil and gas markets. He would likely push onward with the Petrobras divestment plan that was started under the current center-right president, Michel Temer. As part of that plan, which was designed to reduce Petrobras’s enormous debt, the company has sold off assets in refining, logistics, and transport to focus on its more profitable core business of oil exploration and production. Continued privatization is worthwhile, but beyond his support for it, Bolsonaro has been widely criticized for lacking any specific energy plan or even a detailed economic agenda.

Haddad, meanwhile, is fairly clear in his support for a return to the resource nationalism favored by his fellow Workers’ Party member former President Luiz Inácio Lula da Silva. Following the 2007 discovery of vast deepwater oil reserves, Lula introduced reforms that increased the government’s stake in Petrobras and made the state company the exclusive operator of the new fields. Temer later signed a law that reversed Lula’s bill, creating more opportunities for private investment in the sector. Haddad has promised to reverse Temer’s reversal and recover the oil to benefit the people. He has also pledged to strengthen Petrobras and to support the development of local industries by increasing local content requirements in oil exploitation and production. In short, Haddad would likely look to slow Petrobras’s divestment to keep energy assets in the state company’s hands and reassert its role as a driver of economic development.

Once in office, the new leaders of Mexico and Brazil will inevitably face challenges to implementing many of their plans. It is unlikely that Brazil’s next president will have enough support in Congress to overturn Temer’s law, for example. Likewise, in Mexico, although the president has broad powers to roll back aspects of the energy reform, only a two-thirds congressional majority—which López Obrador is unlikely to secure—can undo a constitutional reform. And in both countries, the administrations would face major legal challenges if they tried to unilaterally change existing contracts with private energy companies.

And then there’s the budget to think of. New refineries cost billions of dollars, are highly susceptible to corruption, and ultimately won’t lower gasoline prices for consumers. Expanding large hydroelectric dams also takes money, and it presents tremendous social and environmental challenges. Forcing a state oil company to operate all exploration and production projects risks massive corporate debt and a credit rating downgrade—precisely what happened to Petrobras under Lula and his successor, Dilma Rousseff. Meanwhile, strict local content requirements that are not coupled with programs to modernize local suppliers merely slow the development of oil and gas reserves. Despite the discovery of the undersea reserves in 2007—one of the most significant oil finds in the world in years—Brazil’s oil production remained nearly flat for years.

State-led development of energy resources can be very successful. Witness Saudi Aramco, the state oil company that has made Saudi Arabia one of the largest oil producers in the world. But experience in Latin America suggests that giving state companies a monopoly over energy production tends to restrict the industry rather than boosting it. And beyond that, it is worth considering whether it is wise to continue depending on oil to float the economy at all. As many other countries around the world, from nearby Colombia to Saudi Arabia, debate whether the time has come to transition the economy away from dependence on fossil fuels, in Mexico and Brazil, debates over energy policy continue to focus on nationalization versus privatization.

Considering resource nationalism’s poor track record in actually benefiting most citizens, it is time for these countries to shift the focus of policy discussions toward addressing today’s more pressing problems.

Lisa Viscidi is the director of the Energy, Climate Change, and Extractive Industries Program at the Inter-American Dialogue.



Mexico’s Lopez Obrador Pushes Big Oil To Hurry, But Offers Little

(Reuters, David Alire Garcia, Marianna Parraga, 16.Oct.2018) — At his first meeting with foreign oil majors, Mexico’s leftist president-elect pushed the companies to prove themselves by quickly pumping oil from recent finds, sources say, but gave no sign of offering up new fields to reverse dwindling output.

President-elect Andres Manuel Lopez Obrador repeated a promise to respect more than 100 existing contracts awarded following a sweeping five-year-old energy overhaul as long as a review by his team finds no corruption. And he added: companies must show results, three executives who attended the meeting said.

For U.S. independent Talos Energy, which is developing a high-profile, big offshore discovery announced last year along with partners Premier Oil and Sierra Oil & Gas, Lopez Obrador’s message was clear: quickly bring new streams of production online.

“We know we have to exceed expectations and we’re trying to make sure we do that,” said Talos Energy CEO Tim Duncan, one of the executives who attended the session.

At the Sept. 27 meeting, the president-elect also criticized the 2013 constitutional reform for failing to stop an extended output slide.

Operators such as Talos and Italy’s Eni, which also announced a major offshore find last year, are on Lopez Obrador’s watch list to pump oil quickly, said Carlos Pascual, a former U.S. ambassador to Mexico who now helps run consultancy IHS Markit’s global energy business.

“The focus on increased barrels is going to create greater pressure for some companies,” he said.

The oil and gas blocks awarded in bidding rounds over the past three years to companies including Royal Dutch Shell and Chevron will result in $160 billion in new investment, the outgoing government estimates.

Lopez Obrador’s pick to be the new oil minister, Rocio Nahle, did not respond to a request for comment about Lopez Obrador’s presentation.


At the meeting, Lopez Obrador also explained he intends to put some 20 idle drilling rigs belonging to a few Mexican service firms to work for state giant Pemex, according to three executives who attended the meeting.

The executives, who asked not to be named to avoid any ill-will from the incoming government, said they were surprised at the decision to talk up the service contracts for Pemex instead of encouraging much bigger investments the oil companies are capable of making.

A former senior executive with Pemex said the plan could add at most 150,000 barrels per day (bpd) to Mexico’s 1.8 million bpd production in a year, far short of the 40 percent increase to 2.6 million bpd he is targeting during his six year term.

Lopez Obrador is a long-time critic of the energy reform that brought major oil companies to Mexico for the first time in more than 70 years, and has warned he will not offer up more areas for auction.

Oil companies still hope he will soften that position in order to meet his ambitious production goals.

The veteran leftist politician adopted a diplomatic tone at the industry session, said the company executives, and his team even pledged to ease regulatory delays companies face.

“Reality could force pragmatism,” said an oil executive who attended the meeting, arguing it is highly unlikely Mexico could meet Lopez Obrador’s lofty output goal with government spending alone.

As an indicator, firms are closely watching whether oil auctions set for February by Mexico’s independent oil regulator will be canceled or postponed after Lopez Obrador takes office in December.

If that happens, along with the pledge to focus production plans on squeezing more out of Pemex fields with local rigs, outside investment could cool for years in Mexico’s oil patch, home to under-explored shale plays and the country’s potentially lucrative deepwater Gulf of Mexico, according to the executives and sector analysts.

The head of the oil regulator, Juan Carlos Zepeda, has said Pemex would need to dedicate $20 billion each year to exploration and production activities to hit Lopez Obrador’s output goal, about double this year’s budget.

Advisor Rocio Nahle, Lopez Obrador’s pick to be energy minister, said last month Pemex will be allocated about $4 billion for “exploration and drilling” in 2019, without going into detail.

The nearly two hour meeting between Lopez Obrador and oil company executives ended with a promise to maintain “continuous dialogue” going forward

However, there was no question-and-answer period, and following the set speeches, Lopez Obrador and his senior energy aides quickly departed. No new meetings have yet been scheduled.

One attendee bluntly quipped afterwards: “He really doesn’t like us.”



Mexico Plans To Enforce Odebrecht Fines Via Seizure -Official

(Reuters, 12.Oct.2018) — Mexico plans to enforce fines imposed on Odebrecht over corruption allegations by confiscating some $30 million owed by state oil company Pemex to the Brazilian firm, a top official at the public administration ministry said.

Christian Ramirez, coordinator-general of the public administration ministry (SFP), told Reuters on Tuesday that he expected Mexico’s tax authority to seize the $30 million “in the coming months.”

Brazilian construction firm Odebrecht has spent the past few years at the center of one of the largest corruption scandals in Latin America, and has admitted paying bribes from Peru to Panama.

In Mexico, the SFP imposed fines worth some $56.8 million in total on two Odebrecht subsidiaries in April. Since the end of 2017, it has punished several Odebrecht businesses in Mexico, barring them from signing contracts with public bodies for up to four years.

Mexico’s government did not detail the reasons for the fines, but officials said they related to probes into suspected corruption between Odebrecht and Pemex.

Ramirez on Tuesday said the Brazilian firm had “practically left” Mexico and that tax officials who recently visited an Odebrecht subsidiary only found “two computers and a desk.”

Neither Odebrecht in Mexico nor in Brazil responded to requests for comment. In April, the company said it planned to fight the fines.


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Pemex Rolls Out New Fuel Additive To Protect Gasoline Engines

(Pemex, 11.Oct.2018) — Pemex introduced the new gasoline additive that will be added into Pemex Magna and Pemex Premium fuels, the additive will be promoted under the brand name of Pemex Aditec. This fuel additive is environmentally friendly, and will keep the engine up to 97 per cent free of dirt, to promote efficient combustion and higher-powered driving.

This Mexican technological innovation is a competitive advantage for the Pemex franchise, which comprises over 10,000 service stations throughout the country.

During the presentation of the product, led by Pemex Transformación Industrial Executive Director (Pemex Industrial Transformation), Carlos Murrieta Cummings, it was highlighted that this technology maintains engine pistons at peak performance and optimal working conditions, will allow emissions of polluting gases to decrease.

Technical Information about the fuel additive

The new Pemex fuel additive contains detergent agents that maintain the intake valves and injectors of the engine free of dirt. It optimizes the engine’s output, actively contributing to obtain peak performance and reducing polluting emissions.

The additive contains an antioxidant or prevention agent to prevent valves from rusting and deteriorating, as well as an anti-adhesive agent that prevents valves from getting stuck.

It also contains a solvent that contributes to maintain the stability of the compound when mixed with gasoline at different temperatures, to maintain its fluidity into the engine. Furthermore, it contains an emulsion prevention additive, an agent that reduces the formation of emulsions in the engine, as well as a corrosion inhibitor.



Pemex Hopes Gulf Discoveries Mesh With New President’s Goals

(Houston Chronicle, Jordan Blum, 11.Oct.2018) — Leaders of Mexico’s state oil company Pemex initially feared the inevitable election of leftist presidential candidate Andrés Manuel López Obrador, who spoke of rolling back the nation’s recent energy reforms and building new refineries.

Now with López Obrador set to take office in two months, Pemex is seemingly adjusting its priorities to adapt to the incoming president.

Pemex announced new shallow Gulf of Mexico discoveries this week that the company will develop on its own, aiming to undo the nation’s decade-long reduction in oil production and rely less on volumes produced from international companies, including those from Texas.

More conservative administrations in recent years pushed through the constitutional amendments to undo Pemex’s century-long monopoly and open Mexico up to exploration and production from energy companies worldwide. Pemex downsized and focused on becoming a profitable, competitive company.

While those changes won’t be undone any time soon, Lopez Obrador wants to build new refineries and reduce oil and gasoline imports, especially as Mexico is increasingly relying on U.S. companies for fuel and power supplies.

By focusing on new shallow-water oil discoveries that can ramp up more quickly, Pemex now aims to produce more oil for domestic consumption, said Ulises Hernández, director of resources, reserves and partnerships for Pemex, in a phone interview.

“It really fits in with the priorities of the next administration,” Hernández said. “All of these fields are to be developed exclusively by Pemex with no partners.”

Pemex aims to get most of these new discoveries online by the end of 2020 and rely less on U.S. oil and gas from Texas in areas like the booming Permian Basin and the Eagle Ford shale.

“We want to accelerate the development of these fields to supply the necessary light oil for our refining system,” he added.

Pemex will continue to work with other companies for deepwater exploration and production where U.S. and European companies have more expertise.

Pemex said its new discoveries offshore of southeastern Mexico near Tabasco are named Manik and Mulach and – combined with other recent finds in the region – should provide a big boost to oil and gas production volumes in the coming years.

As for the new discoveries, Pemex said the Manik and Mulach plays add 180 million barrels of oil equivalent to its probable and possible reserves. They wells have the potential to produce 250 thousand barrels of oil per day and 600 million square feet of cubic gas, Pemex said. Both new finds are proving much more fruitful than Pemex initially anticipated.

Pemex also touted the potential for its other recent finds in the region that are called the Kinbe, Koban, Xikin and Esah fields.

All of the recent discoveries add up to well more than 800 million barrels of oil equivalent.

Still, there’s the question of whether Lopez Obrador’s proposed multibillion-dollar refining investments will take away from Pemex’s exploration and production.

Pemex Chief Executive Carlos Treviño has complained it is too expensive to build new refineries and that it’s much cheaper and more efficient to overhaul and improve the existing refineries.

“That’s a decision that will have to be made at some point,” Hernández said. “But we will need to produce more oil to meet the refining capacity.”


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Pemex: 2 New Wells Have 180 Million Barrels 3P Oil

(AP, 9.Oct2018) — Mexico’s state-owned oil company says two wells in shallow Gulf of Mexico waters have found about 180 million barrels of proven, probable and possible oil and gas reserves.

The Manik well is about 52 miles (85 kilometers) offshore, and the Mulach is about 11 miles (17 kilometers) offshore.

In April, Manik found two separate reserves, and Mulach found five oil pockets.

The Pemex oil company said Tuesday four other shallow-water fields discovered between 2011 and 2016 will enter production soon.

The Kinbe and Koban fields hold about 325 million barrels of 3P reserves, and the Xikin and Esah fields hold 360 million barrels.

Pemex’s production dropped to 1.88 million barrels per day in the first half of 2018, down from 3.4 million barrels per day in 2005.


Pemex Finds 2 New Oil Fields in Gulf of Mexico

(FT, Jude Webber, 9.Oct.2018) — Mexican state-owned oil company Pemex said it had discovered two new shallow water fields that, combined with other discoveries in recent years, would add production of as much as 210,000 barrels of oil per day and 350m cubic feet of gas.

The Manik-101 A and Mulach-1 fields, in shallow waters of the south of the Gulf of Mexico, could contain so called possible, probable and proven reserves of 180m barrels of oil equivalent and are located near existing infrastructure. The discoveries included light and super light oil, which is the most used by Mexico’s refineries.

Carlos Treviño, Pemex chief executive, said the discoveries represented a “good platform” for the incoming government of Andrés Manuel López Obrador, which takes office on December 1. Mexico’s oil production has been in steady decline since 2004.

Pemex said Manik-101 A was expected to produce 10,000 to 15,000 bpd of oil, while Mulach-1 was expected to produce 20,000 to 30,000 bpd of oil.

Pemex also spelt out expected production at four previously discovered fields — Kinbe, Koban, Xikin and Esah-1.

Kinbe was expected to add 24,000 bpd of oil and 35m cubic feet a day of gas. Koban is expected to produce 46,000 bpd of oil and 219m cubic feet per day of gas. Xikin should add 70,000 bpd of oil and 91m cubic feet of gas. Esah-1 will produce 23,000 bpd of oil and 9m cubic feet of gas a day.

Esah-1 is expected to begin production next year and Xikin in the first quarter 2020.

Total investment in the six fields was expected to be $7bn to $10bn, said José Antonio Escalera, Pemex’s exploration director.

Pedro Joaquín Coldwell, energy secretary, said the new discoveries were among the 10 most important in shallow waters in the last 15 years and said they meant Pemex would be close to reversing the downward trend of oil reserves in the next two years.

The announcement will be music to the ears of the president-elect, who wants to boost production by at least 600,000 barrels per day by the end of his six-year term, including some 280,000 from the private sector.

Pemex’s production sank to 1.816m barrels of oil per day in August and this year’s goal had been 1.951m, but Mr Treviño told an oil congress last month that the output this year would be “significantly” under target and Pemex would need to import 100,000 barrels of light crude a day in October to meet refining needs. He declined to give a new output goal for 2018.

Mr López Obrador has softened his former opposition to a landmark energy reform four years ago that opened Mexico’s energy sector to private investment but nonetheless seized on that as proof that the reform was failing to deliver as expected.

Mr López Obrador has announced a sweeping “rescue” plan for the sector, including a $4bn capital injection for Pemex and construction of a new refinery and improvements to Pemex’s existing six refineries. He has yet to spell out how he intends to pay for the projects but Arturo Herrera, incoming deputy finance minister, told the FT Pemex’s debt would not be increased.

The incoming government has said it will auction service contracts to drill existing Pemex assets but has not yet said whether the next scheduled oil tenders, due on February 14, will go ahead. However, those tenders include shale assets and Mr López Obrador insisted at the weekend that there would be no fracking — the horizontal drilling technique used to extract so-called unconventional resources contained in rock formations — anywhere in Mexico during his term, suggesting that at least the shale auctions would be scrapped.


Pemex Announces Oil Field Find In Shallow Waters Of Southeast Basin

(Pemex, 9.Oct.2018) — Pemex CEO, Carlos Treviño, confirmed the discovery of seven reservoirs in two new wells in Mexico’s Southeast Basin, named Manik-101A and Mulach-1, which will allow the company to incorporate more than 180 million barrels of oil equivalent (MMBOE) of 3P reserves.

Accompanied by Mexico’s Energy Secretary and chairman of Pemex’s Board of Directors, Pedro Joaquín Coldwell, Carlos Treviño outlined the progress the company has done in the two fields as well the development of two other fields that will commence production in the near future.

These new shallow water discoveries will become part of Pemex’s portfolio of fields under development that have been discovered in recent years. The combined peak production of the six fields Pemex is currently evaluating and developing could be up to 210,000 b/d. and 350 MMcf/d of natural gas.

Earlier in April 2018, Pemex drilled Manik-101A in a water depth of 90 meters, reaching a total depth of 4,765 meters. It is located northeast of the Manik field and is between the Ixtal and Ixtoc fields, 85 kilometers from the coast and 102 kilometers from Ciudad del Carmen.

Manik-101 discovered two oil reservoirs, one in the Upper Jurassic Kimmeridgian and another at the Upper Cretaceous horizon. Pemex estimates Manik holds 80 MMBOE of 3P reserves.

Also Pemex successfully drilled Mulach-1 located 8 kilometers from the Yaxche Field and 17 kilometers from Paraiso, Tabasco. This well has a water depth of 21 meters, reaching a total depth of 3,976 meters.

The well discovered five oil reservoirs of light oil in sandstone, dating to the Upper Miocene. Pemex estimates Mulach holds 3P reserve superior to 100 MMBOE.

Treviño also informed that Pemex is assessing its Kinbe and Koban fields, each discovered in 2011 and 2016 respectively. Both are expected to hold important quantities of hydrocarbons.

The Kinbe field is located in the Jurassic rocks and is expected to produce light crude. The field is in a water depth of 21 meters, and a total depth of 5,843 meters.

It is located 28 kilometers from the city of Frontera, Tabasco, the Kinbe-1 well produced more than 5,000 b/d during production trials. Kinbe holds 3P reserves estimated over 120 MMBOE.

Pemex is also delineating its Koban field. Which has a water depth of 11 meters and a total depth of 6,400 meters. The Koban well holds gas and condensate in fractured lime stones of the Cretaceous period with estimated 3P reserves of 205 MMBOE.

Finally, Treviño informed Pemex will soon begin developing its Xikin and Esah shallow water fields. Both fields were discovered in 2015 and hold a combined 360 MMBOE of 3P reserves.

In a water depth of 32 meters, Xikin is located 31 meters from the city of Paraiso, Tabasco. It is in shallow waters 24 kilometers from the coast.

The total depth of the field is located between 6,400 and 7,050 meters and will produce light oil. It has 3P reserves estimated to be around 230 MMBOE.

Additionally, Esah is located 70 kilometers from the coast and 94 kilometers from Ciudad del Carmen, Campeche. The field is in a water depth of 67 meters with a depth ranging 4,200 and 4,700 meters. This field will primarily produce crude, with 3P reserves of 130 MMBOE.

These discoveries are the results of the focus of Pemex’s investments towards areas of greater prospective for oil and they confirm the potential of the Southeast Basin.

Additionally, given its proximity and current infrastructure, its future development will contribute to accomplish the production goals laid out by Pemex in coming years.



Pemex Spill Prompts Evacuations In Mexico

(The Oil&Gas Year, 8.Oct.2018) — Around 300 people were evacuated in the Mexican state of Veracruz as hydrocarbons spilled from a vandalised Pemex pipeline into the Tepeyac creek, which flows into the Coatzacoalcos River, local media reported over the weekend.

According to officials, the spill has also led to the deaths of thousands of animals in a seven-kilometre area and will take months to clean up, necessitating the suspension of fishing activities in the community.

A representative from Mexico’s Secretariat of Environment and Natural Resources characterised the spill as “a problem [affecting] the social and economic structures of the region.”

Local officials have criticised Pemex for its slow response time, saying the company waited around a week to notify authorities and begin clean-up efforts. The city of Nanchital is expected to bring a claim against the NOC for environmental damage.


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Pemex Receives “2018 Most Innovative Award”

(Pemex, 5.Oct.2018) — Pemex Digital, Pemex’s Digital Transformation project, which is spearheaded by the Corporate Office of Information Technology and is supported by Pemex CEO Carlos Treviño Medina and the company’s senior management, received the 2018 Most Innovative Award (Las Más Innovadoras 2018), from Netmedia Research’s IT Masters Mag.

This acknowledgment is awarded to private and state-owned companies that promote the strategic use of information technologies for innovation and value generation. Pemex Digital is such an initiative, which seeks to increase profitability, production, security and efficiency for Mexico’s largest company.

This award assesses the use of new technological tools, outward impact, and tangible results. It is awarded by the magazine’s board of editors, assessed by a Qualification Committee comprised of IT executives from the private sector, former Government officials, experts and senior Netmedia officials. The assessment is then audited and validated by consulting firm PriceWaterhouse Coopers.



AMLO Sees EOR, Pemex Farm-Outs As Key To Boosting Mexican Oil, Gas Output

(S&P Global Platts, Daniel Rodriguez, 4.Oct.2018) — Mexico’s President-elect Andres Manuel Lopez Obrador will allow Pemex to continue farming out projects to boost oil and natural gas production from mature and aging fields, according to a senior adviser to the incoming administration.

The incoming administration, in its oil production forecast for 2024, expects new secondary oil production will produce 380,000 b/d, or 15% of that year’s 2.48 million b/d expected output.

Lopez Obrador is going to be a pragmatist and will evaluate all options available for boosting oil and gas output, Abel Hibert, an economic adviser on the president-elect’s transition team, said at an event Wednesday.

“Pemex can’t do it all alone, from a financial point of view firstly and secondly from a technical know-how” perspective, Hibert said.

When asked by S&P Global Platts if a projected increase in secondary oil and gas was a clear message that Pemex farm-outs would continue under the incoming administration, Hibert responded: “Yes, definitely.”

In a meeting last week, Lopez Obrador sought the support of private operators to continue Pemex’s farm-outs to enhance recovery from mature fields, he added.

“Under Lopez Obrador’s administration, Pemex will be open to continuing farm-outs to exploit mature fields and raise output,” Hibert said.

Pemex is responsible for 80% of Mexico’s proven and probable reserves. In some cases, the company has not been able to produce oil or gas from these resources due to technical limitations or lack of funds, he added.

“The president-elect has described the decrease in oil production as an emergency, so Pemex requires all the support it can get to boost output,” Hibert said.

Pemex’s executive team under the outgoing administration of President Enrique Pena Nieto has an ambitious farm-out program in place that seeks partners for all its deepwater and most of its onshore projects.

In 2017, Pemex said it was looking to farm out as many as 74 clusters composed of 155 prospective production areas and 66 exploration areas, which would represent more than 55% of all its production and 65% of its exploration portfolio.

The company is currently tendering farm-outs for seven onshore clusters in southern Mexico. The auction will be held in February.

Due to a lack of resources, Pemex has been investing the minimum necessary to maintain operations in these areas. If the situation continues, their production will decrease to 14,100 b/d and 90 MMcf/d by 2020, data from Mexico’s National Hydrocarbon Commission show.

However, if Pemex can attract companies to come in and operate these areas, it expects to invest close to $4.65 billion over the life of the areas alongside its potential partners.

With greater resources, Pemex believes production in these areas could be raised to a combined 47,630 b/d and more-than 525 MMcf/d in the medium term.

According to CNH data, the seven clusters held a total of 191.3 million barrels of oil and 951.3 Bcf of gas of proven, probable and possible reserves in January 2017. Also, four of the seven areas have close to 450 million barrels of equivalent oil in prospective resources.

Pemex is also looking in the short term to farm out its Ayin-Batsil shallow water and Maximino-Nobilis deepwater projects. Their combined potential production peak is 280,000 b/d. The company tried unsuccessfully to auction both projects last year.


Mexico’s President-Elect AMLO Commits to Respect Oil Contracts

(Renaissance Oil Corp., 2.Oct.2018) — Renaissance Oil Corp. announced that Mexico’s president-elect, Andres Manuel Lopez Obrador, who will take office on December 1, 2018, assured private energy executives on September 27, 2018 that their contracts will not be canceled if they meet existing terms.

During the meeting with AMEXHI, Mexico’s association of oil and gas producers, which Renaissance is a member of, Mr. Lopez Obrador underlined the importance of the private sector’s participation in developing the oil and gas sector in Mexico and its important role in increasing production in the following years.

Further, Mr. Lopez Obrador’s designated Energy Minister, Rocio Nahle, confirmed the incoming administration’s support for the contracts as well as a commitment to resolving regulatory delays.

“Renaissance is reassured by these developments and encouraged that the Mexican government is supportive of the important role international oil companies, like Renaissance, play in the development of the Mexican petroleum industry,” said Renaissance CEO Craig Steinke.


Pemex to Import U.S. LLS Crude for Oct Delivery

(Reuters, 1.Oct.2018) — Mexico’s state-run Pemex has launched a tender to buy 350,000 barrels of U.S. Light Louisiana Sweet (LLS) crude for October delivery, according to a document seen by Reuters on Monday, a deal that marks the first crude imports in over two decades.

Pemex, which plans to use the foreign crude to supplement its dwindling domestic fuel output, would mostly process the oil at its largest refinery, the 330,000-barrel-per-day Salina Cruz, the company’s chief executive said last week.

Since 2015, Pemex has been considering a crude swap with the United States so it can import lighter oil while exporting its flagship heavy Maya crude. The company finally opted for importing the U.S. light oil on the open market at least until the current administration finishes its term at the end of November.

“(The) Light Louisiana Sweet shall be obtained from conventional fields without being blended, processed chemically or being added with naphtha or condensates,” according to the document detailing the tender’s terms.

Pemex is requesting the cargo be delivered between Oct. 20-22 at its Pajaritos terminal in the Gulf coast state of Veracruz.

Payment will be made 45 days after delivery. Bids will be received until Oct. 3, and must be indexed to West Texas Intermediate crude prices, according to the document.

LLS is a very light crude grade with 38.5 API degrees of density and about 0.4 percent of sulfur content. Tests for choosing the crude to be purchased were completed several days ago, Pemex said.

Pemex’s fuel imports increased 17 percent in 2017 as Mexico’s refining network worked far below capacity. So far this year, fuel purchases have remained almost unchanged at 961,100 bpd as input of light grades to its domestic refineries has been limited. Independent retailers have started importing their own gasoline and diesel on top of that volume.

Apart from a limited oil exchange with the U.S. Strategic Petroleum Reserve in the late 1990s, Mexico has not recently swapped or otherwise imported U.S. crude.

Some U.S. crude exporters have this year sought new customers amid trade tensions between China and the United States affecting the bilateral oil trade.

U.S. crude exports have grown this year. In July, they averaged 2.139 million bpd versus 956,000 bpd in the same month last year, according to the Energy Information Administration.


Obrador’s Government Will Renovate Refineries of Petroleos Mexicanos

(Prensa Latina, 1.Oct.2019) — The government of elected president Andres Manuel Lopez Obrador will make a strong investment to rehabilitare the six refineries presently property of Petroleos Mexicanos (Pemex) in the country, it was known today.

Obrador announced that in the period 2019-2020 they will use with such purpose 50 billion pesos (about three billion dollars).

Refineries are located in Tula, Hidalgo; Cadereyta, Nuevo Leon; Salamanca, Guanajuato; Minatitlan, Veracruz; Salina Cruz, Oaxaca, and Ciudad Madero, in Tamaulipas.

Those industries have had operational problems and México was forced to increase gasoline imports.

Mexico’s Oil Regulator Backs Pemex Picking Its Own Partners

(Reuters, 30.Sep.2018) — Mexico’s oil regulator supports a proposal to allow state-run oil company Pemex to pick its own equity partners for exploration and production projects, the head of the National Hydrocarbons Commission (CNH) said on Friday.

Aides to President-elect Andres Manuel Lopez Obrador, a fierce critic of a four-year-old energy reform, have said the new government will seek to allow Pemex to select the companies it ties up with for oil and gas projects.

The reform required competitive auctions conducted by the CNH to select Pemex’s joint venture partners.

“I agree (that Mexico’s national oil company picks its partners),” said CNH President Juan Carlos Zepeda at an oil conference in the Pacific beach resort of Acapulco.

“I think its good… but what we have to demand and what needs to be established in law is that Pemex does this with at least the same transparency standards that the National Hydrocarbons Commission has used,” he added.

The current selection process in Mexico is rare in oil producing countries, in which national companies are generally free to choose their partners to better suit their own strategies.

(Reporting by David Alire Garcia and Marianna Parraga; Editing by Sandra Maler)


Mexico Must Double Oil Exploration Spending to Halt Output Fall: Pemex

(Reuters, Marianna Parraga, David Alire Garcia, 28.Sep.2018) — Mexico will need to double to about $4 billion its annual oil exploration investment to reverse a 14-year decline in output, a move that will require more funding by Pemex and private producers, a top official with the state-run firm said Friday.

The nation’s oil industry needs Petroleos Mexicanos to invest more than $2.5 billion per year and another $1 billion to $1.5 billion from private companies to fully replace its reserves, Jose Antonio Escalera, the firm’s chief of exploration, said at an energy conference in Acapulco.

Pemex this year expects to invest about $1.65 billion, roughly the same as 2017. Reserves fell 7 percent this year, to 8.48 billion barrels of oil equivalent, and have slid more than 40 percent over the past decade, according to government data.

Escalera made the comments as the administration of President-elect Andres Manuel Lopez Obrador is still formulating its plan for Pemex and has given mixed signals over the future of the landmark energy reform.

Lopez Obrador, who will take office in December, has said he aims to boost Mexico’s oil production by a third to 2.5 million barrels per day (bpd,) from 1.82 million bpd in August. He also wants to increase domestic refining to end imports of foreign fuel.

However, he has been a critic of the nation’s opening of its oil industry to outside firms and has called for a review of the more than 100 exploration and production contracts awarded to oil companies, and a suspension of future auctions, casting doubts on what direction the energy reform will take in coming years.

“The reason why Mexico has seen an output decline since 2004 is not because of lack of potential, it is because it stopped exploring,” Juan Carlos Zepeda, chief of Mexico’s energy regulator National Hydrocarbons Commission (CNH), said at the energy conference.

Pemex said it will not meet its annual output target in 2018, and is likely to see a further slide in 2019.


Pemex is making progress: It drilled 24 exploratory wells in 2017 and 35 are planned for 2018. But stemming the oil output decline will require the country to replace its reserves faster, Pemex and experts interviewed at the conference said.

The country will need $20 billion in exploration investment in the long term to confirm its estimated reserves and increase oil and gas output, according to Pemex’s calculations, a difficult task as prospective oil and gas resources to be confirmed are mostly in deep waters and onshore shale formations that require higher investment and technical knowledge.

As a sign of how it has fallen behind in replacing those reserves, Mexico has drilled 58 exploration wells on its side of the deep water Gulf of Mexico, compared with more than 1,100 on the U.S. side.

“What we need is more activity, even more exploration,” said Monica Boe, Mexico country manager of Norwegian oil major Equinor. She said auction terms could be changed to encourage more exploration activity.


Mexico Oil Auction Winners Stay Positive

(Bloomberg, Amy Stillman, 28.Sep.2018) — Mexico’s oil auction winners BHP Billiton Ltd and DEA Deutsche Erdoel AG are hopeful that the slowdown in bid rounds is a feature of the country’s political transition and won’t be permanent.

“We have expectations that things will pick up again and continue,” said DEA Deutsche chief executive officer Maria Moraeus Hanssen. The company expects to start wells in Mexico in one or two years and is in the process of seeking approval of its development plan for the onshore Ogarrio field that it operates in a joint-venture with Petroleos Mexicanos. It has also won rights to four exploration blocks in Mexico and is the operator of three of them.

Australian miner BHP, which won a 2016 tender to partner with PEMEX in its deep-water Trion field in the Gulf of Mexico, expects to start appraisal drilling before the end of the year and take advantage of higher oil prices, said Steve Pastor, the company’s petroleum operations chief, in a Thursday interview in Acapulco. “The opportunity is very attractive for us to move quickly right now because we’re still enjoying a relatively low point in the cost cycle,” said Pastor.

While Mexico is due to hold competitive bid rounds in February next year, President-Elect Andres Manuel Lopez Obrador has said he could indefinitely suspend oil auctions when he comes into office on December 1. That could see private companies focus their efforts on purchasing stakes of privately-owned oil assets in Mexico.

“At a certain time there will be a secondary market that we are not ruling out,” said Moreaus Hanssen.


Energy Reform To Continue To Reap Benefits For Mexico: Treviño Medina

(Pemex, 27.Sep.2018) — Petróleos Mexicanos CEO, Carlos Treviño Medina, assured that the Energy Reform is beginning to yield important benefits for Mexico by allowing new financial actors to participate that will contribute to the generation of greater wealth for the country.

He stated that this new framework gives the energy sector greater solidity and added that Pemex has more tools to contribute to relevant development in coming years.

This energy reform “is the great reform,” Treviño Medina explained during his speech at the International Forum titled “The Importance and Role of Partnerships in the Development of the Oil Industry in Mexico,” as part of the XIII edition of the Mexican Oil Conference (Congreso Mexicano del Petróleo).

During the encounter he emphasized the confidence that companies from the energy sector have for investing in Mexico and in developing new projects with complete transparency within an appropriate and solid regulatory framework.

“I believe that the Energy Reform has without any doubt proven to be a great reform and I hope that it will continue to bring great benefits to Mexico,” said Treviño Medina who accompanied the BHP Billiton President of Operations, Steve Pastor, CEO and Chairwoman of the Board for DEA Deutsche Erdoel, Maria Moraeus Hanssen, and CEO Grupo Diavaz, Alfredo Bejos Checa on the panel.

Moraeus Hanssen, as well as Pastor and Bejos Checa agreed that the Energy Reform allowed them to gain presence in Mexico which has made dynamic development of the sector possible and with greater benefits for the public.

Moraeus Hanssen explained that thanks to this reform, companies like DEA Deutsche Erdoel are now in Mexico developing projects and consolidating investment plans for the future.

Steve Pastor underscored that this new framework in the energy sector opens the possibility for companies to enter into partnerships with Pemex to promote mutually beneficial projects and stated that the potential to tap into greater benefits is improved through a partnership with Pemex rather than doing it on their own.

Bejos Checa highlighted the benefits that Grupo Diavaz has obtained through this reform that was approved in 2013, which has allowed the company to grow and contribute more to the financial development of the country.

All three agreed that two of the most important reasons for entering into a partnership with Petróleos Mexicanos are the vast knowledge base and know-how of the company, regarding the geography and geology of the fields, as well as regarding the Way of Doing Business in Mexico.

Likewise, the oil companies including Pemex, acknowledged the transparency and order of the opening processes for the participation in farm-outs and migrations.

As the panel’s moderator, Carlos Treviño Medina spoke about the social role of the oil sector as well as the positive impact of the sector in the communities around the country. He especially underscored the importance of the human capital of the sector.

The participants of the panel recognized the responsibility of the Mexican oil sector towards environmental protection and pointed out that the industry is committed to make all necessary efforts to keep this topic always on their work schedule.

In this regard Pemex CEO, Carlos Treviño Medina, mentioned the meeting held recently in New York with other oil companies. Pemex is a member of the Oil & Gas Climate Initiative (OGCI), which has committed to reduce greenhouse gas emissions into the atmosphere to comply with the Paris Agreement signed in December 2015.



Pemex to Begin Importing US Crude in H2 October: CEO

(S&P Global Platts, Daniel Rodriguez, 27.Sep.2018) — Pemex plans to begin importing light crude from the US Gulf Coast in the second half of October, CEO Carlos Trevino told S&P Global Platts.

The imports will enable Pemex to raise its total crude processing to 700,000 b/d-800,000 b/d in the final months of 2018, he said on the sidelines of the Mexican Petroleum Congress in Acapulco Wednesday.

A “question many people ask me is, ‘will this benefit us?’ The definite answer is yes,” Trevino said, adding that the measure will allow Pemex to improve its crude processing and marketing margins.

Trevino did not specify the volume or the terms of the purchase, saying it was competitive, private information. He added that the incoming administration has to decide whether the strategy would continue.

It will enable Mexico’s 330,000 b/d Salina Cruz refinery to raise its operational levels by 100,000 b/d. The refinery lacks coking capacity, preventing it from processing Mexican Maya heavy crude blend at a positive margin, Trevino added.

“We are going to empower Salina Cruz as it is the refinery where we can boost crude processing levels the most,” Trevino told reporters on Thursday at a press conference.

Salina Cruz processed 150,550 b/d in August, compared with a 2018 monthly peak of 236,700 b/d in April and an average of 269,000 b/d for the full-year 2014.

Trevino also told reporters the imports could be used to enhance operations at its other two refineries designed to process light oil: the 315,000 b/d Tula and 220,000 b/d Salamanca facilities.

The optimal and profitable operation of these facilities has been affected by light crude shortages. Tula processed 132,200 b/d and Salamanca 158,320 b/d in August.

Pemex’s light crude production has been skidding lower for some time. Its light crude output was 759,250 b/d in August, down from 861,160 b/d in January and 1.16 million b/d in 2014.

The slide has steepened this year because of seawater invading its Xanab shallow water field in on the Tabasco coastline.

Xanab’s production has been in freefall since January, decreasing its output by 68,200 b/d to 104,400 b/d in August. Pemex produced 1.81 million b/d in August, down from 1.93 million b/d in January.

Trevino said the company is doing its best to solve the “premature” water invasion at Xanab as fast as possible.

In August, the company processed 404,300 b/d of light crude, 60% of its overall slate, compared with 455,800 b/d in 2017 and 651,000 b/d in 2014.

The company is focusing on profitability rather than refining fuel at any cost. For the first time in decades, Pemex’s refining unit posted positive results in 2017, although this led to lower crude processing.

Pemex’s downstream director, Carlos Murrieta, previously told Platts the company has been weighing the costs of importing fuel against refining it domestically.

Murrieta also said the company is going to evaluate the differentials between light and heavy crude oil to decide how much sweet crude it could import.


Interview: Pemex’s CEO Expects FID for Four New Fields in 2019

(S&P Global Platts, Daniel Rodriguez, 27.Sep.2018) — Mexico’s state oil company Pemex expects to make a final investment decision (FID) and begin development of its Ixachi, Pokche, Xikin, and Suuk discoveries in 2019, CEO Carlos Trevino told S&P Global Platts.

These fields are at the top of Pemex’s project pipeline, but their FID will depend on other stakeholders such as Mexico’s Treasury Secretariat, Trevino said on the sideline of the Mexican Petroleum Congress in Acapulco late Wednesday.

“We expect the incoming president will give a great value to these fields in his mission to raise Mexico’s oil production,” Trevino said.

Based on the information available, Platts Analytics estimates the peak production of these four fields could produce a combined 135,000 b/d.

Xikin has 190 MMbbl 2P reserves, Suuk has 50 MMbl 2P and 205 MMbbl 3P, Pokche has 36 MMbbl 2P and 186 MMbbl 3P, and Ixachi with 67 MMbbl 2P and 120 MMbbl 3P.

President-elect Andres Manuel Lopez Obrador has pledged to raise Mexico’s crude oil production to 2.6 million b/d by the end of his term in 2024, up from 1.8 million b/d in August.

Trevino said Pemex is not going to be able to achieve its goal of having a yearly production average of 1.95 million b/d for 2018.

The company will not be able to achieve its goal because of water invading its Xanab shallow water field in Tabasco’s coastline.

Xanab’s production has been in a freefall since January, decreasing its output by 68,200 b/d to 104,400 b/d in August. Pemex produced 1.81 million b/d in August, down from 1.93 million b/d in January.


The great challenge Pemex faces is to decouple itself from the country’s federal government budget in its mission to become a competitive state-owned company, Trevino said.

“It is hard to know what Pemex’s budget will be as long as it will depend on the state of public finances,” Trevino added.

Since oil prices crashed in 2014, Pemex’s upstream capital investment budget was cut by two thirds to $7.2 billion in 2018, making it difficult for the company to develop its production portfolio.

If prices stay at $80/b, Trevino said Pemex’s upstream capital investment budget should return to levels similar to 2014 or 2015, somewhere between $12.7 and $17 billion.

However, the final budget the company will have will depend on the incoming administration, led by President-elect Andres Manuel Lopez Obrador.

According to Mexico’s National Hydrocarbon Commission, Pemex requires an investment of at least $20 billion to be able to develop the acreage it won at hydrocarbon auction round zero.

According to CNH, this will allow Pemex to increase its crude oil production to 1.96 million b/d by 2022 from a bottom of 1.7 million b/d in 2020.

Trevino said that he expects Pemex to reach an inflection point somewhere before 2020, adding that CNH’s projection is the worst case scenario while the state company’s forecast of producing 2 million b/d by 2020 is the best case scenario.

The critical difference between Pemex and CNH’s projections are the permitting times. “We input the shortest approval times possible while they take the maximum allowed times for granting permits,” he added.


Venezuela Faces Fresh Blow With Ship-Fuel Rules Threatening Exports

(Bloomberg, 27.Sep.2018) — New rules forcing ships to use cleaner marine fuels may deal yet another blow to cash-strapped Petroleos de Venezuela SA, an exporter of high-sulfur fuel oil.

From Jan. 1, 2020, vessels will have to switch to less-polluting bunker fuel or be fitted with equipment to curb emissions, under new International Maritime Organization rules. That’s expected to weaken demand for the high-sulfur residual fuel oil produced by PDVSA, pushing prices lower at the same time that the cost of importing clean fuels rises, said Mel Larson, a consultant at KBC Advanced Technologies Inc.

As refiners prepare to produce IMO-compliant fuels that rely on low-sulfur crude oils, sour crude produced by Venezuela and Mexico may be sold at deeper discounts. Meanwhile, demand for lighter distillates, including diesel, is expected to increase. That ultimately will take a toll on the economies of Venezuela, Mexico and Ecuador that rely on imported diesel and gasoline.

“IMO 2020 has the potential to hurt GDP growth in most Latin American economies, especially the ones that subsidize fuel prices,” Larson said by email. “As the cost of imported fuels rise, subsidizing gasoline and diesel will only serve to expand a country’s or company’s debt load.”

Most refiners in Latin America haven’t invested in units that can remove sulfur or crack residuals into more valuable molecules. That puts them at a disadvantage ahead of the rule, which is expected to slash global demand for high-sulfur bunker fuel to as low as 1 million barrels daily from 4 million barrels currently.

By this measure, Petroleos Mexicanos and PDVSA, respectively Latin America’s largest and second-largest exporters of fuel oil, are the ones who have most to lose.

Petroleo Brasileiro SA, on the other hand, is set to take advantage of the fuel shift, according to Guilherme Franca, executive manager of commercialization. Petrobras already exports IMO-compliant fuels and is exploring the re-opening of fuel oil storage tanks in Singapore to better supply bunker fuel markets in Asia.


Pemex Plans up to 100,000 b/d of Light Crude Imports, Says CEO

(Reuters, David Alire Garcia, Marianna Parraga, 26.Sep.2018) — Mexican state-run oil company Pemex expects to begin importing up to 100,000 barrels per day of light crude oil, likely from the United States, from late October and at least until the end of November, its chief executive said on Wednesday.

“A hundred thousand barrels (per day) more or less is what we’re going to import to process and incorporate into our refineries, mostly at Salina Cruz,” Pemex CEO Carlos Trevino said in an interview with Reuters on the sidelines of the Mexican Petroleum Congress in Acapulco.

The imports, planned to run through at least the end of President Enrique Pena Nieto’s tenure in office on Nov. 30, mark a stark shift for historically major crude exporter Mexico, where decades of oil self-sufficiency are a badge of pride.

Years of under investment and declining crude output have severely hampered Mexico’s refineries and helped necessitate the move.

Salina Cruz, like Pemex’s other five refineries, has recently been producing far below capacity due to accidents and operational problems, as well as Pemex’s focus on maximizing the value of its oil even if that means refining less domestically.

“We’re going to mix it with Mexican crude, with some of our mix to be able to process at the levels we want to get back to in refining. We should be around 800,000 barrels (per day of refining in the country’s entire system) by the end of the year,” he added.

Mexico’s refining network can process up to 1.6 million bpd of crude. It has been working this year at around 40 percent.

Trevino said he expects auctions of oil exploration and production blocks scheduled for February, which include the selection of key partners for Pemex, will take place as planned.

“I think there is total certainty” that Mexico’s oil regulator, the National Hydrocarbons Commission (CNH), will carry out the auctions.

Mexican President-elect Andres Manuel Lopez Obrador has said that oil auctions are suspended until contracts already awarded over the past few years have been reviewed, but he has not specifically weighed in on the February tenders.

Pemex, whose oil production and refining volumes have continued declining this year amid the depletion of some of its main oilfields, will not meet its crude output target of 1.95 million barrels per day in 2018.

“We’re going to be considerably below that,” Trevino told reporters at the conference later in the evening, declining to provide a specific volume.

He expects another year of production decline in 2019, even though Pemex had originally planned to stabilize output by then.

Lopez Obrador, who takes office on Dec. 1, handily won Mexico’s presidential election in part by promising sweeping changes to Mexico’s energy industry. His energy team has signaled they want Pemex to select its own partners instead of having them chosen in auctions run by the CNH.

Trevino said the new process would be “easier,” underscoring that the current selection process “costs us time.”


Giving More Money to Pemex Could Hurt The Company

(Energy Analytics Institute, Ian Silverman, 25.Sep.2018) — Contrary to what is thought, investing in Pemex and increasing its production could weaken the oil company, since it hasn’t achieved the profitability necessary to operate with good finances.

The solution is no as easy as just opening the wellhead and allowing production to flow, as Mexicans sometimes think is the case, reported the daily newspaper El Financiero, citing the Pulso Information Director Pabló Zárate. “On the one hand we need more investment, but we also have to see that investments are done with profitability in mind so that Pemex is strengthened and not be weakened,” he said.

The executive added that giving more resources to Pemex doesn’t mean that its level of debt and finances will improve.

“You could end up pushing Pemex into a scheme where it produces more, its activities expand, its income is higher, but its earnings don’t necessarily increase at the same rate,” he said. “[Instead] what you would have would be something bigger but not necessarily stronger,” he concluded.


Pemex, Consortium Sign First Ever Pre-Unitization Agreement in Mexico

(Pemex, 20.Sep.2018) — Pemex and the Block 7 consortium signed the first ever pre-unitization agreement in Mexico.

Petróleos Mexicanos (Pemex) and Talos Energy, as operator of the Block 7 Consortium, announced that Pemex and the international Block 7 Consortium (Talos Energy, Sierra Oil and Gas, and Premier Oil) signed a Pre-Unitization Agreement (PUA) related to certain tracts within the Amoca-Yaxche-03 allocation (assigned to Pemex as part of Round 0) and the contiguous Block 7 production sharing contract (assigned to the consortium by the National Hydrocarbons Commission as part of the first tender of Round 1). Both areas are situated in the offshore portion of Mexico’s prolific Southeast Basin.

This is the first Pre-Unitization Agreement ever to be signed in Mexico. Under the country’s recently revamped legal and regulatory framework, this two-year agreement enables information sharing related to the recently announced Zama discovery and its potential extension into Pemex’s neighboring block. It also sets a clear path for the signing of a Unit Agreement and Unit Operating Agreement in the event a shared reservoir is confirmed, as it establishes a defined process based on international practices to determine the resulting participation of each party in the potential overall development.

As a result of the agreement, both parties will immediately form a Working Group, with the objectives of maximizing operational and informational efficiencies, defining activities on each tract that optimize the collection of data in the area, and reducing any potential hazards, all to maximize the benefits for México. The Working Group will be comprised by legal and technical representatives from the member companies.

The PUA has previously been approved by the Ministry of Energy (SENER).


Pemex CEO Launches Management System at Cangrejera Petrochemical Complex

(Pemex, 19.Sep.2018) — The CEO of Petróleos Mexicanos, Carlos Treviño Medina, launched the Management Assessment System at the Cangrejera Petrochemical Complex, located in the state of Veracruz that will help increase the production value of oil products processed in this center, through the identification of critical inventory items, oversight the plant´s operation, inputs and consumables for production, maintenance and financial performance.

Following up on the visits he has made to strategic Pemex facilities around the country, on Sept. 20 Treviño Medina toured the Cangrejera Complex and the “Lázaro Cárdenas” Refinery in Minatitlán, to oversee operations and get a first-hand account of the concerns and needs of the oil workers stationed in these work centers.

Regarding the Control Center and the Management Assessment System of Pemex Etileno (Pemex Ethylene), the CEO of the state-owned productive company pointed out that launching this system will allow the company to anticipate and manage changes promptly, solve problems and make better decisions using a single system that allows for real-time monitoring of all processes simultaneously from a single location.

He explained that the automated management system is based on information technologies that promote the coordination of efforts through the periodical exchange and analysis of electronic data providing the characteristics of various different analysis and decision-making systems in a single application. “With this system, we integrate key operating, logistics and financial information for online and prompt decision-making,” he said.

In recent weeks, Treviño Medina has kept up an intense schedule of visits to various strategic facilities to oversee their operation. During July and August, he visited the Storage and Dispatch Terminal (TAD) in the state of Querétaro and the Tanker Vessel Calakmul, which is docked at the facilities of the Integrated Port Management of Puerto Progreso, in the state of Yucatán.

He awarded acknowledgments to both facilities for their outstanding compliance with the Order and Cleanliness Campaign.

He also toured the Antonio M. Amor Refinery, located in Salamanca, in the state of Guanajuato, as well as the Dos Bocas Maritime Terminal in the state of Tabasco, where he learned of the progress made on the Command and Control Center that will safeguard this strategic facility.

He was recently at the “Antonio Dovalí Jaime” Refinery in Salina Cruz, in the state of Oaxaca, where he oversaw the progress of the ongoing reconstruction efforts of several facilities that were damaged during the earthquakes that occurred on September 2017.

During his visits, Treviño Medina has expressed his deepest recognition tothe oil workers, who, with their daily effort, commitment and capabilities, have turned Pemex into the largest company in Mexico and one of the most valued Latin American brand names.

“A time of great change is coming, but what we have sown here will endure forever, because Pemex is one of the foundations of Mexico thanks to the strength you have given this great company, which is a source of pride and wealth for the country,” he affirmed.


Pemex Performs Earthquake Drill at 140 Facilities Across Mexico

(Pemex, 19.Sep.2018) — At 13:16 hours, on September 19th a massive, country-wide earthquake drill started and 140 Petróleos Mexicanos facilities participated simultaneously. This country-wide drill is held in Mexico each year to commemorate the National Civil Defense Day and as a day to honor the victims of the devastating 1985 and 2017 earthquakes.

At the Petróleos Mexicanos Management Center (Acronym in Spanish: CAP) in Mexico City, over 12,000 employees were evacuated, 30 percent of whom work in the executive tower. Prior to the drill, a minute of silence was held to honor the victims of both earthquakes.

The drill was supervised directly by Pemex CEO Carlos Treviño Medina and the Corporate Director of Management and Services, Marco Antonio Murillo, from the Emergency Command Center of the company, which is located on the ground floor at CAP building B.

As part of promoting a culture of civil defense and disaster preparedness within the company, which is aimed to promote workers’ safety, the drill allowed for the assessment of current protocols and safety programs in Pemex facilities and test alarm systems, safety and firefighters´ equipment.

After three short bells, members of the safety brigade began to evacuate personnel using established routes to the emergency gathering points, using the slogan: “No running, no yelling, no pushing.”

Additionally, Fire and Rescue personnel from CAP performed a rescue drill for three “victims”, who were taken to the Medical Unit of the Management Center.


Mexico’s New President Should Postpone Oil Auctions: Former Pemex Official

(Reuters, Collin Eaton, 19.Sep.2018) — A former Petroleos Mexicanos board member said on Wednesday Mexican President-elect Andres Manuel Lopez Obrador has enough political support to change the nation’s energy law and should postpone planned competitive oil auctions until the law is revised.

Fluvio Ruiz Alarcon said, following an address at the Baker Institute of Public Policy, the new administration would have the clout in congress to roll back portions of the nation’s landmark energy reforms that opened its oil fields to foreign investment.

Lopez Obrador, who takes office on Dec. 1, handily won Mexico’s presidential election in part by promising sweeping changes to Mexico’s energy industry. One of his aims is to have the state-owned oil company, known as Pemex, select partners instead of having them chosen in auctions run by Mexico’s National Hydrocarbons Commission (CNH).

“Pemex should choose its own allies,” said Ruiz. “The hydrocarbon law says that it is CNH that makes the bidding for the alliance of Pemex. They say, ‘Who wants to marry Pemex?’ They say, ‘Who offers more?’ We want Pemex to choose.”

He also said Mexico should postpone the competitive tenders for Pemex joint ventures scheduled for February until the law is changed.

The Feb. 14 oil auctions are the only ones scheduled and cover 46 onshore blocks in northern Nuevo Leon and Tamaulipas states, including the first shale areas.

The February tender would also feature seven opportunities to tie up with Pemex on onshore projects in the southern states of Veracruz, Tabasco and Chiapas.

The auctions were originally scheduled this year in the waning months of President Enrique Pena Nieto’s term, but were postponed by the National Hydrocarbons Commission (CNH), Mexico’s independent oil regulator which runs auctions and supervises the contracts.

When it announced the later date, CNH officials said they wanted to give interested oil companies more time to evaluate the projects. They also expressed a desire to work with the incoming administration of President Andres Manuel Lopez Obrador.

To date, 17 companies have begun the process of pre-qualifying for the auctions while another eight have done so for the Pemex joint ventures.


Mexico Oil Production to Reach 2.6 MMb/d by 2025: Lopez Obrador

(S&P Global Platts, Daniel Rodriguez, 11.Sep.2018) — Mexico’s President-elect Andres Manuel Lopez Obrador said Sunday he plans to focus on developing and exploring onshore and shallow water areas under the control of state oil company Pemex to boost the country’s oil production.

“We have a projection, and our plan is to have production of at least 2.6 million b/d by the end of the presidential term; additional production of 800,000 b/d,” Lopez Obrador said in webcast press conference.

Lopez Obrador was speaking to journalists after a meeting with Mexican drilling and oil service companies at Villahermosa in Tabasco.

Mexico’s production averaged 1.8 million b/d in July, down from an historical high of 3.4 million b/d in 2004, latest data from Mexico’s National Hydrocarbon Commission showed.

Lopez Obrador said the incoming administration plans to tender drilling contracts in December when his six-year term begins to develop Pemex’s shallow water and inland areas to boost oil production. “We are inviting all companies to participate in these tenders. However, we will have a preference over domestic contractors,” he added.

He said he planned to add Peso 75 billion ($3.9 billion) to Pemex’s exploration and production budget to boost drilling and thus raise output. The tenders will help Mexico reverse its production downtrend by the end of 2019, he added.

Mexico’s oil industry is at a crisis as a result of low public investment in the sector. Pemex in 2017 had an E&P capital expenditure budget of Peso 81.5 billion, down from Peso 222 billion in 2014, the company’s annual financial statements show. The cut in Pemex’s budget resulted in a significant decrease in drilling activity; it drilled 83 wells in 2017, compared with 705 in 2013.

Lopez Obrador blamed the previous administration for Pemex’s lower capital expenditure, claiming it was done on purpose amid expectations the private sector would offset lower activity from the state company. “It has been a complete failure, this wrongly named energy reform,” Lopez Obrador said

The president-elect has historically been an opponent of private participation in Mexico’s energy sector. His critics note Pemex’s spending cuts reflect lower global oil prices after 2014.

The president-elect neither mentioned the long-term nature of the energy sector nor the advances made by Eni at Amoca, PanAmerica with Hotchi and Talos with Zama, where peak production across the three fields could be above 250,000 b/d.

Analysts also point out that Lopez Obrador does not acknowledge that it has been a challenge for Mexico to replace production from the aging Cantarell super field, which produced 2.1 million b/d in 2003 and but 160,000 b/d in July.

Mexico won’t call for new hydrocarbon auction rounds until all 107 contracts awarded to date under the energy reform are reviewed for corruption, Lopez Obrador said.

“The majority aren’t working, there is no investment, but those 107 contracts don’t include all the oil regions in the country, just a fraction of Mexico’s hydrocarbon potential,” he added.

The president-elect did not indicate when this contract review process could conclude. Currently, Mexico’s National Hydrocarbon Commission is organizing two gas-rich auction rounds, which are expected to be awarded in February.

The commission postponed both auctions as well as a Pemex’s auction to farm out seven onshore clusters in southern Mexico from this summer until the coming year, citing a request from the industry for more time to analyze the areas as well as the opportunity to involve the incoming administration in the process.

Lopez Obrador said the state owns all of Mexico’s oil resources, and has greater control over areas that have not yet been assigned. “The greater majority of our oil potential is still under the control of Pemex,” he added.


Concerns Raised Over Contract Release Program in Mexico

(S&P Global, 6.Sep.2018) — Mexico gas market observers have expressed concern that a lack of liquidity and supply guarantees will complicate the final phase of Pemex’s natural gas contract release program, which is designed to allow the entry of new gas marketers.

Mexico’s Energy Regulatory Commission (CRE) last week approved the final phase of the release program, known as PCC for the acronym of its Spanish name. The final rules of the regulation have yet to be published in Mexico’s Official Federal Journal (DOF).

The commission joined the second and third phases of the program as one and set its rules in a motion approved August 31.

In January 2017, CRE approved the program, setting the goal for Pemex to release 70% of its gas marketing contracts under a four-year period.

As of March 2018, Pemex has released 30% of its marketing portfolio, 10% more than the goal established in PCC’s first phase, which began in February 2017.

CRE said Friday the final phase would maintain some first phase rules, including full transparency on offers made to users, and a no-penalty clause to end contracts with Pemex.

Other rules to be retained include one requiring Pemex to provide binding offers to users, and another requiring provision of a base formula to allow comparison of offers from Pemex and new marketers.

The energy manager at one of the largest industrial users of gas in northern Mexico told S&P Global Platts that insufficient access to cross-border pipelines is limiting the entry of new marketers.

“At the time of selecting a marketer, the factors most important for users are the economic benefits and supply warranty,” the manager said.

Industrial users’ largest concern is finding a marketer that can offer a real supply alternative beyond Pemex and CFE, the manager said. “We have seen both state companies have a monopoly in most cross-border pipelines,” he added.


“The PCC’s first phase opened the eyes to users of the supply alternatives beyond Pemex as well as the mechanics and rules of the new market,” he said.

Before Pemex’s gas supply was taken for granted and users didn’t know how to optimize its gas supply and consumption, the manager said.

“For users, the opportunity in the PCC program is to diversify their supply portfolio beyond Pemex,” he added.

“It is true Pemex is still behind most cross-border pipeline capacity, but the PCC program has empowered users by giving us more information and thus increasing our negotiating power to a certain extent,” he added.

Gonzalo Monroy, managing director of Mexico City-based energy consulting firm GMEC, told Platts he has concerns related to PCC’s last phase.

“For this final phase, due to the lack of reliable private supplies, practically everyone will sign with Pemex or CFE,” Monroy said.


The PCC was well drafted, but realistically it has a limited possibility of being applied. It is hard to migrate to a new marketer if it doesn’t have access to reliable infrastructure, Monroy said.

“Contracts have to be sold desegregated in its different components; companies can quit their contract without a penalty; all that is good. But at the end of the day, everything comes down to supply warranty,” Monroy said.

Mexico seeks to have an open access market, but this goal is difficult to achieve due to lack of liquidity and access to cross-border capacity for new marketers, he added.

Market participants have told Platts that the three private companies growing the most in Mexico are Shell, BP and Macquarie.

Monroy said these companies have enough upstream assets in the US to allow them to negotiate with CFE and Pemex for market access in Mexico.

‘However, as a marketer, if you have no bargaining position, no trading chip, you’re hanged,” Monroy said.


AMLO to Continue Drilling Service Contracts

(Bloomberg, Amy Stillman and Eric Martin, 6.Sep.2018) — Mexico’s next president said he will continue with tenders for drilling service contracts starting when he takes office.

“We are preparing the rescue plan for the oil industry that will consist of producing more crude oil soon, and we will need these companies that have experience, most of them national companies,” President-elect Andres Manuel Lopez Obrador told reporters on Thursday in Mexico City. “We are already preparing tenders for the drilling of wells, and we are getting ready because we are going to launch those tenders from the first days of December.”

Lopez Obrador said he will travel to his home state of Tabasco on Saturday to meet with representatives from oil service companies. The meeting will take place with his pick for energy minister Rocio Nahle and the next chief executive officer of Pemex, Octavio Romero, according to a spokesman for Lopez Obrador who asked not to be identified, citing internal policy.

Mexico’s National Hydrocarbons Commission plans to hold auctions for more than 40 blocks and Pemex farm-out deals on February 14.

The leftist leader had previously indicated that future oil auctions, which have lured some of the world’s biggest oil companies, could be suspended or canceled as his government seeks to strengthen Pemex and focus on expanding refining capacity. He has also said that more than 100 oil contracts already awarded to companies such as Royal Dutch Shell Plc, Exxon Mobil Corp and BP Plc are being reviewed.

Pemex’s crude oil output has declined every year since 2004, which Amlo has pledged to turn around with an additional 75 billion pesos ($3.9 billion) for exploration and production investment.


AMLO Plans Massive New Oil Refinery

(, Irina Slav, 5.Sep.2018) — Mexico’s President Andres Manuel Lopez Obrador has plans to build the country’s largest refinery with a capacity to produce 400,000 barrels of gasoline daily, Reuters reports, citing comments by Obrador during a meeting with businessmen in Monterrey.

The refinery would cost US$8 billion to build and construction could start soon, which would see it complete within three years. Though Reuters quoted Obrador as saying, “400,000 bpd of gasoline,” it added in its report that the comments did not made it clear whether he was referring to the crude oil processing capacity of the future facility or its gasoline production capacity.

Currently, Mexico’s refineries have a combined processing capacity of a maximum 1.6 million bpd of crude but, Reuters notes, it has been working at just 40 percent capacity since the start of the year because of accident-caused outages and operational issues. Pemex, which operates the six refineries, also exported more crude as prices improved internationally. In July, the state oil company produced 213,000 bpd of gasoline.

Earlier this year, Rocio Nahle, an adviser to Obrador and the most likely candidate for the Energy Minister job, said “In a three-year period, at the latest, we need to try to consume our own fuels and not depend on foreign gasoline.” This would be bad for U.S. refiners, who export the biggest portion of their production to Mexico. In the last few years, Mexican imports of gasoline and diesel have risen to more than 800,000 bpd, representing over 66 percent of domestic demand.
Mexico’s current oil production stands at about 1.84 million bpd, of which 60 percent is exported. At the same time, according to Reuters, the country imports around 1 million bpd of refined products.

“The commitment is to produce gasoline in Mexico,” Obrador said at the Monterrey meeting. “We want to produce gasoline because we have the raw material, we have crude oil.”

Regarding production, last month Obrador said all oil auctions would be suspended until contracts awarded by the previous government over the last three years are reviewed.


Mexican Fuel Consumption 778 Mb/d: Jan.-Jul. 2018

(Energy Analytics Institute, Jared Yamin, 3.Sep.2018) — During the first seven months of 2018, the average consumption of gasoline in Mexico was 778,000 barrels per day, or 124 million liters per day.

Of the total, approximately 659,000 barrels per day, or 85% of total consumption, corresponded to Pemex Magna, while the remaining 119,000 barrels per day, or 15% of total consumption, corresponded to Pemex Premium, announced Pemex in a Twitter post.

During the same time period, consumption of diesel was approximately 339,000 barrels per day or 54 million liters per day, according to the state oil company.


S&P Confirms Pemex’s Global Rating at BBB+

(Pemex, 31.Aug.2018) — Rating agency Standard and Poor’s (S&P) confirmed the global rating of Petróleos Mexicanos at ‘BBB+’ with stable outlook after its annual review of the company, and modified its individual credit profile from ‘bb’ to ‘bb-‘.

Additionally, the global rating and stable outlook reflect not only the implicit support of Pemex from the Federal Government regarding adverse financial scenarios, but also an improvement in the company’s financial position, such as  adequate liquidity as its cash flow sources are 1.2 times higher than its forecast expenditures for the next 12 months. The ratings agency also underscored that Pemex has started various initiatives to improve its financial balance, which could, in its opinion, gradually improve the company’s profitability and reduce its requirements for financing in the future.

The analysis additionally includes qualitative factors, such as a strong relationship with banks, excellent presence in capital markets and, overall, prudent risk management.

On the other hand, the amendment of the company’s individual credit profile follows production forecasts and is caused by the natural decline of the platform and the restoration of reserves recorded in 2017. According to the ratings agency, the downward production trend is caused by delays in the company’s new projects and the uncertainty associated with the implementation of farm-outs and partnerships.


Pemex Pauses Light Crude Exports: Data, Source

(Reuters, Ana Isabel Martinez, Marianna Parraga, 30.Aug.2018) — Mexico’s state-run oil firm Pemex has not exported light crude since May, according to a source and export data seen by Reuters on Thursday, as it gears up to process more of the oil at its domestic refineries.

Mexico’s President-elect Manuel Andres Lopez Obrador has said he wants to reduce the country’s crude exports and increase domestic production of gasoline and diesel despite a persistent lack of investment in refinery expansion and modernizing.

Pemex’s domestic refining network has underperformed again this year, increasing the need for imported fuel. Mexico has bought 1.19 million barrels per day (bpd) of U.S. fuel this year, a 12 percent increase versus the 1.06 million bpd imported in 2017, according to the U.S. Energy Information Administration (EIA).

Pemex’s lightest crude grades, Isthmus and Olmeca, were traditionally offered and sold on a spot basis, not through long-term supply contracts, so the pause should not affect specific customers, according to a trader from a company that made purchases last year.

In recent years, Olmeca and Isthmus crudes were mostly exported to customers in Asia, according to the trader and Reuters trade flows data.

“Those crude are for our refineries,” said the Pemex source who was not authorized to speak publicly about the matter.

Exports of Isthmus crude declined to an average of 53,000 bpd this year versus 86,000 bpd in 2017, while no barrels of Olmeca have been exported during 2018 compared with 19,000 bpd sold last year, according to Pemex figures.

Conversely, exports of Maya heavy crude, Mexico’s flagship crude grade, has averaged 1.157 million bpd this year versus 1.07 million bpd in 2017. Most Maya crude exports ended up in the United States.

Pemex’s crude output declined to 1.84 million bpd last month, including 1.07 million bpd of heavy grades. Its refineries worked in July at about 40 percent of their joint capacity of 1.6 million bpd, down from 57 percent of capacity for all of 2017.


Pemex’s Oil Workers Donate to Mexican Red Cross

(Pemex, 28.Aug.2018) — Pemex CEO Carlos Treviño Medina, presented the donation of 15,685,324 pesos made by the oil workers’ community in the country as part of the 2018 Fundraiser to the director of the Mexican Red Cross, Fernando Suinaga Cárdenas.

Source: Pemex

He stated that Petróleos Mexicanos’s most important assets are its people, and this fundraiser shows that solidarity is still one of the distinguishing features of the oil workers’ community, which has also translated into hundreds of tons of food and the invaluable support provided by volunteers of the institution during natural disasters, such as the devastating earthquakes of 2017.

During a ceremony that was held this morning at the Executive Tower of the Pemex Management Center, Treviño Medina pointed out that during this administration, the state-owned company has donated over 135 million pesos thanks to the support and commitment of its workers of all levels, members of the Mexican Oil Workers’ Union, as well as the nationwide network of Petróleos Mexicanos volunteers.

“This great institution is always there to come in our aid during natural disasters, which are a danger for all of us. I commend its courage, its contribution, organization and capacity for deployment, as well as its readiness to work side by side with Pemex personnel at any time,” Treviño Medina emphasized.

Mexican Red Cross director Fernando Suinaga thanked Pemex for its contribution on behalf of all Red Cross volunteers and contributors, as, he said, it will be vital to maintain and improve all ongoing relief and assistance operations throughout the country. “Pemex and the Red Cross have one thing in common: we work as a single team for the benefit of all Mexicans,” Suinaga said.

Mrs. Bertha Galván de Treviño, honorary chairwoman of Voluntariado Pemex (Pemex Volunteers); Mrs. Carmen Lebrija de Suinaga, Chairwoman of the Gray Ladies of the Mexican Red Cross; Mrs. Blanca Alencaster de Murillo, honorary co-chairwoman of Voluntariado Pemex; Marco Murillo Soberanis, Corporate Director of Management and Services; and Daniel Aguado Rojas, Adjustments Secretary of the General Executive Committee of the Oil Workers’ Union; as well as senior management officers of the state-owned company and the Trust of the Mexican Red Cross, were present at the event.


AMLO Says NAFTA Preserves Energy ‘Sovereignty’

(Reuters, 28.Aug.2018) — Mexican president-elect Andres Manuel Lopez Obrador welcomed a deal between Mexico and the U.S. to overhaul the North American Free Trade Agreement (NAFTA) that he said preserved Mexican “sovereignty” in the energy sector.

The U.S.-Mexico deal was announced by U.S. President Donald Trump on Aug. 27, putting pressure on Canada to agree to new terms and details that were only starting to emerge. Lopez Obrador said it was important that Canada be part of the deal.

Lopez Obrador, who is scheduled to take office on Dec. 1, said Trump “understood our position” and accepted his incoming administration’s proposals on the energy sector. The text of the new agreement has not yet been made public.

“We put the emphasis on defending national sovereignty on the energy issue and it was achieved,” Lopez Obrador told reporters after arriving in the southern state of Chiapas.

“We are satisfied because our sovereignty was saved. Mexico reserves the right to reform its constitution, its energy laws, and it was established that Mexico’s oil and natural resources belong to our nation,” he said.

Lopez Obrador opposed a constitutional change pushed through by Mexican President Enrique Pena Nieto that opened production and exploration in the energy sector to private capital.

Mexico has already awarded more than 100 oil exploration and production contracts to private companies.

Lopez Obrador has said he would pour resources into state oil company Pemex while still respecting private sector contracts, as long as a review does not find evidence of corruption.

He is expected to slow down or stall the process of offering more contracts to private players.

Jesus Seade, Lopez Obrador’s designated chief NAFTA negotiator, participated in the latest talks between the current Mexican administration and the U.S. Trade Representative to strike the new NAFTA agreement.

Seade said on Aug. 27 that both Pena Nieto’s team and the U.S. had agreed to change language in a draft proposal of the NAFTA overhaul on energy that had previously been a “cut and paste” from the text of Mexico’s energy reform.

The new language still preserved the same ideas and was consistent with Pena Nieto’s reform, Seade said, adding that Lopez Obrador was not seeking to change the legal framework for private energy projects in Mexico.

While the new administration planned to increase production at Pemex, Seade told a news conference in Washington “there will be areas where cooperation with the private sector is needed.”


Pemex Insider Destined for Key Post Under AMLO

(Bloomberg, Amy Stillman, 28.Aug.2018) — 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 percent of the federal budget, down from about 40 percent 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 chief executive officer.

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 million barrels of crude a day during the second quarter, its 13th consecutive year-over-year decline. Its reserves have shrunk by more than half over the past six years.


Mexico’s New President To Deal Blow To Oil Industry

(, Nick Cunningham, 26.Aug.2018) — Mexico will likely halt oil auctions for at least two years, dealing a blow to its oil industry.

Mexico’s president-elect Andres Manuel Lopez Obrador (AMLO) will reportedly suspend oil auctions for at least two years, according to the Wall Street Journal, with some experts believing that his administration won’t hold any new oil auctions at all during his six-year term. He has also vowed to review the 107 contracts already awarded to companies through auctions over the last few years to check for corruption, although he has said he would not try to invalidate them so long as they check out.

Also, AMLO wants to revise some of the energy laws that govern the oil and gas sector, which could dramatically alter the landscape for foreign oil and gas companies. He long opposed the historic reforms that ended seven decades of state control over the energy sector, although he moderated his position during this year’s presidential campaign. Rolling back the reforms would be exceedingly difficult, requiring a change to the country’s constitution.

Instead, AMLO wants more modest, though still significant, legislative changes. The WSJ reports that he will pursue legislative tweaks that bolster the power of state-owned Pemex, while weakening the regulatory body that has pursued a technocratic approach and presided over the oil auctions over the last three years.

AMLO’s desired changes include allowing Pemex to choose its own private-sector partners, without needing the approval from regulators. Current rules require Pemex to partner with the highest bidder for blocks put up for a farm-out. He wants the government to be able to award Pemex with oil blocks directly. And he wants to make Pemex the sole marketer of oil produced by private firms, the WSJ reports.

These changes would amount to a partial rollback of the energy reforms, re-empowering Pemex and government control over the oil sector. Moreover, as president, AMLO chooses the head of Pemex, granting him a lot of leverage over the company. “If licensing rounds are canceled and joint ventures are the only vehicle for entry to the country, it reflects a consolidation of power within” Pemex, Maria Cortez, Latin America Upstream Senior Research Manager at Wood Mackenzie, told Bloomberg in an email. ”That could be viewed negatively by outside investors.”

On top of that, the WSJ says AMLO will push to raise local content rules, which would require a higher percentage of domestic involvement in oil projects. That means that if a company like ExxonMobil or Chevron or some other outside entity wants to drill for oil in Mexico, it would need to source a certain percentage of equipment and services from within Mexico. The idea is to capture a greater portion of the benefits of oil and gas development for the country, while also building up expertise for local industries.

However, many of these changes will be loathsome to the international oil companies, who will view them as onerous burdens that inject higher levels of uncertainty into their investments. Oil companies have repeatedly blamed strict local content rules in Brazil for years of cost inflation and delays.

“If all of this is confirmed, it would send a signal that the continuity of the oil opening may be in doubt,” Pablo Medina, an analyst with Welligence Energy Analytics, a research firm based in Houston, told the WSJ in an interview.

Meanwhile, in addition to the legislative changes to the energy reforms, AMLO’s core energy plan consists of pouring billions of dollars back into Pemex for oil exploration, with a particular focus on revitalizing the downstream sector. He wants $2.6 billion to rehabilitate Mexico’s six aging oil refineries, plus more than $8 billion to build a new refinery from scratch. The idea is to cut down or even eliminate gasoline imports from the United States.

Mexico’s oil production has been declining for over a decade, falling to 1.9 million barrels per day recently, down from 3.4 mb/d in the mid-2000s. The IEA sees output falling by another 130,000 bpd this year, due to the aging offshore oil fields, although that is a narrower decline compared to the 235,000 bpd the country lost last year.

AMLO is aiming to boost production by 600,000 bpd over the next two years, which will be a monumental task. If he is to succeed, AMLO is betting that Pemex will lead the way.


Pemex Industrial Transformation to Challenge Cofece Fine

(Pemex, 26.Aug.2018) — As of today, the Commission of Economic Competition (acronym in Spanish, Cofece) published the fine imposed on Pemex TRI for over 418 million pesos, for allegedly having failed to comply with one of the obligations acquired in October 2016, to restore competition in marketing and distributing 7 oil products.

Pemex Transformación Industrial wishes to state the following in this regard:

– 1) Pemex TRI has complied with all the obligations it acquired with the Cofece to prevent any inappropriate practices in the first-hand competition and sales of  oil products currently under investigation.

– 2) Pemex TRI has worked with the Cofece from the start to correct such practices. Since Pemex TRI assumed the obligations assumed with the Cofece, the company has corrected all the practices that were observed.

– 3) Among the obligations that were acquired, Pemex TRI assumed the obligation to submit an annual report for five years, issued by an external auditor who will accredit that marketers of the oil products under investigation are receiving equal treatment. This report must be submitted during the first quarter of each year.

– 4) Pemex TRI ratified the obligations it assumed on October 11, 2016, and therefore, the obligation to prepare the annual report issued by the external auditors expired on October 11, 2017. From this period onwards, the report was to be issued during the first quarter of 2018. The external auditor’s report was submitted on March 23, 2018.

– 5)However, the Cofece stated that the annual auditing report for the first year was submitted out of time. It claims the report should have been filed during the first quarter of 2017, that is, four months after signing the commitment, which contradicts the nature of the annual report established by the Commission and article 114 of the Federal Law of Economic Competition.

– 6) Pemex TRI will file proceedings before the Judicial Branch to contest this measure, as the fine is in itself illegal and disproportionate.

– 7) Notwithstanding the above, Pemex TRI will continue to promote competition through actions that will further transparency and clarity in its relationships with its clients.