The Mexican government, led by President Claudia Sheinbaum Pardo, plans to present a strategic plan for Pemex (Petróleos Mexicanos), the state oil company, to address its persistent operational and financial challenges. This plan, announced for November 13, is part of a series of structural reforms aimed at modernizing the company while attracting private investment.
According to Víctor Rodríguez Padilla, general director of Pemex, the objective is to maintain national production at 1.8 million barrels per day (bpd). This would be enough to meet the needs of local refineries, but this level of production is threatened by the gradual decline of the company’s major fields, discovered several decades ago.
The limits of service contracts
Since the 1980s, Pemex has relied heavily on service contracts to collaborate with private companies. However, this model is considered obsolete by experts, because it does not encourage an increase in production. “Service contracts are not the answer,” says Miriam Grunstein, a researcher at the Baker Institute at Rice University. According to her, this model does not promote operational efficiency or innovation, while increasing financial losses.
Currently, Pemex operates approximately 250 fields, 180 of which produce less than 1,000 barrels per day. This situation is unsustainable, according to Gonzalo Monroy, CEO of GMEC in Mexico, who emphasizes that these loss-making operations aggravate the company’s debt. At the end of the third quarter of 2023, Pemex owed its suppliers more than $20 billion.
An urgent need for private capital
To stabilize and possibly increase its production, Pemex will need to attract private capital through structured partnerships, such as “farm-outs” or “farm-ins”. The Trion project, a joint venture with Woodside Energy, is a rare example of success. Located in the Gulf of Mexico, this field could add 110,000 b/d to domestic production once fully operational.
However, many experts believe such initiatives should have been launched at least a decade ago. “The lack of long-term planning is one of the most serious problems facing the Mexican energy sector,” says Rosanety Barrios Beltrán, an independent consultant and former official responsible for the 2013 energy liberalization.
An uncertain future
Pemex’s future will depend on its ability to balance modernization and cooperation with private partners. Constitutional reforms are also in preparation, aimed in particular at eliminating certain independent regulators. These measures could affect transparency and competitiveness in the energy sector, according to observers.
Meanwhile, growing debt and steadily declining production threaten the company’s long-term viability. Decisions made in the coming months will be crucial in determining whether Pemex can once again become a key player in the global oil industry or whether it will continue to decline.
