Falling Production and Challenges Ahead for Pemex
Mexico’s state-owned oil company, Pemex, has been facing significant declines in the production of liquid hydrocarbons and natural gas. This downward trend has been observed throughout the year, with production levels hitting historic lows, the lowest in 45 years. This situation highlights the challenges facing one of the country’s most important companies.
The decline in production began in August, when Pemex failed to meet its fuel import reduction targets. Additionally, the company’s overall energy business goals fell short of expectations. Despite an increase in locally produced petroleum products, import volumes of gasoline and diesel remained higher than Pemex’s production, due in part to the underwhelming performance of its new oil refinery during its initial months of operation.
The company’s crude production hit a new multi-decade low in September, under the administration of former President Andrés Manuel López Obrador. During his six-year term, Obrador invested approximately $50 billion in Pemex. November was the second month where the country failed to reach its oil production goal of 1.8 million barrels per day, a target President Claudia Sheinbaum had pledged to maintain during her term.
Recent Oil Production Trends in Mexico
According to official figures, Mexico produced 1,747 million barrels per day of liquid hydrocarbons in November. This includes 1.488 million barrels per day of crude oil and 259,000 barrels per day of condensate, a very low-density liquid hydrocarbon product. The country’s natural gas production also hit a new low for the year, at 3,531 million cubic feet per day.
Pemex, which produces 94% of the country’s liquid hydrocarbons and 95% of its natural gas, continues to struggle despite receiving significant government support in recent years. The company’s production has been declining rapidly from its peak of 3.383 million barrels per day two decades ago, particularly in older sites in the Gulf of Mexico, with recent discoveries not meeting expectations.
Future Plans for Pemex
Without significant investments in exploration and production, Mexico may be forced to import crude oil to fuel its local refineries in the next decade, a shift in direction for the country. The decrease in production, combined with a slight increase in refinery production rates and the start of tests at a new refinery, have already impacted crude oil exports.
President Sheinbaum has largely maintained the energy policies of her predecessor, Andrés Manuel López Obrador, except for her strong support for renewable energy sources. However, she has yet to outline plans to reduce the country’s dependence on fossil fuels or address the significant debt facing Pemex, which exceeds $100 billion and poses a challenge to Mexico’s energy sovereignty.