The downfall of Mexico’s state oil company Pemex has lasted for 20 years

Noé Cruz Serrano
The downfall of Mexico’s state oil company Pemex has lasted for 20 years
Pemex and Mexico's destinities are intertwined - Photo: File photo/EL UNIVERSAL

The downfall of Mexico’s state oil company Pemex has lasted for 20 years

Noé Cruz Serrano
Mexico City
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In the last two decades, Mexico and Pemex have gone down in the global ranking of the fossil fuels industry

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Mexico, as an oil country, and Pemex, as the main state company of the sector, went down in the global ranking of this industry in the last two decades.

Neither the reformer attempts of the sector nor its opening since 2017 avoided 20 years lost consecutively in this industry during the governments of Ernesto Zedillo – the last year of his administration – Vicente Fox, Felipe Calderón, Enrique Peña Nieto, and the first year of government of Andrés Manuel López Obrador with which the second decade ends.

In that period, the company generated almost MXN $20 billion in revenues for the sale of goods and services in the national and export markets; nevertheless, Mexico lost 11 places for proven oil reserves.

Did you know Mexicans didn't benefit from the deregulation of fuel prices?

The downfall was also observed at the level of proven gas reserves for Mexico sank 16 places in the global ranking.

As a producer, Mexico descended five places in oil and lost nine places in gas. Meanwhile, it is stagnant in the processing of crude oil and only lost one place.

Regarding the level of crude oil sales, it went from the 11th to the 18th place in the global ranking and went from the 7th to the 16th place on gas sales, according to information of the publication Oil and Gas Journal, Pemex’s Statistics Yearbooks, Energy Intelligence Group (PIW), Fortunes, and the National Fossil Fuels Commission (CNH).

In fossil fuel reserves value, the most important information displays required by governments, the finance sector, and oil companies to define the actions and warrant long-term sustainability, for they are a guarantee to have access to big capitals, Mexico extracted 18,516 million barrels considered proven reserves.

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Nevertheless, this extraction could not be 100% compensated with new fields.

In the end, the volume of proven oil reserves went down from 24.9 billion barrels in 1999 to 6.4 billion on January 1, 2019, according to the CNH.

In that period and due problems like low investment levels in exploration in the industry – for between 2014 and 2016 there was a budget cut of MXN $200 million – or external factors like the fluctuation of crude oil prices, countries like Canada, the United Arab Emirates, Russia, the U.S., Nigeria, Kazakhstan, China, Qatar, Brazil, Argelia, and Norway will occupy the place Mexico held 20 years ago.

The volume extracted in those two decades represents 6 billion more barrels than the current proven oil reserves in Brazil or Argelia, or 2.2 times the proven oil reserves in Norway – the country from which Mexico’s government tried to copy the energy reform.

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Wells depletion
The accelerated extraction of proven crude oil reserves brought effects like the depletion of 20 of the main oilfields in Mexico, among them Cantarell, the main asset in the country for over 30 years and considered the third producer field in the world. It supplied up to 2, 125,000 barrels per day in 2004. Today, it produces an average of 145.4 thousand barrels per day.

According to Pemex reports, this asset had an original volume of oil in site of approximately 16,000 barrels of equivalent crude oil.

Currently, it is in a steep decline phase.

The same happens with the main producer, Ku-Maloon-Zaap, which back in 2013 supplied 863.7 daily barrels on average. In November 2019, it supplied only 770.4 thousand daily barrels.

This situation, according to Pemex reports, has had an impact on the production of crude oil, up to the point that Mexico, as a producer country, lost five places and Pemex, as a company, lost seven places in the global ranking.

In 20 years, the platform of oil production in land and sea fields declined from 3,070,000 daily barrels on average to 1,678,000 barrels.

Did you know Mexico and Pemex are at risk of a rating downgrade in 2020?

Steep downfall
However, the decrease of the 2009-2019 decade that involves the administrations of former presidents Calderón, Peña Nieto, and the first year of López Obrador was bigger than the previous decade: -35.5% versus -7.3%.

One of the direct consequences of the smaller volume of produced crude oil is the increasingly reduced capacity to produce one of the highest-demand products in the national market: gasoline – both Magna and Premium.

The behavior of the production of these fossil fuels can be measured in two moments:

In the 1999-2008 decade, when its production rose from 405.8 thousand daily barrels on average to 451.1 thousand barrels per day.

And, in the 2009-2019 decade, when the drastic downfall of 57.1% took place, going from 472.1 thousand barrels to 202.2 thousand daily barrels on average.

Have you heard Mexico hedged Pemex 2020 oil output to protect from low crude prices?


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