Pemex: What’s There to Celebrate?


Photo: Energía Hoy


On Saturday, March 18, Mexico’s ever-contentious, leftist-to-the-end President Andrés Manuel López Obrador (AMLO) and his team of “Fourth Transformation” zealots will be celebrating the anniversary of the 1938 expropriation of the country’s oil interests.

AMLO’s National Regeneration Movement (Morena) organizers have already predicted a 280,000-person turnout in Mexico City’s central plaza Zócalo for the 85th anniversary fest (although these are the same people who claimed that there were less than 90,000 protesters defending the National Electoral Institution against the president’s Plan B in February, so their counting skills should be taken with a grain of salt).

But whatever the numbers of Mexico’s-oil-is-ours revelers might attend the festivities, the truth is that there really is not all that much to extol about the now-state-run oil giant Petróleos Mexicanos (Pemex).

Yes, at age 85, Pemex is as moribund as most human octogenarians, and it is sinking in debt, with outstanding financial obligations of more than $108 billion, making it the world’s most-indebted oil company.

And to make matters worse, Pemex will have to pay down some $8.2 billion in loans that come due this year and another $9 billion more in 2024.

Ever since he took office in December 2018, López Obrador has been devising ways to bail out the depleted oil company, pouring more than $45 billion in cash into the company over

And while Pemex, with the president’s deep pockets (fed by Mexican taxpayer dollars), has managed to trim down a sliver of its debt thanks to high oil price — registering a profit of about $1.2 billion in 2022, at least according to government statistics — most of those profits were consumed by higher gasoline import costs and internal overhead.

When AMLO came to office, he promised that within a year Pemex would be producing 2.6 million barrels of crude oil daily. Now he is projecting that the company will reach 2 million barrels a day by 2024. Talk about lowering expectations…

The truth is that Pemex is at corporate death’s door, registering under AMLO a significant drop in production, a decline in untapped reserves and a downturn in international oil prices.

The country’s antiquated oil refineries can only produce about 30 percent of national demand, which means Mexico is a net importer of gasoline, and even the promise of the ever-delayed, ever-more-expensive Dos Bocas refinery is no guarantee that the country can become self-sufficient in fuel production.

And while AMLO has made a great show of  playing shell games with figures to create an illusion of a fresh influx of investment capital to revitalize a rapidly crumbling Pemex, the Big Three international rating agencies (Fitch, Moody’s and Standard and Poor’s), the International Monetary Fund (IMF), the Organization for Economic Cooperation and Development (OECD) and even the Bank of Mexico (Banxico) have all essentially said that Petróleos Mexicanos is the equivalent of a massive financial black hole that is dragging the entire national economy into collapse.

These experts have said that it would take an annual input of between $13 billion and $18 billion a year just to get Mexico’s oil production back at its previous levels of 940 million barrels a day.

The fact of the matter is that one of the reasons that Mexico’s crude oil production has dropped off so dramatically over the past decade is that output from mature fields has tapered off.

In other words, the cow has run dry and is no longer producing milk. The goose with the golden eggs has stopped laying them.

Despite a landmark Energy Reform by AMLO’s predecessor, Enrique Peña Nieto, in 2013, which was intended to free up the Mexican hydrocarbon industry by allowing foreign investment, there have been no major new startups to compensate for that production slowdown.

As a result, Pemex, which is the key source of revenues for government coffers, has become a financial albatross with dwindling outputs and increasing debt.

Yes, AMLO and his team are planning a blockbuster party on Saturday to celebrate  the glorious 85-year history of the state-owned oil mammoth.

But, sadly, that mammoth is an antiquated mastodon on its last legs that is threatening, with the help of AMLO, to bring down Mexico’s entire national economy.

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