Mexico and the Gradual Restructuring of the Oil Sector

Changes in energy policy, combined with economic pressures, energy-sovereignty priorities and rising domestic demand, are driving a fundamental realignment of Mexico's oil sector—particularly upstream. This is not a crisis; it is a structural shift unfolding in real time. Individually, the moves behind it look unrelated. 

Together, they outline a clear trend: Capital is becoming more selective toward Mexico, and the operational burden is shifting increasingly onto Mexican companies and PEMEX, which has yet to resolve its financial situation. Understanding this reconfiguration requires four lenses at once: the realignment of international operators, PEMEX's financial health, regional competition for capital, and the nascent advance of new contractual frameworks, including fracking.

Private Operators Entering, Exiting, Repositioning.

The first front is the most visible. BP and Equinor returned deepwater blocks, now taken over by TotalEnergies; BP had barely executed its approved investment plan, and its exit likely reflects a low probability of geological success. That explanation is plausible, but it shouldn't be read in isolation: Majors are trimming upstream exposure across multiple countries as part of global capital discipline, while that same capital keeps finding a home elsewhere in the region. Discipline, in other words, means choosing more carefully—not pulling back.

Talos illustrates this realignment quite well, with a few nuances. It reduced its Zama stake by selling to Grupo Carso, while entering Block 29 alongside Repsol to pursue deepwater exploration with a proven technical partner. On the Mexican side, Grupo Carso keeps consolidating its position as the country's largest private E&P player, with stakes in Zama, in Ichalkil-Pokoch (via Fieldwood), and in Ixachi through a drilling contract with Pemex plus the Macavil mixed-contract—positioning it, with further acquisitions likely, as a key force in future production.

Trion offers the counterpoint: real progress, driven largely by a contractual model fundamentally different from the mixed-contract scheme. It is essentially a farmout—a model that could be replicated for Nobilis-Maximino and, arguably, the most viable path for deepwater fields.

PEMEX: Improved Results, Persistent Weakness

The second front is PEMEX. The results for the second quarter of 2026 were positive: operating income of US$4,942 million (reversing the operating loss from the same period in 2025), a 30.3% year-on-year increase in sales and a 9.1% reduction in financial debt. However, the cumulative half-year balance sheet remains negative, and the quarterly improvement does not alter the structural assessment.

As some of us predicted, PEMEX will not reach financial self-sufficiency by 2027. Moody's expects negative free cash flow at least through 2028 and continued dependence on federal support beyond that date. Unlike its global peers, PEMEX has been unable to capitalize on the crude-price rebound, held back by its limited ability to redeploy capital and make commercial decisions at market speed. Closing that gap doesn't require abandoning energy sovereignty—the two can coexist—but it does demand structural agility. The recent deepwater cooperation agreement with Petrobras points in the right direction, though concrete capital decisions remain some way off.

Consequently, the government is finding it increasingly difficult to continue supporting Pemex without endangering the country’s investment-grade rating. This pressure will undoubtedly force the government to consider adjusting the contractual framework to allow greater investment by private operators.

Regional Competition for Capital Intensifying

The third front is geographical: Mexico is no longer competing against itself but with at least fourteen other countries which this year have had open bidding rounds for the same capital. In this regard, Venezuela and Argentina stand out.

The White House has described the oil deal signed by Venezuela with the United States as the largest in history. The deal gives the United States control over a significant portion of Venezuela's proven oil reserves and promises nearly US$100 billion of private investment. Chevron, the incumbent operator that never left, has already announced plans to expand its operations.

Argentina ended May with production at 887,000 barrels per day, marking a 19% year-on-year increase. Vaca Muerta is offering breakeven prices ranging from US$32 to US$49 per barrel, and the RIGI framework provides a 30-year guarantee of fiscal stability. To date, 22 projects totaling more than US$47 billion have been approved under the RIGI.

Fracking and Fair Contracts

The fourth front brings together two elements that are often mentioned in the same breath, but which are progressing at different speeds. Mexico’s willingness to evaluate fracking based on the recommendations of an independent scientific panel is a significant signal to international investors, who are considering whether Mexico is a suitable jurisdiction in which to invest in unconventional resources. However, experts agree that it will take at least three years to get started and that infrastructure and many studies are still needed. 

It is worth clarifying which operator is most likely to be interested in reality. While technical expertise in unconventional resources is certainly held by the major oil companies, it is primarily the domain of a network of small- and medium-sized independent operators — many of whom are based in Texas — who have spent two decades mastering the shale learning curve. It is these companies, not the major oil companies, that possess the operational know-how and cost structure suited to intensive well development. However, due to their size and tighter financial margins, they require particularly attractive contractual arrangements to deploy capital outside their natural market.

Mixed-contracts are not entirely suitable for attracting specialized operators. Therefore, it is important to understand why mixed contracts have only attracted domestic service companies, with no more than 10 contracts awarded and signed, and have failed to attract international operators. The answer largely lies in the design of the contracts, which stipulate a minimum 40% share for PEMEX without requiring a capital contribution, operational control, risk sharing, or legal certainty, among other factors. These contracts would not be optimal for fracking projects unless they undergo substantial changes or farmouts are utilized. On the other hand, according to some specialists, the contribution from the signed mixed contracts would not exceed 9% of total production.

A Selective Reconfiguration, Not a Retreat

Taken together, these four trends do not suggest a sector in decline or retreat, but rather one actively restructuring. New ownership structures, farmout models and partnership arrangements are being tested in real time, and those who move quickly - Grupo Carso, Talos, Harbour, Repsol and TotalEnergies- will likely set the terms for those who follow. Investors and operators with a long-term vision for Mexico should pay close attention now. We must ask ourselves whether the contractual framework is clear enough to convert undecided capital into commitments, and whether the government and PEMEX's decisions can create the conditions to attract what fracking and deepwater development actually require.