How PEMEX Can Bridge the Gap Between Investment and Production

Recent operational and financial disclosures by PEMEX offer a revealing snapshot of the current state of Mexico’s upstream sector.

In 2025, the company reported payments of more than MX$582 billion (US$33 billion) to suppliers and contractors, including MX$192 billion channeled through the financial support mechanism coordinated with the Ministry of Finance (SHCP) and Banobras.

Capital investment reached MX$140 billion, with 77% allocated to Exploration and Production (E&P), the segment responsible for generating reserves and sustaining hydrocarbon output.

On the operational side, liquids production appeared to stabilize toward the end of the year at around 1.64 million barrels per day, while natural gas output with partners reached approximately 3.9 Bcf/d in December 2025.

Yet, the broader production trend tells a different story. Average crude oil production declined by nearly 8% compared with 2024.

This contrast highlights a structural issue that increasingly defines the performance of Mexico’s upstream sector: the challenge is no longer primarily financial.

The industry today has both capital resources and technical capability. The real bottleneck lies in the system’s ability to translate programmed investment into executed operational activity at the pace required by the industry.

In other words, the key issue is not the availability of investment, but the efficiency with which investment becomes projects in the field and production in the market.

Ensuring that projects move from budget allocation to operational execution without unnecessary administrative or contractual friction has become one of the central challenges shaping upstream performance in Mexico.

When Operational, Contractual Logic Diverge

Exploration and Production activities operate according to a strict operational sequence. A typical upstream project advances through a predictable chain: well engineering and planning, mobilization of equipment, drilling, well completion, installation of production infrastructure, and ultimately the commissioning of the asset.

Each phase depends directly on the previous one and determines the timing of the next. When operational planning and contractual implementation advance in sync, projects progress efficiently. Equipment is mobilized according to schedule, specialized crews remain deployed, critical materials arrive on time, and technical decisions are processed within the natural rhythm of field operations.

Under those conditions, capital investment quickly translates into executed activity and incremental production.

However, when administrative timelines become misaligned with operational schedules, the sequence breaks down. Operational continuity is disrupted. Project costs increase. And the economic value of the asset is pushed further into the future.

This challenge becomes particularly visible in complex operational environments where multiple specialized services must be coordinated simultaneously including drilling, cementing, completions, surface services, artificial lift systems and fluid management.

When contractual frameworks fragment these activities across numerous independent agreements, the number of operational interfaces multiplies. Each transition introduces additional technical validations, administrative reviews and approval processes.

Even when these procedures are justified from a governance standpoint, they introduce delays that were never contemplated in the original operational schedule. Oilfield service companies have long observed a clear pattern: predictability drives efficiency.

When execution conditions are stable and foreseeable, suppliers can plan inventories, maintain specialized crews, ensure equipment availability and optimize logistics. When implementation becomes unpredictable, coordination costs rise and nonproductive time inevitably increases.

For this reason, productivity in Exploration and Production cannot be understood solely in terms of investment volumes or technological capabilities. It also depends on the capacity of the contractual framework to align with the operational dynamics of oilfield development and allow the technical sequence of projects to unfold without unnecessary interruptions.

Enabling Contracts, Operational Continuity

Within this context, the concept of an “enabling contract” should be understood in strictly operational terms. An enabling contract is one that allows the technical activities of an oil project to be executed continuously and within the operational windows defined by the development plan.

Rather than fragmenting closely related activities across multiple agreements, enabling contracts integrate them under a single contractual framework aligned with the operational sequence of the project.

This approach allows technical coordination across disciplines to occur within a unified planning and supervision structure, helping maintain the continuity of operational campaigns while reducing the risk of delays between project phases.

In practice, this type of contractual architecture generally incorporates three key elements. First, a sufficiently broad operational scope, capable of covering the full sequence of activities required for a project, thereby avoiding the need to award multiple independent contracts for closely interconnected services. Second, clear mechanisms to process reasonable technical adjustments during execution, recognizing that reservoir behavior and well conditions frequently require operational adaptations that should not trigger entirely new administrative procedures. Third, an operational governance structure with decision timelines aligned with field operations, ensuring that technical approvals can be processed within the real operational calendar of the project.

Importantly, adopting this type of contractual design does not imply weakening oversight or reducing transparency standards. On the contrary, concentrating supervision, performance monitoring and compliance mechanisms within a clearer contractual framework can actually strengthen traceability and accountability.

For an organization with the scale and operational complexity of Pemex, where multiple projects are executed simultaneously across several regions of the country, reducing administrative friction between operational phases can translate directly into greater efficiency and improved production outcomes.

Ultimately, the value of enabling contracts lies in their ability to align administrative timelines with the geological and operational realities of upstream development.

When this alignment is achieved, investment allocated to Exploration and Production converts more rapidly into operational activity and operational activity translates more efficiently into production.

Implications for Unconventional Resources

These questions of operational execution are becoming even more relevant as Mexico reassesses the potential development of unconventional hydrocarbon resources.

President Claudia Sheinbaum has indicated that the federal government is evaluating the technical feasibility of unconventional gas development under stricter environmental and social conditions.

Mexico’s resource base remains substantial. The country holds an estimated 112.9 billion barrels of oil equivalent in prospective resources, approximately 57% of which correspond to unconventional shale formations, primarily located in northeastern basins.

The potential of these resources was first highlighted internationally in 2013, when the US Energy Information Administration (EIA) identified Mexico’s shale formations as a geological extension of the prolific Eagle Ford play in South Texas.

These formations are concentrated mainly in the Burgos, Sabinas and Tampico-Misantla basins, where geological continuity with US shale systems has long attracted industry attention.

Yet, unconventional resource development cannot be approached as a collection of isolated projects or a limited number of exploratory wells.

International experience, particularly in the United States, demonstrates that shale development depends on sustained operational campaigns, where productivity emerges from the systematic repetition of drilling and hydraulic fracturing operations combined with highly coordinated logistics across multiple specialized services.

For that reason, any serious discussion of unconventional development inevitably leads to a broader question: the architecture of execution.

Technological capabilities in this field have evolved significantly over the past decade. Key advances include water recycling and treatment systems that reduce freshwater consumption, improved fracture design that better confines stimulation within target formations, and high-precision microseismic monitoring technologies that allow real-time tracking of fracture propagation.

However, even with these technologies readily available in global markets, the success of unconventional projects ultimately depends on organizational and contractual capacity.

Developing these resources requires implementation frameworks capable of coordinating drilling, completions, fluid management, logistics, environmental monitoring and operational supervision within integrated execution models. Without that level of coordination, the efficiency gains that define successful shale developments are difficult to achieve.

From Policy Decisions to Operational Results

If Mexico ultimately decides to move forward with pilot projects for unconventional resource development, international experience suggests that operational continuity will be one of the decisive factors in determining their technical, economic and environmental viability.

More broadly, the discussion surrounding productivity in Mexico’s upstream sector increasingly centers on the system’s ability to convert energy policy decisions and budget allocations into projects executed efficiently in the field.

Investment and geological potential are essential components of that equation, but they are not sufficient on their own. Bridging the gap between planned investment and operational execution will require contractual and organizational frameworks capable of supporting the operational realities of the industry.

When those frameworks are in place, the sector can reduce friction, accelerate production timelines and ensure that investment translates more effectively into tangible results.

Ultimately, strengthening the efficiency of upstream execution will play a key role in advancing one of Mexico’s long-standing strategic objectives: achieving greater energy sovereignty through the responsible development of its hydrocarbon resources.