To Keep Investors, PEMEX Must Upgrade Environmental Efforts

PEMEX is preparing to strengthen its environmental efforts to retain its bank financing and investors. The NOC’s debt has soared to US$107.7 billion as the company is under pressure from stakeholders to cut its carbon footprint. 

While benchmarking and reporting ESG metrics is not mandatory, these criteria are now essential for measuring risk regarding how sustainable a company is. And it is becoming increasingly relevant for investors that business models align with sustainability. ESG ratings provide analytical tools that help the financial sector to make more informed investment decisions.

Therefore, the state-owned company is updating its safety and environmental procedures to ensure it can attract financing from banks and investors demanding more robust ESG standards from fossil fuel companies.

Among the banks supporting the NOC to develop a long-term plan to enhance its ESG track record are Banco Bilbao Vizcaya Argentaria SA, HSBC Holding and BNP Paribas. They are helping the NOC.

PEMEX has recently been accused of increasing its gas flaring despite its commitment to decrease this practice. The NOC signed a partnership with the US Environmental Protection Agency (EPA) and received US$2 billion in government funding to curb its methane emissions by 98%.

At the end of 2022, PEMEX announced that it would invest the money to reduce the amount of gas lost through flaring at Ixachi. The investment plan comprises both PEMEX’s own resources as well as international credits for the refurbishment of the Papan Measurement and Control Station.

PEMEX has previously said its failure to properly maintain and refurbish its gas processing centers as one of the main reasons the hydrocarbon is released into the atmosphere. Ixachi, for example, still lacks the crucial infrastructure to commercialize its abundant gas reserves. Heavy machinery has only just started clearing dense vegetation to allow for further construction.

Moreover, in Nov. 2021, the NOC signed the Global Methane Pledge to cut its methane emissions by 2030. However, Mexico appears to be moving in the opposite direction, as recent images published by the media show the increased gas flares from the Papan Plant at the Ixachi field in Veracruz.

PEMEX, followed by CFE, was rated as 2022’s global companies most at risk for non-compliance with ESG benchmarks, according to the research institute México Evalúa. Experts argue that PEMEX must now upgrade its policies to reduce their negative impact on the environment and neighboring communities.