More Changes to PEMEX Needed, Says Former Board Member

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The second day of Mexico Oil & Gas Review 2020 opened with oil and gas analyst Fluvio Ruiz Alarcón, who shared his deep knowledge on PEMEX and Mexico’s oil history to locate the company in today’s market, highlighting the problems it has faced and changes that may come in the future.

Ruiz Alarcón, a former independent board member of PEMEX, said that the Energy Reform had been driven by the country’s need to use the historically-strong oil and gas industry as a force for economic development despite its rapidly dwindling production rates. “From my perspective, Mexico’s falling production pushed the Mexican state to correct the oil industry. Nevertheless, this did not change its role in economic development. That is to say, with the Energy Reform in 2013-2014, other participants were added to the oil industry to try and correct the falling production rate,” said Ruiz Alarcón.

The root of this problem came around 1981, according to Ruiz Alarcón, when PEMEX’s objectives were changed from those set in 1950 by former PEMEX Director Antonio J. Bermúdez. From 1950 to 1981, PEMEX’s aims involved national considerations, including ownership of national resources, self-sufficiency in energy, contributing to the public purse and improving the lives of oil industry workers. However, in 1981, following the global oil glut, PEMEX’s role was transformed to a financial and economic tool.

The Energy Reform arrived with the intention to support PEMEX’s rehabilitation but decisions made from within the company meant that, in some cases, the NOC’s needs were not met, said Ruiz Alarcón. "I witnessed how Round 0 became an example of how the Energy Reform is more aggressive towards PEMEX than what was intended,” he said.

Though the Energy Reform provided important changes like limiting the emission of new PEMEX policies, the NOC remains under threat. Now, with PEMEX still struggling under a heavy debt burden, Ruiz Alarcón believes further changes will be made to the structure and role PEMEX will play within the Mexican economy.

"New institutional adjustments can be expected regarding the role that PEMEX will have in the Mexican oil and gas industry in the future,” he said.

Among those suggested, he noted the separation of PEMEX’s accounting from the national public accounts, along with a further reduction in the company’s tax regime, the prioritization of national oil production for domestic demand and an increase from 0.65 percent of oil income to 1 percent to be allocated to scientific research and technological development.