/
Analysis

The PEMEX 2023 Blueprint: An Overview

By Pedro Alcalá | Tue, 01/21/2020 - 20:26

The administration’s full commitment to revitalize PEMEX has been its primary goal and the dominating force in the process of shaping its oil and gas strategy. At the core of this process is the PEMEX Business Plan, which had been the source of expectations and speculations during the first few months of President López Obrador administration. The plan was published in July, generating reactions from private and public institutions in the energy, financial and industrial sectors. It details the company context both nationally and internationally and outlines its priorities, presenting 11 strategic objectives, each with its respective subcategories that seek to synthesize its goals. 

The first objective deals with the fiscal areas of opportunity for PEMEX: “Strengthening the company’s financial situation.” One of the main purposes of the business plan was to address the concerns of financial institutions both national and international, particularly credit rating agencies such as Fitch, Moody’s and S&P. PEMEX’s debt is a major concern, last reported to be a whopping US$99.6 billion, a figure the NOC has struggled with throughout the past decades due to its oversized tax burden. Modifying this fiscal situation had been discussed to no avail in many administrations. 

The second objective calls for “accelerating the incorporation of reserves to ensure the sustainability of the company.” This addresses the concern echoed by CNH commissioners and analysts that the NOC’s asset portfolio is predominantly composed of mature fields in the final stages of their productive life. This objective calls for the intensification of exploratory activities in shallow waters and onshore fields due to their shortterm potential. This initiative seeks to correct the limited investment in exploration campaigns of the last years, resulting from the downturn’s general impact on upstream investment, and seeks to incorporate new discoveries, such as Ixachi.

The second objective is tied to the third one, which is the one the government has been most vocal about: increasing hydrocarbon production levels. By the end of the presidential term in 2024, PEMEX has committed to a 2.6MMb/d production goal. According to calculations from third parties, reaching this milestone would imply the depletion of over half of PEMEX’s current 1P reserves. Included in this objective is the development of newly discovered reservoirs and the prioritization and execution of all exploratory and drilling activities necessary for the recategorization of probable and possible reserves into 1P reserves. 

The fourth objective is the reconfiguration and upgrading of production facilities. This is meant to be one of the categories in which PEMEX seeks to address its aging infrastructure, particularly in flagship mature fields such as Cantarell. It is also meant to address the economic need to apply new technologies and build new state-of-the-art facilities with the purpose of saving as much money as possible in the production of each barrel; CAPEX investments in renovation projects can generate these necessary OPEX savings through new efficiencies. In other words, PEMEX must implement ultraefficient best practices into its operations, especially when technologies that can reduce costs have taken precedence.  

The fifth objective is worded as “increase the reliability and security of operations.” This can seem very general and perhaps even vague,but its content is defined in subcategories. One is to “give certainty to the measurement of hydrocarbons, refined oil products and petrochemicals throughout the value chain.” This refers to the lack of standardization in PEMEX’s processing and distribution infrastructure and measuring instruments throughout the value chain.

The sixth objective, promises to “provide coordination and support services in an efficient and timely manner, applying ethics, transparency and honesty.” This objective is primarily concerned with PEMEX's human resources. In a broader sense, its subcategories are the platform through which the government can relaunch PEMEX as an active player in the development of Mexico's economy.

The seventh objective calls for an increase in the production of fuel and petrochemicals. This objective is portrayed in public discourse and media coverage, especially when referring to one of PEMEX’s most ambitious projects: the construction of the new Dos Bocas refinery. While the construction of the refinery is not mentioned in the plan's subcategories, there are references that indicate that PEMEX's refining capacity is to be increased both through the completion of the new refinery by 2022 and also through the intervention and modernization of PEMEX’s six existing refineries, most of which are operating at half their capacity or less. 

PEMEX's eighth objective is to “strengthen marketing and ensure the supply of petroleum products in an efficient and timely manner, while offering quality services.” The best way to understand this objective is to think of it as the development goal of a private company. What it references is PEMEX’s position within increasingly privatized national markets in a state of accelerated transition, such as the fuel retail market. This calls for the NOC to “strengthen the value proposal, customer service and the recognition of the PEMEX brand to improve its competitive position in the products and services markets.” PEMEX gas stations are no longer the only player in Mexico. Internationally-recognized IOCs such as BP, Total and Shell, each with their own added value and products, such as fuel additives, are established in the country.

The next two objectives also respond to the need to optimize internal PEMEX processes and structures, resembling those of private companies in terms of regulatory and operational efficiency, reliability, social accountability and environmental performance. The ninth objective highlights the need to “improve the management and efficiency of operational and administrative activities,” with an emphasis on “ensuring the transfer of knowledge.” The 10th objective addresses the need to increase social responsibility and decrease environmental impact.

The final objective demands that PEMEX “ensures the physical integrity of facilities and information systems.” This objective makes explicit the correlation between PEMEX’s plans and the national strategy to mitigate nationwide criminal practices such as fuel theft and the growth of an illicit fuel and crude market. It has also become particularly prescient on the cybersecurity front given the recent kidnapping of PEMEX’s computer systems by an anonymous hacker. 

Pedro Alcalá Pedro Alcalá Senior Journalist & Industry Analyst