PEMEX 2025–2035 Plan Pragmatic But Risks Remain High: UBS

UBS sees PEMEX’s freshly unveiled strategic plan as more pragmatic than past blueprints, but still riddled with execution risks that could leave the NOC dependent on government support well beyond the 2027 target. In a research note, the bank said the plan’s production goals are more realistic than those of the previous administration, and welcomed a renewed focus on exploration, debt reduction, and private participation. But UBS warned that PEMEX’s track record of underperformance, structural inefficiencies and financial liabilities cast doubt on the company’s ability to meet its objectives.

President Claudia Sheinbaum, supported by her energy and finance ministers as well as the CEOs of PEMEX and development bank BANOBRAS, presented the 2025–2035 plan on Aug. 5. The centerpiece is a bid for PEMEX to become financially self-sufficient by 2027, at which point budgetary transfers from the Treasury would end. To help bridge the transition, authorities will create a special purpose vehicle (SPV) that will channel MX$250 billion into PEMEX investment projects over the next two years. Banobras will provide half of the funds, while commercial banks and private investors will cover the rest. The SPV will be backed by the Finance Ministry and repaid with revenue streams from the projects.

The strategy calls for stabilizing oil production at 1.8MMb/d including condensates and private output, up from 1.6MMb/d today. To achieve this, the NOC will intensify exploration to extend its reserves-to-production ratio to 10 years, from 8.5 years at present. The plan also highlights boosting natural gas production to reduce dependence on imports from the United States, largely through service contracts with private partners.

Refining remains a pillar of PEMEX’s strategy. Authorities pledged to fully integrate the Dos Bocas and Deer Park refineries and modernize Tula and Salina Cruz, aiming to raise refining utilization rates to 75% by 2027 from 54% today. Government officials said this could turn PEMEX into a net fuel exporter as early as 2026. The NOC will also seek to revive its petrochemicals and fertilizer units by raising output of ammonia, ethylene, polyethylene and urea.

Beyond hydrocarbons, the company is being tasked with building four cogeneration plants totaling 2,750MW, which should cut CO2 emissions and lift energy efficiency. The plan also emphasizes an eventual transition from oil producer to broader energy company, with projects in solar, wind, geothermal, hydrogen, biofuels, and even lithium.

UBS analysts noted several positive elements. The target of 1.8MMb/d is modest compared with PEMEX’s past overly ambitious forecasts. Roughly 84% of investment is earmarked for exploration and production, a pivot away from the downstream-heavy spending of the López Obrador years. The introduction of mixed contracts, allowing the NOC to partner with private firms while retaining at least 40% ownership, could attract much-needed expertise and capital. According to the plan, such contracts could add 274Mb/dd of output by 2035, offsetting some of PEMEX’s expected production declines. The government has also taken steps to ease the NOC’s borrowing costs, such as issuing US$12 billion in pre-capitalized notes in July, which recently led Fitch to upgrade Pemex’s rating by two notches.

Still, UBS stressed that execution risks are high. Even “conservative” PEMEX targets have historically fallen short as production continued to erode. The breadth of the plan, from refining integration to petrochemicals, power generation, and renewables, raises concerns about overstretching the company’s capabilities. Funding is another challenge: the MX$250 billion package may not be sufficient to cover the wide scope of projects, leaving PEMEX vulnerable if revenue assumptions falter. The company is counting on an 8% rise in sales, but if crude output lags, Mexico may even have to import oil to feed its refineries.

Debt remains a pressing issue. The plan sets a goal of cutting short-term debt by 32% this year and overall debt by 10%, with the Finance Ministry continuing to help extend maturities. Yet supplier debt, which reached MX$430 billion at the end of June, remains unaddressed. Meanwhile, PEMEX has announced austerity measures, eliminating advisory roles and trimming labor costs, with expected savings of MX$50 billion between 2026 and 2030. Whether those savings materialize remains uncertain.

Another question mark is whether private firms will respond to the new contractual schemes after years of policy reversals. Mexico has swung from opening its oil sector to closing it and now to a partial reopening. That policy volatility, UBS noted, may keep some investors on the sidelines, particularly in gas development. In addition, Pemex’s reinforced status as a public enterprise could raise concerns under USMCA, with the United States and Canada having already challenged Mexico’s energy policies.

For UBS, the 2025–2035 plan ultimately represents continuity with past strategies rather than a radical break. PEMEXis doubling down on vertical integration, aiming for energy independence while being pushed to diversify into cleaner energy sources. Success will depend heavily on private-sector participation, sustained cost discipline and Pemex’s ability to execute profitable projects.

Despite the government’s assertion that PEMEX will no longer require budgetary support after 2027, UBS concluded that fiscal assistance would still be forthcoming if needed. “We think PEMEX will remain the largest short-term liability for the Treasury in the foreseeable future,” the bank wrote.