PEMEX Appears to Risk Fines Rather than Imperiling Production

Pressured to meet production goals, PEMEX seemingly runs the risk of possible negative consequences. Despite possible fines and mounting environmental damage, the company continues its production without addressing its flaring issues, reported Reuters. Over the past year, the NOC has received four fines for not meeting its development plans from its regulator, the National Hydrocarbons Commission (CNH), all for not meeting development plans and failing to manage excessive flaring at Ixachi and Quesqui.

Reuters reported that the two most recent fines could each reach MX$120 million (US$6.2 million. Nevertheless, in the NOC’s view, they represent a small price to pay to reach productive objectives imposed by President López Obrador. PEMEX was fined MX$42 million (US$2 million) for breaching its plans at Ixachi earlier this year. These fines are the highest individual fines ever imposed by CNH. 

According to the law, CNH can only impose fines for non-compliance with development plans and not for causing environmental damage. For the latter issue, energy and environment regulator ASEA is in charge but has historically not taken any action against PEMEX for flaring.

Moreover, PEMEX’s efforts to reduce emissions have been mostly unsuccessful so far. After receiving fines for excess flaring during former President Enrique Peña Nieto’s administration, the company promised to invest US$3 billion to fix the problem, but the plan was practically abandoned by the end of his administration. As previously reported by MBN, the NOC decided to abandon the plan halfway through its completion because low natural gas prices made it less attractive to process the resource and political priorities changed to increase oil production instead. The decision was taken despite the environmental question and threats from regulators to fine the company. 

PEMEX recently announced that the Environmental Protection Agency (EPA) would assist the company with diagnoses and economic analyses to support decision-making for oil and gas operations to reduce greenhouse gas emissions, specifically methane.

Frequent reports of oil spills have also been a cause of concern. Such incidents have raised concerns about the company’s practices for environmental safety.

PEMEX has put much effort into reaching its production goals. While it aimed to focus on energy self-sufficiency, the company has exported more in recent months. The company’s exports increased to 1.2MMb/d in September whereas in September 2021 exports amounted to 983,000b/d. The NOC announced plans to decrease its exports to increase national refinement as well as simultaneously drop its fuel oil production by 2H22. However, in September exports to Europe increased by 85 percent to 149,734b/d, and exports to the Middle East increased by 80 percent to 292,008 b/d. Strengthened by the backing of the López Obrador administration, PEMEX has set out to further increase its production figures, which would enable it to benefit from both exports and greater refining levels.