PEMEX, CFE May be Breaching ESG Benchmarks
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PEMEX, CFE May be Breaching ESG Benchmarks

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Conal Quinn By Conal Quinn | Journalist & Industry Analyst - Wed, 06/22/2022 - 16:54

Among this week’s most important stories in the oil and gas industry, PEMEX and CFE are at risk of breaking ESG compliance, disincentivizing investment. Meanwhile, the NOC is called on by the president to increase the part of its budget allocated to reducing greenhouse gas emissions.  

 

For this and more, here’s the week in oil and gas!

 

Mexico:

 

PEMEX and CFE: Most at Risk Regarding ESG Criteria

PEMEX, followed by CFE, were rated as 2022’s global companies most at risk for non-compliance with environmental, social and governance (ESG) benchmarks, according to the research institute México Evalúa. The ranking, supported by the firm Sustainalytics, measures the adoption and compliance of ethical practices that contribute to the environment and social issues.

 

AMLO Discusses Mexico’s Commandments Against Climate Change

At the virtual Forum of the Major Economies on Energy and Action, hosted by the US, President López Obrador presented a series of actions in which Mexico will collaborate to face climate change. As a part of these measures, PEMEX is to invest US$2 billion to reduce greenhouse gas emissions (GHGE), specifically methane. The goal is to reduce 97 percent of the current emissions coming from exploration and oil production processes. The announced investment would represent one of its largest spendings in remediation of environmental externalities in the NOC’s history.

 

PEMEX and CFE’s Spending Drops Off

In 1Q22, the investment of PEMEX and CFE shrank 16.7 percent compared to the same period last year, according to official figures. The negative trend can be explained by an 18.1 percent year-over-year decrease observed in the expenses that the state-owned companies spent on construction, maintenance of construction sites and the acquisition of goods.

 

Fuel Subsidies Result in Financial Complications for Government

Amid the highest oil prices due to an increased global fuel demand, Russia’s invasion of Ukraine and supply chain disruptions induced by the pandemic, the government attempts to maintain President López Obrador’s commitment to keep gasoline prices stable, even if that means losing out on revenue. To keep prices from peaking, the Mexican government has subsidized the price by expanding a temporary exemption on the Special Tax on Production and Services (IEPS) and granted a complementary fiscal subsidy. However, experts argue the move has created significant financial difficulties for Mexico’s government.

 

PEMEX’s Contribution to the Mexican Treasury Is in Decline

National oil company (NOC) PEMEX faces many challenges that have deteriorated its financial situation and its production capacity. This has been reflected in a decrease of its contributions to the Mexican treasury, which reached MX$95.57 billion (US$4.7 billion) at the end of May 2022. This amount represents 5 percent of total tax revenue of MX$1.7 trillion (US$83.4 billion), in comparison to the 11 percent in registered in 2020, according to the Tax Administration Service (SAT).

 

PEMEX Faces Scrutiny While Struggling to Pay Suppliers

PEMEX is now the most indebted oil company in the world, as its financial debt rose to US$108.1 billion by the end of 2021. This remains a concern for companies investing in Mexico; the strategies adopted by the state-owned company have not met the expectations of its suppliers, to whom PEMEX owes more than US$3.7 billion as of 1Q22.

 

CNH Denies PEMEX’s Quesqui Development Plan

CNH denied a development plan to PEMEX’s division for Exploration and Production (PEP) for the extraction of hydrocarbons at the flagship Quesqui field due to the plan’s low probability of success. 

The state-owned company presented a project to extract hydrocarbons in the assignation AE-0045-7M-AGUA DULCE-04, which has a surface area of 85.36km² and is located Huimanguillo, Tabasco.

 

PEMEX Union Leaders Pressured to Enhance Working Conditions

PEMEX’s labor union has filed several complaints regarding lacking equipment and inadequate workplace conditions. Additionally, temporary workers demand to be fully contracted, which would provide them with a greater deal of labor rights protection, as well as an increased labor certainty. President López Obrador called on the union’s leaders to accept this call for regularization and prioritize those that had worked at the NOC the longest.

 

International:

Exxon Joins Major Energy Companies Investing in Qatar Gas Projects

 

Exxon Mobil is investing in a US$29 billion project to boost Qatar’s gas exports, joining others including ConocoPhillips, TotalEnergies and Eni. The US oil giant will take a 6.25 percent stake in the North Field East project, said to be the biggest in the gas industry, which is expected to start operating in early 2026. The expansion will increase Qatar’s liquefied natural gas capacity to 110 million tons annually, just as demand surges across the world.

EU Signs Gas Deal with Egypt, Israel to End 'Dependency' on Russia

Israel and Egypt plan to boost gas exports to Europe under an agreement signed during a Cairo visit by EU Chief Ursula von der Leyen, as the bloc seeks to wean itself off Russian gas.

 

Ukraine Missile Raid Takes Out Black Sea Gas Facility

 

Ukraine authorities have accused Russia of using at least three Black Sea gas production platforms to host air defense and radar units, as Kiev sought to justify missile strikes against three facilities, located south of Odessa.

 

Nigeria: Shell Sets Scene for Bonga North Bid Battle

After more than a decade waiting in the wings, Shell is at last staging a tender process for the key packages set to underpin its 120Mb/d Bonga North project off the shore of Nigeria.

 

 

 

 

 

 

 

 

 

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