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News Article

PEMEX Is No Longer Participating in the OGCI

By Paloma Duran | Fri, 12/04/2020 - 17:59

PEMEX is no longer an active member of the Oil and Gas Climate Initiative (OGCI), the largest organization within the global oil and gas industry. According to its annual report of the organization currently has 12 members

The Oil and Gas Climate Initiative (OGCI) – a group composed of the major oil companies that support the Paris Agreement- aims to work collaboratively to address climate concerns. OCGI has among its goals to lower the carbon intensity of upstream operations by 2025.

The annual report shows that the number of members’ spending on clean energy is decreasing.  In 2019, members spent US$800 million more on green initiatives than the previous year, compared to an increase of US$1.2 billion in 2018. David Doherty, Oil Analyst at BloombergNEF, said that if the organization wants to achieve its goals, members need to increase their investment substantially.

OGCI spokesperson made it clear that PEMEX did not leave the organization. However, the Mexican company has not been participating recently. The OGCI only communicates the commitments and reports to active members, reported Bloomberg.

This is not the first time that OGCI has lost an active member, Reliance Industries Ltd left in 2018. Meanwhile, in the same year, Exxon, Chevron Corp., and the Occidental Petroleum Corp joined the initiative, reported Bloomberg.

Mexico ratified the Paris Agreement in 2016, joining the efforts of nations aiming to limit the rapidly rising global temperature by 1.5°C. However, with the López Obrador administration setting its sights on returning PEMEX to its former splendor, the country appears far from reaching its pledge, reported MBN.

In October, The Guardian published an investigation of the 20 companies responsible for a third of the global CO2 emissions. PEMEX, Petroleum of Venezuela (PDVSA) and Petrobras were among the list, reported LatinAmerican Post.

The study showed that Pemex is the most polluting company in Latin America, contributing 1.67 percent of the total greenhouse gas emissions in the world. Ambitious projects as the Dos Bocas refinery differ from the General Climate Change Law of 2012. In this case,  “the Government of Mexico committed to reduce its greenhouse gas emissions by 30 percent by 2020, and by 50 percent by 2050, with respect to the emissions of 2000”, reported LatinAmerican Post.

Moreover, Mexico’s National Refinery System (SNR) performance has led to an increase in the production of fuel oil, a byproduct of petroleum distillation. It has high levels of sulfur dioxide, an air pollutant that is harmful for both humans and the environment, reported MBN.

According to MBN, this has led to more pollution in regions where the SNR’s refineries are located. In Guanajuato where PEMEX’s Salamanca refinery is located, the refinery has become responsible for 80 percent of the state’s pollution.

This is happening at a time when the Mexican government and CFE are moving to reduce private sector´s participation in the country’s renewable sector. Since López Obrador’s presidency, the Mexico’s energy policy has been unstable, reported MBN.

The 2014 Energy Reform attracted unprecedented green energy investment to the country through the entrance of private companies in the market. However, López Obrador has criticized the Energy Reform. Since the beginning of its presidency, Obrador has been saying that the reform brought corruption and unfavorable contracts for the government, while PEMEX and CFE were weakened by unfair private competition, reported MBN.

Mexico´s current energy policy aims to strengthen state production companies so they can serve to more socially oriented goals. However, this does not mean that Mexico needs to disregard its climate goals, Ramon Moreno, CEO of Mitsui Power Americas, told MBN. “There is no conflict but rather a necessity of having solid state-owned companies to comply with international agreements, including those related to the decarbonization of the economy,” said Moreno to MBN.

Juan Manuel Ávila, CEO and Co-Founder at TOP Energy, said that if the government does not change its rhetoric first, companies might not see Mexico as the ideal business partner. The manner in which the Mexican government has communicated its intentions through public energy policy has not been optimal for attracting investment, Ávila told MBN.

Joe Biden’s victory in the US presidential elections has changed the political spectrum. It is expected that Mexico will experiment changes in its energy policies. Donald Trump didn’t  concern about clean energy, climate research and innovation, which allowed President López Obrador to have federal energy policies that are not green. However, enforcing a clean energy revolution is a priority for Joe Biden, reported MBN.

Mexico will face pressure from the US to implement a political agenda that promotes renewables, the creation of green jobs and investment in science and technology toward the reduction of carbon emissions from the energy sector, reported MBN.

The data used in this article was sourced from:  
MBN, Bloomberg, LatinAmerican Post, OIGC
Photo by:   Alexander Tsang
Paloma Duran Paloma Duran Junior Journalist and Industry Analyst