PEMEX Outlines 2023 Objectives as FDI Decreases
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PEMEX Outlines 2023 Objectives as FDI Decreases

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Perla Velasco By Perla Velasco | Journalist & Industry Analyst - Fri, 06/09/2023 - 13:16

PEMEX reported reduced profits in 1Q23 against the same period last year. The company’s financial results were impacted by a decrease in sales and other income sources, as well as an increase in asset deterioration, although this was partially offset by exchange rate gains. 

PEMEX reported a net profit of US$3.1 billion in 1Q23, representing a significant 53.7% decrease from the same period in 2022. Revenues for the quarter totaled MX$418.4 billion (US$23.4 billion), reflecting a 19% year-on-year drop due to lower global crude and petroleum prices.

The recent decrease in oil prices, which prompted OPEC to announce production cuts, could further affect PEMEX's financial performance. Geopolitical tensions played a role in driving up oil prices last year, allowing PEMEX to report strong profit figures. However, this year, China's economic activity is notably impacting oil futures, leading to fluctuations in oil prices throughout May. The interconnectedness of the global economy continues to exert influence on oil markets, with OPEC taking measures to stabilize and drive prices up through production cuts. The recent extension of these production cuts resulted in a surge in oil prices, with the WTI mix increasing by 4.6% to reach US$75.06 per barrel. Brent crude oil also experienced a 2.4% increase during Asian trade on June 5, settling at approximately US$77 per barrel.

Foreign direct investment (FDI) in Mexico's exploration and production (E&P) sector has also declined over the past four quarters, spanning from April 2022 to March 2023. In 2Q22, FDI inflows amounted to US$0.7 million, followed by negative inflows in the subsequent two quarters, of US$57.9 million and US$51.9 million, respectively. In 1Q23 inflows reached US$10.4 million. Consequently, Mexico has recorded a negative net inflow of US$98.7 million over the past four quarters. Although FDI in Mexico's oil and gas extraction sector reached a record high of US$1.61 billion in 2021, it plummeted to US$344 million in 2022, marking its lowest level in the past eight years, as reported by El Economista.

PEMEX's CEO, Octavio Romero Oropeza, has outlined the company's objectives for what is left of the current administration. PEMEX aims to drill 97 exploratory wells and 256 producing wells in 2023, with the goal of increasing reserves by 904MMboe and achieving an average daily production of 1.95MMb/d. However, Romero highlighted that private companies' production in the bidding rounds only reached 66Mb/d during the January-May 2023 period, representing 3% of national production. Based on this data, Romero referred to the energy reform that opened up the oil market as a failure.

In recent years, private oil companies have abandoned various exploration blocks to focus on more promising ventures. However, the cancellation of bidding rounds by the government has hindered further investment in the oil industry by private entities and restricted access to additional areas for E&P. Experts have also pointed out ongoing obstacles in Mexico's energy regulation, which have impeded the operation of private companies. The energy policies implemented by the administration have faced criticism and discontent, leading to disputes with Mexico's North American trading partners.

Photo by:   najmi1990

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