As Mexico’s state-owned Pemex experiences yet another fire on its platform, its health and safety standards are once again being called into question. Pemex has long faced international pressure to improve its health and safety standards following years of avoidable accidents that have had a detrimental impact on both its workers and the environment. Following another fire this month, the company is once again in the limelight with critics questioning whether it will ever improve.
At the beginning of July, at least two people were killed, and one person missing, following a fire at the Nohoch Alfa offshore platform at the Bay of Campeche, in the Gulf of Mexico. The platform is operated by the state-owned oil company Petróleos Mexicanos (Pemex). When the fire started, 321 of the 328 workers were evacuated, with four boats being sent to manage the fires. Those killed and missing were apparently from a company working at the facility and not Pemex.
The fire caused major destruction to the platform, with an investigation being called to see how it started. Due to the fire, Pemex initially estimated that it had lost 700,000 barrels of crude. This was mainly due to the closure of all wells in the area. Although most production was resumed by the following day. Pemex engineers are assessing the repairs required for pipelines, interconnections, and other infrastructure to begin restoration.
But this is not the only incident seen at a Pemex site in recent years. The company experienced a major fire in 2021, as well as enduring several other safety events. In March this year, Bloomberg reported that Pemex had plans to improve its environment and safety procedures to help it attract financing from banks and investors demanding tougher standards from fossil fuel companies. The state-owned company is highly indebted, owing around $107.7 billion. Several banks and advisors are helping Pemex to develop a long-term plan to improve its environmental, social and governance (ESG) track record, including Banco Bilbao Vizcaya Argentaria SA, HSBC Holdings Plc and BNP Paribas.
More and more investors are now expecting companies to report their ESG metrics. While this is not mandatory, rising pressure from governments to cut carbon emissions and support national climate pledges is driving banks and investors to ask more from companies. And Pemex does not have a good track record when it comes to ESG.
The Mexican oil giant has been accused of increasing its gas flaring, even after committing to curbing the practice. Pemex signed an agreement with the U.S. Environmental Protection Agency, being paid $2 billion in government funding to reduce its methane emissions by 98 percent. In late 2022, Pemex stated that this funding would go towards reducing flaring practices at Ixachi. The firm has long neglected much of its infrastructure due to a lack of finance, acknowledging that it had failed to maintain and refurbish its gas processing centres, leading to an increased level of flaring. But this is a slow process, as the company needs to clear dense vegetation before constructing the infrastructure required to process gas for sale. Media images from earlier this year showed an increased level of flaring from the Ixachi field, suggesting Pemex is falling behind on its ESG pledges.
And it’s not just in its environmental practices that Pemex is failing, the company has reported a multitude of safety failings in recent years. In February this year, there were fires at three different Pemex facilities in Mexico and the U.S., leaving two people dead. That same month, two people died after a vehicle collision inside a Pemex refinery in the Mexican state of Hidalgo. In May, the company announced that there had been an explosion caused by an illegal pipeline tap, which injured 13 people.
A plethora of safety incidents in recent years have led to international criticism of the Mexican oil firm, with many questioning when it will change its practices. In 2021, five people were killed and a further six injured following a fire at an offshore Pemex platform. The fire was so extensive that work at 125 oil wells had to be halted. This followed a gas leak in an underwater Pemex pipeline just six weeks before. The blaze was widely known as the “eye of fire” due to its appearance in the water. Pemex CEO Octavio Romero emphasised the fire was not due to a lack of investment in infrastructure stating: “There is not a problem of lack of resources. The oil industry is a risky industry. We have had accidents, which in numbers are less than in previous years.”
The most recently reported platform fire is the latest in a long line of safety incidents from Mexican oil firm Pemex. The indebted company has supposedly begun to develop a long-term ESG plan in an attempt to attract funding from banks and investors. But failures to curb gas flaring practices, despite receiving funding to do so, as well as other health, safety and environmental failures, could leave Pemex without the support it needs to return to its prior glory.
By Felicity Bradstock for Oilprice.com
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