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An Energy Independent Mexico Is A Pipedream

Natural production declines, the price drop of 2014-2015, the status of a national cash-cow, lack of sophisticated EOR technology, regular policy U-turns on foreign investment – it is difficult to pick the single most important factor that has contributed to the state PEMEX finds itself in, yet the situation is dire nonetheless.

The Mexican national oil company is hunched under the weight of its debt obligations, generating loss after loss ($7.6 billion in 2018 after a horrendous $14.3 billion in 2017) with no evident way out. The new Mexican President Andres Manuel Lopez Obrador looks to tackle Mexico’s myriad of oil problems, but at the end of the day he has to sort out PEMEX’s upstream, midstream and downstream travails at the same time.

It might be said that Mexico’s primary problem is falling crude production. Having peaked in 2004, its output more than halved in 15 years, dropping from 3.8mbpd at its peak to the latest lackluster result of 1.69mbpd in March 2019. Were production to be increasing, the market sentiment regarding the Mexican NOC might have been different – absent any miraculous divine intervention, PEMEX will experience all the shades of being in a purgatory before it can actually bounce back a bit from 2022 onwards. Taking center stage in all of this – the Mexican state, root cause of PEMEX’s dire financial condition and its only realistic saviour right now.

(Click to enlarge)

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