Sheinbaum’s Pemex plan leaves out a key word: profitability
Natural gas flaring tower at Pemex s Dos Bocas petroleum exporting complex in front of the hamlet of Nuevo Turno Largo. Image credit: Keith Dannemiller / Alamy
Mexican President Claudia Sheinbaum has announced a plan to revitalize Pemex, aiming to position the state-owned oil company as central to Mexico’s economic development. The plan includes a $6.7 billion capital injection from next year’s federal budget and measures like austerity, operational reforms, productivity boosts, fiscal simplifications, and strategic partnerships.
On paper, the proposals seem promising, but they represent significant challenges for Pemex, the world’s most indebted oil company. Sheinbaum and her team are confident the plan can transform Pemex into a competitive powerhouse, especially after constitutional reforms expanded its control over Mexico’s oil industry.
“We will back Pemex so it can better leverage its resources and operational efficiencies for the benefit of all Mexicans,” said Energy Minister Luz Elena González during the unveiling at the National Palace.
Still, the plan lacks a critical focus: profitability. Despite the capital injection and reforms, Pemex’s chronic losses—especially in refining—remain unaddressed by Sheinbaum, González, or Pemex’s new CEO, Víctor Rodríguez.
Rodríguez, a physicist with advanced degrees in energy and economics, faces the daunting task of overhauling Pemex despite having no business management experience. His first challenge is the refining division, which has lost over 800 billion pesos ($40 billion) in six years. These losses have forced the government to provide $40 billion in capital, tax breaks, and debt refinancing under the López Obrador administration.
Despite this massive support, Pemex keeps losing public funds, and without profitability, its long-term survival is doubtful.
“The fact that the federal government is willing to continue losing funds and backing inefficiencies within Pemex is inconceivable,” said Mariana Campos, head of think tank México Evalúa, appearing on the Mexican news programme Es La Hora de Opinar. “This issue has yet to be addressed, and I hope the government proposes new solutions next year.”
Whether Sheinbaum’s administration will adopt a different approach remains uncertain. Pemex has repeatedly failed to resolve its financial and operational problems despite plans and government support. The pursuit of "energy sovereignty," championed by López Obrador and now by Sheinbaum, complicates achieving a meaningful reform.
Pemex’s oil production is profitable, but its refining business drags it down. Until Mexico addresses this inefficiency, Pemex’s future will remain bleak. “Refining will remain in the red and continue to pull the rest of the company down, especially if the government persists in pushing for increased domestic fuel production to reduce imports,” said energy expert Luis Miguel Labardini of consultancy Marcos y Asociados.
Pemex’s precarious finances now affect its core business: crude oil production. Experts warn that without resources, Pemex may struggle to maintain current output of 1.8 million barrels a day.
The administration is exploring private partnerships, offering some hope. Pemex can now form joint ventures with private investors to meet production goals. “Joint ventures between Pemex and private firms can be developed while maintaining energy sovereignty for the people,” González said.
Analysts welcomed this shift but stressed the need for profitable contracts to attract investors. “Pemex has the crude reserves, prospective resources, and potential, but without sufficient investment, much value could be lost for the nation and its people,” said Labardini. “If new contracting schemes aren’t implemented, production will soon decline. Pemex simply doesn’t have the resources it needs to sustain production.”