Report: Mexico's Pemex Destroyed Resources Worth $342M

Facts

• According to Reuters, three internal documents produced by Mexico's oil regulator show that the country's state oil company Pemex illegally burnt off hydrocarbon resources worth more than $342M in the three years up to August 2022.¹
• The regulator used prices from non-public contracts to assess that the company destroyed resources worth $275M from the Ixachi field and $67M from the Quesqui field during this time.²
• The destruction in the Ixachi field was bigger because production started a year earlier, with Pemex burning some 62.9B cubic feet of gas and 310K barrels of condensate. According to Reuters, this equals 31% of the total amount of gas produced from the field and 1.3% of total condensate.¹
• This comes two months after reports emerged alleging that Pemex had carried on with its production without addressing its flaring issues as it was pressured to meet extraction goals despite the risk of negative consequences, including fines and environmental damage.³
• Pemex, the world's most indebted oil company, stated late last year that it would stop the flaring practice at Ixachi in the wake of reports on development plan violations at the two fields and related fines.⁴
• Ixachi and Quesqui were among 17 new priority fields announced early in Andrés Manuel López Obrador's presidency to boost national production and make Mexico energy independent. However, Pemex failed to complete the infrastructure needed to produce gas and condensate without high levels of waste.¹

Sources: ¹Reuters, ²The Yucatan Times, ³Mexico Business and ⁴US News .

Narratives

• Narrative A, as provided by Reuters. Mexico is among the world's biggest gas flarers and even Pemex has acknowledged its poor environmental, social and governance (ESG) record, which could affect its financing as competitors transition to clean energy. As Pemex has historically neglected investing in infrastructure to produce gas and condensate, it's now facing the consequences of its choices.
• Narrative B, as provided by Mexico Business. After acknowledging the existence of this problem, Mexico and Pemex are taking decisive steps to tackle the excessive flaring. A $2B investment plan to reduce the amount of gas lost as well as a cooperation agreement with the Environmental Protection Agency to provide diagnosis and economic analyses have been announced in line with the government's vow to protect the environment.