PEMEX: Energy Sovereignty or a Sovereign Risk?

PEMEX entered the first quarter of 2026 in a critical situation. The company reported losses of MXN 46 billion, financial debt approaching USD 79 billion, and liquid hydrocarbon production of just 1.65 million barrels per day, well below official targets. These challenges were compounded by accidents, fires, and spills at key facilities, reflecting not only financial fragility but also operational deterioration and shortcomings in industrial safety.

These results undermine the logic that dominated between 2018 and 2024: the idea that restoring PEMEX’s full control over production, allocations, and budgeting, while reducing its tax burden and transferring public resources to the company, would be sufficient to rescue it within six years.

The accumulated government support was enormous, including tax relief and foregone petroleum revenues. Nevertheless, production continued to decline, and the company became increasingly dependent on the state, with reduced operational capacity and no reversal of the structural decline of its producing fields.

The model promoted during the previous administration sought to recentralize the energy sector around PEMEX. Oil licensing rounds were suspended, open competition was curtailed, and the state oil company was positioned as the cornerstone of energy sovereignty. Although the Shared Profit Duty was reduced and government transfers increased to support debt payments, refining activities, and infrastructure projects, the productivity of that support remained low.

PEMEX failed to increase production or improve profitability and ultimately emerged with larger liabilities, growing debts to suppliers, and greater dependence on fiscal support.

The administration of Claudia Sheinbaum inherited a financially exhausted company and began pursuing a different approach. The 2024 constitutional reform transformed PEMEX into a State Public Enterprise and eliminated part of the regulatory architecture established in 2013.

The new strategy seeks to prioritize liquidity, refinancing, and financial restructuring through a new fiscal regime, mixed contracts, and extraordinary government support. However, the results have also proven insufficient. Production remains below target levels, and the company continues to post losses even in an international environment characterized by relatively high oil prices.

At this stage, the problem has ceased to be exclusively corporate and has begun to affect the sovereign itself. Growing transfers to PEMEX have reduced the state’s net oil income and increased pressure on Mexico’s public finances. Moody’s, Fitch, and S&P have explicitly linked the country’s fiscal deterioration to the government’s continuing support for the state oil company.

While major international oil companies took advantage of the recent period of higher oil prices to generate record profits, PEMEX continued to lose money due to its debt burden, low productivity, and operational challenges.

The central conclusion is that rescuing PEMEX only makes sense if the objective is to restore public value for Mexico rather than simply preserve the company as a political symbol. Achieving this would require establishing clear metrics for profitability, production, and safety; conditioning any fiscal support on measurable performance; separating profitable business segments from those that destroy value; restoring competition and credible technical regulation; and prioritizing maintenance and industrial safety.

The model that provided PEMEX with financial resources, tax relief, regulatory control, and unrestricted political support has already been tested. The result was not energy sovereignty, but rather growing pressure on the country’s sovereign credit profile.

This article was originally published by La Prensa OEM.
Date: June 5, 2026
Link: https://oem.com.mx/la-prensa/analisis/opinion-por-paul-alejandro-sanchez-30370677 [Online]

OPEC+ Cuts Again

This Sunday the news was spread that OPEC+ is planning a new voluntary cut led by Saudi Arabia that by itself would reduce 500,000 barrels per day. The members of OPEC and their allies could reduce between 1.1 and 1.6 million barrels per day of crude in the world market, which depends on Russia contributing another 500,000 barrels per day to the reduction. In any case, the cut would enter into force starting in May and would extend throughout all that remains of 2023.

Of course this is not a coincidence. In the midst of the financial chaos caused by the inflationary escalation, the continuous rise of the reference rate and the blow to banking institutions, it is not the best moment for energy prices to come back on the offensive. But it is clear that the surprise cut is directed at the United States for a couple of reasons particularly.

“It is clear that the surprise cut is directed at the United States.”

On the one hand, in October of last year the United States promised Saudi Arabia that it would not let oil prices collapse and that, once prices touched $75 dollars per barrel in the Brent reference, the government of the United States would begin to fill its strategic reserve to keep the price stable.

However, when the price of Brent fell below the mark in mid-March, the Biden government showed little interest in beginning the purchase of oil to refill the strategic reserve and even declared that perhaps, toward the end of 2023, they could begin with the purchase to observe the behavior of global markets derived from the recent financial shocks.

On the other hand, just last week the United States Energy Information Agency published that in 2022 the United States broke a record of crude exports, reaching 3.6 million barrels per day, which represented an increase of 22% compared with 2021.

Faced with greater production of American oil in the world and with prices falling in comparison with the previous year, it seemed like a good moment to begin filling the strategic reserve of the United States. This would allow reducing the circulating crude and stopping the fall of international prices.

These two events could have had political implications, or that is what is rumored in the circles that follow the issue. That Biden did not quickly fulfill his word to maintain the international price of oil contributes to the deterioration of relations between the two nations.

For now, the price of oil in the main references has risen around five dollars per barrel after the announcement. It is too soon to know whether this price will be maintained in the future or how the United States will respond or, even, whether the countries, including Russia, comply with the voluntary reduction, but what is a fact is that this occurs at a complicated moment due to global inflationary pressure.

This article was originally published by Energía a Debate.
Date: April 3, 2023
Link: https://energiaadebate.com/la-opep-recorta-de-nuevo/ [Online]

Electricity as a Tax

The electric reform presented by the president and that will be discussed this Sunday considers electricity not as a means to generate wealth nor well-being. At the heart of the declarations and intentions lies a painful truth regarding the origin and objectives of the reform: that electricity be a tax paid by Mexican companies and households.

There is a great conceptual confusion that permeates from equating the history of the national electric sector with that of oil, or even mines because of lithium. At the heart of the confusion, a 2.0 nationalization of electricity in the country is intended, but it is forgotten that electricity by itself is not wealth, but rather it is a means that would allow wealth to be generated if used in the correct way.

I reiterate, electricity by itself does not generate wealth, since we cannot generate it, bottle it and export it so that other countries buy it and profits are obtained from its exploitation. Nor can we use it to infinitely increase our well-being, that is, if price did not matter, having six refrigerators turned on does not improve our quality of life.

To the point of absurdity, neither can we use electricity as a force field to avoid invasions and protect national sovereignty from external aggressions. Much less give electricity to families so that they may feed themselves if food is lacking. We cannot use electricity as money, nor save electricity for the future or to relieve economic recessions.

“The vision is not only archaic, but, deep down, it is tributary.”

Electricity is, then, a means, not an end in itself. It is a means that allows us to improve the conditions of households, the lighting of streets, the mobilization of people and the productive activation of factories. Electricity is a means to mobilize and drive the economy; as a country, having an abundance of electricity means that you can offer it to companies so that they generate productive processes.

In Mexico, around 70% of the country’s electric energy is consumed by companies, from small businesses to large industries, and only 25% of consumption is attributable to households. This means that it is of no use to us to have an abundance of electricity if it is not used to strengthen the economy. That is, if tomorrow all companies stop consuming, Mexican households do not benefit; on the contrary, the economy is harmed.

If a country has an abundance of clean and cheap energy, it immediately positions itself as one of the most attractive countries to invest in and that is what generates wealth, not electricity flowing through the networks without being able to be used because companies abandon and stop investing.

The objective of the electric reform is clear and has been reiterated by its defenders on multiple occasions: that industries, businesses and households pay more for electricity, that they pay more to CFE and that CFE obtains control to set the tariffs it wants to whomever it wants and that each and every one of the load centers only buy electric energy from CFE.

The vision is not only archaic, but, deep down, it is tributary, because instead of seeing electricity as a good or service whose purpose is to enable satisfiers and drive economic dynamism, it is only seen as a tax to extract rents from the companies and households that consume the energy. It is simply and plainly about obtaining more cash flow for CFE.

This article was originally published by Energía a Debate.
Date: April 17, 2022
Link: https://energiaadebate.com/la-electricidad-como-un-impuesto/ [Online]