Pemex

History

Asphalt and pitch had been worked in Mexico since the time of the Aztecs. Small quantities of oil were first refined into kerosene around 1876 near Tampico. By 1917 commercial quantities of oil were being extracted and refined by subsidiaries of the British Pearson and American Doheny companies, and had attracted the attention of the Mexican government who then claimed all mineral rights for the state as part of its Constitution.

In 1938, President Lázaro Cárdenas (1934–40) sided with oil workers striking against foreign-owned oil companies for an increase in pay and social services. On March 18, 1938, citing Article 27 of the Constitution of 1917, President Cárdenas embarked on the state-expropriation of all resources and facilities, nationalizing the United States and Anglo–Dutch operating companies, creating Pemex. He is famous in saying in his speech addressing the nation,

I ask the entire Nation to furnish the necessary moral and material support to face the consequences of a decision which we, of our own free will, would neither have sought nor desired.

He framed expropriation as a necessary national response to the injustice of the operations of foreign companies operating on Mexican soil. Expropriation was not outright confiscation, since the Mexican government promised to compensate companies. However, in retaliation, many foreign governments closed their markets to Mexican oil. In spite of the boycott, Pemex developed into one of the largest oil companies in the world and helped Mexico become the fifth-largest oil exporter in the world.

In an interview on the oil news website in November 2005, a Pemex employee spoke anonymously of the company’s inability to grow production, stating that the company and country is at Hubbert’s Peak. The person interviewed believed export levels could not be recovered once peak had passed, as the size of current fields that have been discovered or are coming online represent a fraction of the size of the oilfields going into terminal decline. Annual production has dropped each year since 2004. Furthermore, it has been reported the 2005-2006 daily oil production was down by approximately 500,000 barrels per day (79,000 m³/d) (a large proportion of the country’s 4,500,000 barrels) on the previous year. Pemex averaged 3.71 MMBPD in 2006. Pemex has never produced 4 MMBPD or higher for a yearly average. Pemex has been replaced as Latin America’s largest company by Petrobras, according to the latest Latin Business Chronicle ranking of Latin America’s Top 500 companies. To help capitalize the company, former President Vicente Fox brought forward the possibility of making shares of Pemex available to Mexican citizens and pension funds, to complement a current project-specific investment setup known as "Proyectos de Inversión Diferida En El Registro del Gasto" (Deferred Investment Projects in the Expenditure Registry); this proposal, along with alleviating Pemex’ heavy tax burden and a substantial budget increase, have met opposition in Congress. President Calderón made clear at the beginning of his presidency that he would try his best to open up the sector to private investment. Pemex is Latin America’s second largest company measured by revenues, according to a ranking of the region’s 500 largest companies by Latin Business Chronicle, behind Brazilian oil company Petrobras. In June 2009, Pemex has asked for an extra $1.5 billion state aid to finance oil fields investments, reported Bloomberg.

President Felipe Calderón called for change in Mexico’s oil industry after output at Pemex fell at the fastest rate since 1942. His comments came after Petrobras and London-based BP said they made a "giant" oil find of as much as 3 billion barrels (480×10^⁶ m³) in the Gulf of Mexico southeast of Houston. According to Mexican Energy Minister Georgina Kessel, Mexico may seek to emulate Brazilian Oil rules that strengthened Petroleo Brasileiro SA as it considers regulation changes to revive the oil industry.

In January 2014 Pemex signed a cooperation agreement with the Russian oil company Lukoil focusing on oil production and field exploration as well as exchange of knowledge in the aforementioned areas, including actions for ecological preservation and environmental protection.

In February 2016, Emilio Lozoya Austin stepped down as CEO of Pemex, replaced by Dr. José Antonio González Anaya..

Exploration

It is said that Pemex lacks the equipment, technology, and financial means to explore for new reserves in deep water or shale gas; hence, a reform to Mexican law has been put forward by the government.

In addition to a failing infrastructure, dwindling reserves have created urgency in completing some type of reform. Only 20% of Mexico has been extensively explored for further reserves, and it has been argued that Pemex will need the help of some form of foreign investment to successfully explore new reserves, including in the Gulf of Mexico.

In February 2015, the board approved a $4.16 billion spending cut, pulling the company’s budget down 11.5 percent from the 2015 budget approved by Mexico’s congress. The company also said it will delay deepwater exploration plans and cut jobs in response to weak oil prices.

Incidents

In 1979, Pemex’s Ixtoc I exploratory oil well in the Bay of Campeche suffered a blowout resulting in one of the largest oil spills in history. Pemex spent $100 million to clean up the spill and avoided most compensation claims by asserting sovereign immunity as a state-run company.

On 19 September 2012 an explosion at the Pemex gas plant in Reynosa, Tamaulipas killed 30 and injured 46 people. Pemex Director Juan Jose Suarez said that there was "no evidence that it was a deliberate incident, or some kind of attack".

On January 31, 2013, an explosion occurred at the administrative offices of Pemex in Mexico City. At least 37 people were killed and at least 126 were injured. The cause has not been confirmed. Local media reported that machinery exploded in the basement of an administrative center next door to the 52-story Pemex tower.

On April 1, 2015, a fire occurred on platform Abkatun A in southern Gulf of Mexico which killed 4 workers.

On April 20, 2016, a large explosion and fire at the company's Chlorinate 3 plant in Coatzacoalcos killed at least 28 people.

On September 24, 2016, a fire broke out on the oil tanker "Burgos", off the coast of Boca del Río, Veracruz, forcing all the crew (31 members) to be evacuated safely. The tanker was carrying 80,000 barrels of diesel and 70,000 barrels of gasoline.

Controversies

In 2009, the U.S. Justice Department reported that some U.S. refineries had bought millions of dollars worth of oil stolen from Mexican government pipelines. Criminals, especially drug gangs, tap remote pipelines and sometimes build their own pipelines to siphon off hundreds of millions of dollars worth of oil each year. One oil executive has been charged and has pleaded guilty to conspiracy charges. The U.S. Homeland Security Department will return $2.4 million to Mexico’s tax administration - the first money seized during a binational investigation into smuggled oil that authorities expect to lead to more arrests and seizures. The President of Houston-based Trammo Petroleum is set to be sentenced in December after pleading guilty in May.

There have been various allegations of corruption within Pemex for over a decade. These range from political contributions to the Institutional Revolutionary Party (over $200 million), "no show" jobs (individuals receive a salary while performing no duties whatsoever), various forms of fraud, embezzlement, and even under the table fuel sales. It has been estimated these various forms of corruption contribute to the loss of over $1 billion a year.

Pemex has a long history of violation of human and labour rights regarding engineers, unrightfully considered to be "trusted workers" who have tried to unionize since 1995 and succeeded, after several repression episodes, in doing so in 2008 and 2009, although at a high human cost This included the death of a person who was refused medical service at one of Pemex’ hospitals because his son had just been sacked for belonging to this union, the Unión Nacional de Técnicos y Profesionistas (shorthand UNTyPP). It also included forcing union members to resign from the Union from their hospital beds, as happened to three cancer patients in 2009. Up to date, and in spite of pressure by the Mexican Congress, the International Labour Organization, the Global Compact, the Industrial Global Union and thousands of citizens all over the world, workers sacked in 2002, 2004, 2008, 2009, 2010 and 2011 haven’t been all reinstated nor has there been any reparation otherwise. Pemex has never acknowledged to these violations of human rights.

Financial status

Taxes on Pemex revenue provide about a third of all the tax revenues collected by the Mexican government. Pemex has a debt of $42.5 billion, including $24 billion in off-balance-sheet debt. The state-owned company pays out over 60% of its revenue in royalties and taxes. Mexico exports crude oil, but imports more expensive gasoline.

National Hydrocarbons Commission, created in 2008 by the Mexican Congress to increase regulatory oversight, has increased scrutiny over Pemex in 2012.