UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM20-F

FORM 20-F

for the fiscal year ended December 31, 2013 2016

Commission File Number0-99

PETRÓLEOS MEXICANOS

(Exact name of registrant as specified in its charter)

Avenida Marina Nacional No. 329

Colonia Petróleos MexicanosVerónica Anzures

1131111300 Ciudad de México, D.F., México

(Address of principal executive offices)

Rolando Galindo GálvezJaime José del Río Castillo

(5255) 1944 9700

ri@pemex.com

Avenida Marina Nacional No. 329

Torre Ejecutiva, Piso 38 Colonia Petróleos MexicanosVerónica Anzures

1131111300 Ciudad de México, D.F., México

(Name, telephone,e-mail and/or facsimile number

and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.None

Securities registered or to be registered pursuant to Section 12(g) of the Act.None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Title of Each Class

9.50% Global Guaranteed Bonds due 2027

9 ¹⁄₄% Global Guaranteed Bonds due 2018

8.625% Bonds due 2022

7.375% Notes due 2014

5.75% Notes due 2015

5.75% Guaranteed Notes due 2018

9 ¹⁄₄% Guaranteed Bonds due 2018

8.625% Guaranteed Bonds due 2023

9.50% Guaranteed Bonds due 2027

6.625% Guaranteed Bonds due 2035

6.625% Guaranteed Bonds due 2038

8.00% Guaranteed Notes due 2019

4.875% Notes due 2015

6.000% Notes due 2020

5.50% Notes due 2021

6.500% Bonds due 2041

4.875% Notes due 2022

5.50% Bonds due 2044

3.500% Notes due 2018

Floating Rate Notes due 2018

3.500% Notes due 2023

4.875% Notes due 2024

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  ¨☐    No  No  x☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes  ¨☐    No  No  x☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x☒    No  No  ¨☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

N/A

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a non-accelerated filer.an emerging growth company. See definitionthe definitions of “large accelerated filer,” “accelerated filer,” and large accelerated filer”“emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨                Accelerated filer  ¨                Non-accelerated filer  x

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP¨☐                IFRS as issued by the IASB  x☒                Other  ¨☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  ¨☐                Item 18¨☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).

Yes  ¨☐    No  No  x☒

TABLE OF CONTENTS

i

Petróleos Mexicanos and its fourseven subsidiary entities, which we refer to as the subsidiary entities,Pemex-ExploracióPemex Exploración y Producción (Pemex-Exploration(Pemex Exploration and Production),Pemex-RefinacióPemex Transformación Industrial (Pemex-Refining)(Pemex Industrial Transformation),Pemex-GasPemex Perforación y Petroquímica BásicaServicios (Pemex-Gas(Pemex Drilling and Basic Petrochemicals)Services),Pemex Logística (Pemex Logistics),Pemex Cogeneración y Servicios (Pemex Cogeneration and Services),Pemex-PetroquímicaPemex Fertilizantes (Pemex-Petrochemicals(Pemex Fertilizers) and together with Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals, collectively referred to as the subsidiary entities)Pemex Etileno (Pemex Ethylene), comprise the state oil and gas company of the United Mexican States, which we refer to as Mexico. Each of Petróleos Mexicanos and the subsidiary entities is a decentralized public entityproductivestate-owned company of the Federal Government of Mexico, which we refer to as the Mexican Government, and each of the subsidiary entities is a productivestate-owned subsidiary of Mexico. Each of Petróleos Mexicanos and the subsidiary entities is a legal entity empowered to own property and carry on business in its own name. In addition, a number of subsidiary companies that are defined in Note 1 and listed in Note 3(a)4 to our consolidated financial statements incorporated in Item 18, including the Pemex Project Funding Master Trust (whichwhich we refer to as the Master Trust) andFideicomiso Irrevocable de Administración No. F/163 (which we refer to as Fideicomiso F/163) (which are described below under “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Commitments for Capital Expenditures and Sources of Funding”),our subsidiary companies, are incorporated into the consolidated financial statements; these subsidiary companies are also identified with thetheir corresponding ownership percentages in “—Consolidated Structure of PEMEX” on page 4. As further described under “Item 4—Information on the Company—History and Development—Corporate Reorganization,” the seven new subsidiary entities assumed, on or prior to, November 1, 2015, all of the rights and obligations of the prior subsidiary entities of Petróleos Mexicanos—Pemex-Exploración y Producción(Pemex-Exploration and Production),Pemex-Refinación(Pemex-Refining),Pemex-Gas y Petroquímica Básica(Pemex-Gas and Basic Petrochemicals) andPemex-Petroquímica(Pemex-Petrochemicals). References to the subsidiary entities prior to this corporate reorganization refer toPemex-Exploration and Production,Pemex-Refining,Pemex-Gas and Basic Petrochemicals andPemex-Petrochemicals. Petróleos Mexicanos, the subsidiary entities and the subsidiary companies are collectively referred to as “PEMEX” or “we.” See “Item 4—Information on the Company—History and Development—Energy Reform” for more details.

References herein to “U.S. $,” “$,” “U.S. dollars” or “dollars” are to United States dollars. References herein to “pesos” or “Ps.” are to the legal currency of Mexico. References herein to “euros” or “€” are to the legal currency of the European Economic and Monetary Union. References herein to “pounds” or “£” are to the legal currency of the United Kingdom. References herein to “Swiss francs” or “CHF” are to the legal currency of the Swiss Confederation. References herein to “Japanese yen” or “¥” are to the legal currency of Japan. References herein to “Australian dollars” or “AUD” are to the legal currency of Australia. The term “billion” as used herein means one thousand million.

Our consolidated financial statements included in this annual report were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. We refer in this report to “International Financial Reporting Standards as issued by the International Accounting Standards Board” as IFRS. In addition, these financial statements were audited in accordance with the International Standards on Auditing, as required by theLey del Mercado de Valores (Securities Market Law) and theDisposiciones de carácter general aplicables a las emisoras de valores y a otros participantes del mercado de valores(General Provisions applicable to issuers of securities and other participants in the securities market) in each case, of Mexico, for purposes of filing with theComisiónNacional Bancaria y de Valores (National Banking and Securities Commission, which we refer to asor the CNBV) for purposes of filing withand theBolsa Mexicana de Valores, S.A.B. de C.V. (which we refer to as BMV(Mexican Stock Exchange, or the Mexican Stock Exchange) and with the CNBV,BMV), and in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB, for purposes of filings with the U.S. Securities and Exchange Commission, or the SEC.

The regulations of the SEC do not require foreign private issuers that prepare their financial statements on the basis of IFRS to reconcile such financial statements to United States Generally Accepted Accounting Principles, (whichwhich we refer to as U.S. GAAP).GAAP. Accordingly, while we have in the past reconciled our consolidated financial statements prepared in accordance withNormas de Información Financiera Mexicanas (Mexican(Mexican Financial Reporting Standards, or Mexican FRS) to U.S. GAAP, those reconciliations are no longer presented in our filings with the SEC. We do, however, continue to provide the disclosure required under the U.S. Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 932 “Extractive Activities—Oil and Gas” (which we refer to as ASC Topic 932), as this is required regardless of the basis of accounting on which we prepare our financial statements.

We maintain our consolidated financial statements and accounting records in pesos. Unless otherwise indicated, we have translated all peso amounts to U.S. dollars in this Form20-F, including all convenience translations of our consolidated financial statements included herein, at an exchange rate of Ps. 13.076520.6640 = U.S. $1.00, which is the exchange rate that theSecretaría de Hacienda y Crédito Público (Ministry of Finance and Public Credit, or the SHCP)Credit) instructed us to use on December 31, 2013.2016. You should not construe these translations from pesos into dollars as actually representing such U.S. dollar amounts or meaning that you could convert such amounts into U.S. dollars at the rates indicated. Mexico has a free market for foreign exchange, and

the Mexican Government allows the peso to float freely against the U.S. dollar. There can be no assurance that the Mexican Government will maintain its current policies with regard to the peso or that the peso will not depreciate or appreciate significantly in the future. Due to the volatility of the peso/U.S. dollar exchange rate, the exchange rate on any date subsequent to the date hereof could be materially different from the rate indicated above. See “Item 3—Key Information—Exchange Rates” for information regarding the rates of exchange between pesos and U.S. dollars.

SPECIAL NOTE REGARDING MEXICAN ENERGY REFORM

On December 12, 2013, the Permanent Commission of the Mexican Congress approved amendments to Articles 25, 27 and 28 of theConstitución Política de los Estados Unidos Mexicanos (Political Constitution of the United Mexican States, or the Mexican Constitution), which were subsequently approved by a majority of Mexico’s state legislatures and signed into law by the President of Mexico, Enrique Peña Nieto. On December 20, 2013, these amendments were published as theDecreto por el que se reforman y adicionan diversas disposiciones de la Constitución Política de los Estados Unidos Mexicanos, en Materia de Energía (Decree that amends and supplements various provisions of the Mexican Constitution relating to energy matters, which we refer to as the Energy Reform Decree) in theDiario Oficial de la Federación(Official Gazette of the Federation) and took effect on December 21, 2013.

The Energy Reform Decree includes transitional articles (orartículos transitorios) that set forth the general framework for the secondary legislation or implementing laws, which have not been enacted as of the date of this report. See “Item 4—Information on the Company—History and Development—Energy Reform” for more details regarding the Energy Reform Decree, transitional articles and secondary legislation.

The transitional articles of the Energy Reform Decree outline a process, commonly referred to as Round Zero, for the determination of our initial allocation of rights to continue to carry out exploration and production activities in Mexico. Round Zero is being administered by theSecretaría de Energía (the Ministry of Energy), with technical assistance from theComisión Nacional de Hidrocarburos (National Hydrocarbons Commission, which we refer to as the NHC). In connection with Round Zero, we have submitted to the Ministry of Energy a request that we be assigned the right to explore and develop areas in which we currently operate based on our technical, financial and operational capabilities. As of the date of this report, the Round Zero process has not yet been completed. See “Item 4—Information on the Company—History and Development—Energy Reform—Round Zero” for more details regarding the Round Zero process and our submission.

PRESENTATION OF INFORMATION CONCERNING RESERVES

The proved hydrocarbon reserves included in this report for the year ended December 31, 2016 are those that we have the right to extract and sell based on assignments granted by the Mexican Government to us in August 2014 through the process commonly referred to as Round Zero. See “Item 4—Information on the Company—History and Development—Energy Reform” for a description of the Round Zero process.

The estimates of Mexico’sour proved reserves of crude oil and natural gas for the five years ended December 31, 20132016 included in this report have been calculated according to the technical definitions required by the SEC. Although DeGolyer and MacNaughton, Netherland, Sewell International, S. de R.L. de C.V. (which we refer to as Netherland Sewell) and Ryder Scott Company, L.P. (which we refer to as Ryder Scott) conducted reserves audits of our estimates of theour proved hydrocarbon reserves of Mexico as of December 31, 20132016 or January 1, 2014,2017, as applicable, allapplicable. All reserves estimates involve some degree of uncertainty. SeeFor a description of the risks relating to reserves and reserves estimates, see “Item 3—Key Information—Risk Factors—Risk Factors Related to Ourour Relationship with the Mexican Government—Information on Mexico’s hydrocarbon reserves in this report is based on estimates, which are uncertain and subject to revision” andrevisions,” “—Our abilityWe must make significant capital expenditures to maintain and increase our oilcurrent production levels, depends on our abilityand to successfully developmaintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and failureour inability to do soobtain financing may limit our ability to maintainmake capital investments” and increase our production” for a description of the risks relating to reserves and reserves estimates.

We include these estimates of Mexico’s proved reserves in this report and describe the reserves replacement rate by reference to these proved reserves because, as of December 31, 2013, Pemex-Exploration and Production

had the right to extract, but not own, these reserves, and to sell the resulting production under theLey de Petróleos Mexicanos (Petróleos Mexicanos Law). Following the adoption of the Energy Reform Decree, our ability in the future to extract these reserves, and to sell the resulting production, will be determined by Round Zero, as described above. See “Item 3—Key Information—Risk Factors—Risk Factors Related to Our Relationship with the Mexican Government—“—The Mexican nation, not us, owns the hydrocarbon reserves located in the subsoil ofin Mexico and our right to continue to exploitextract these reserves is subject to the approval of the Ministry of Energy.”

FORWARD-LOOKING STATEMENTS

This Form20-F contains words, such as “believe,” “expect,” “anticipate” and similar expressions that identifyforward-looking statements, which reflect our views about future events and financial performance. We have madeforward-looking statements that address, among other things, our:

Actual results could differ materially from those projected in suchforward-looking statements as a result of various factors that may be beyond our control. These factors include, but are not limited to:

Accordingly, you should not place undue reliance on theseforward-looking statements. In any event, these statements speak only as of their dates, and we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise.

For a discussion of important factors that could cause actual results to differ materially from those contained in anyforward-looking statement, you should see “Item 3—Key Information—Risk Factors.”

PART I

Not applicable.

Not applicable.

SELECTED FINANCIAL DATA

The selected statement of comprehensive income (loss), statement of financial position and cash flows data set forth below as of and for the threefive years ended December 31, 20132016 have been derived from, and should be read in conjunction with, our consolidated financial statements as of December 31, 20122015 and 20132016 and for the years ended December 31, 2011, 20122014, 2015 and 2013,2016, which are included in Item 18 of this report. Our consolidated financial statements for each of the two fiscal yearsyear ended December 31, 2012 were audited by KPMG Cárdenas Dosal, S.C., an independent registered public accounting firm. Our consolidated financial statements for each of the fiscal yearyears ended December 31, 2013, 2014, 2015 and 2016 were audited by Castillo Miranda y Compañía, S.C. (which we refer to as BDO Mexico), an independent registered public accounting firm. Certain amounts in the consolidated financial statements for the years ended December 31, 2012, 2013, 2014 and 2015 have been reclassified to conform the presentation of the amounts in the consolidated financial statements for the year ended December 31, 2016. These reclassifications are not significant to the consolidated financial statements and had no impact on our consolidated net income (loss).

As detailed below, for the years ended December 31, 2016 and 2015, we recognized net losses of Ps. 191.1 billion and Ps. 712.6 billion, respectively. In addition, we had negative equity as of December 31, 2016 and 2015 of Ps. 1,233.0 billion and Ps. 1,331.7 billion, respectively, which resulted in a negative working capital of Ps. 70.8 billion and Ps. 176.2 billion, respectively, and negative cash flows from operating activities of Ps. 41.5 billion for the year ended December 31, 2016. This has led our independent auditors to state in their most recent audit report that there is important uncertainty and significant doubt about our ability to continue as a going concern. We have disclosed the circumstances that have caused these negative trends and the actions we are taking to face them and have concluded that we continue to operate as a going concern. Accordingly, we have prepared our consolidated financial statements on a going concern basis, which assumes that we can meet our payment obligations. For more information on the actions that we are taking to face these negative trends, see “Item 5—Operating and Financial Review and Prospects—Overview” and “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

Selected Financial Data of PEMEX

(2)	Includes Petróleos Mexicanos, the subsidiary entities and the subsidiary companies listed in Note 3(a)4 to our consolidated financial statements included herein.

(3)(2)

Translations into U.S. dollars of amounts in pesos have been made at the exchange rate established by the SHCPMinistry of Finance and Public Credit for accounting purposes of Ps. 13.076520.6640 = U.S. $1.00 at December 31, 2013.2016. Such translations should not be construed as a representation that the peso amounts have been or could be converted into U.S. dollar amounts at the foregoing or any other rate.

(4)(3)

Includes capitalized financing cost. See Note 1012 to our consolidated financial statements included herein and “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

(5)(4)

Earnings, for this purpose, consist ofpre-tax income (loss) from continuing operations before income from equity investees, plus fixed charges, minus interest capitalized during the period, plus the amortization of capitalized interest during the period and plus dividends received on equity investments.Pre-tax income (loss) is calculated after the deduction of hydrocarbon duties, but before the deduction of the hydrocarbon income tax and other income taxes. Fixed charges for this purpose consist of the sum of interest expense plus interest capitalized during the period.period, plus amortization premiums related to indebtedness and plus the estimated interest within rental expense. Fixed charges do not take into account exchange gain or loss attributable to our indebtedness.

(6)(5)

Earnings for the years ended December 31, 20112013, 2014, 2015 and 20132016 were insufficient to cover fixed charges. The amount by which fixed charges exceeded earnings was Ps. 108,098165,217 million, Ps. 283,640, Ps. 765,161 million and Ps. 163,803Ps.236,800 million for the years ended December 31, 20112013, 2014, 2015 and 2013,2016 respectively.

Source: PEMEX’s consolidated financial statements, prepared in accordance with IFRS, as it relates to the Selected Statementsselected statements of Comprehensive Income, Statementcomprehensive income, statement of Financial Positionfinancial position and Statementstatement of Cash Flows Data;cash flows data; and Petróleos Mexicanos, as it relates to Other Financial Data.other financial data.

EXCHANGE RATES

The following table sets forth, for the periods indicated, the high, low, average andperiod-end exchange rates for the purchase of U.S. dollars, expressed in pesos per U.S. dollar. These rates have not been restated in constant currency units.

Source: Noon buying rate for cable transfers in New York reported by the Federal Reserve.

The noon buying rate for cable transfers in New York reported by the Federal Reserve on May 9, 2014April 21, 2017 was Ps. 12.98618.8425 = U.S. $1.00.

RISK FACTORS

Considerations Related to Mexico

The effects of the Energy Reform Decree and its implementation are uncertain but likely to be material.

The Energy Reform Decree, which was enacted in December 2013, included transitional articles that set forth the framework for the implementation of secondary legislation and provided for certain transitional steps, including the Round Zero process described below. We expect that the effects of these developments on our business and operations will be material. Among the features of the Energy Reform Decree that could have an effect on our operations are the following:

As of the date of this report and until the secondary legislation related to the Energy Reform Decree becomes effective and private sector companies enter into contractual agreements to operate in the Mexican energy sector, we are the only entity that conducts the petroleum industry in Mexico on behalf of Mexico.

As of the date of this report, one key aspect of the Energy Reform Decree—our initial allocation of oil and gas exploration and extraction rights—is being implemented pursuant to a process outlined in the transitional articles and referred to as Round Zero. As part of Round Zero, we have submitted a request that the Ministry of Energy assign to us certain oil and gas exploration and extraction rights. The Ministry of Energy has a deadline of September 17, 2014 to respond to our request. See “—Risk Factors Related to Our Relationship with the Mexican Government—The Mexican nation, not us, owns the hydrocarbon reserves located in the subsoil of Mexico and our right to continue to exploit these reserves is subject to the approval of the Ministry of Energy” below in this Item 3.

The secondary legislation implementing the Energy Reform Decree is expected to include, among other things, additional details regarding the contractual and fiscal regime that will be applicable to us and changes to our corporate structure as part of Petróleos Mexicanos’ conversion from a decentralized public entity to a “productive state-owned company” by December 2015. As of the date of this report, this secondary legislation has not been adopted. The impact of the Energy Reform Decree on us will largely depend on how it is implemented by the secondary legislation and on the outcome of Round Zero. It would therefore be premature to predict the long-term effects of the Energy Reform Decree and the new framework it contemplates, but these effects could be adverse to our interests in significant respects. In addition, as a result of longstanding restrictions included in certain of our financing agreements that were based on the legal framework in effect before the Energy Reform Decree was enacted, these effects may cause us to default on these agreements in the event that we are unable to obtain waivers from our lenders or bondholders, as applicable. For more information, see “Item 4—Information on the Company—History and Development—Energy Reform.”

Economic conditions and government policies in Mexico and elsewhere may have a material impact on our operations.

A deterioration in Mexico’s economic condition, social instability, political unrest or other adverse social developments in Mexico could adversely affect our business and financial condition. Those events could also

lead to increased volatility in the foreign exchange and financial markets, thereby affecting our ability to obtain new financing and service our debt. Additionally, the Mexican Government may cut spending in the future. These cuts could adversely affect our business, financial condition and prospects. In the past, Mexico has experienced several periods of slow or negative economic growth, high inflation, high interest rates, currency devaluation and other economic problems. These problems may worsen or reemerge, as applicable, in the future, and could adversely affect our business and our ability to service our debt. A worsening of international financial or economic conditions, including a slowdown in growth or recessionary conditions in Mexico’s trading partners, including the United States, or the emergence of a new financial crisis, could have adverse effects on the Mexican economy, our financial condition and our ability to service our debt.

Changes in exchange rates or in Mexico’s exchange control laws may hamper our ability to service our foreign currency debt.

The Mexican Government does not currently restrict the ability of Mexican companies or individuals to convert pesos into U.S. dollars or other currencies, and Mexico has not had a fixed exchange rate control policy since 1982. However, in the future, the Mexican Government could impose a restrictive exchange control policy, as it has done in the past. We cannot provide assurances that the Mexican Government will maintain its current policies with regard to the peso or that the peso’s value will not fluctuate significantly in the future. The peso has been subject to significant devaluations against the U.S. dollar in the past and may be subject to significant fluctuations in the future. Mexican Government policies affecting the value of the peso or preventing us from exchanging pesos into U.S. dollars could prevent us from paying our foreign currency obligations.

Most of our debt is denominated in U.S. dollars. In the future, we may incur additional indebtedness denominated in U.S. dollars or other currencies. Declines in the value of the peso relative to the U.S. dollar or other currencies may increase our interest costs in pesos and result in foreign exchange losses to the extent that we have not hedged our exposure with derivative financial instruments, which we refer to as DFIs.

For information on historical peso/U.S. dollar exchange rates, see “—Key Information—Exchange Rates” in this Item 3.

Political conditions in Mexico could materially and adversely affect Mexican economic policy and, in turn, our operations.

Political events in Mexico may significantly affect Mexican economic policy and, consequently, our operations. On December 1, 2012, Enrique Peña Nieto, a member of thePartido Revolucionario Institucional(Institutional Revolutionary Party, or PRI), formally assumed office for a six-year term as the President of Mexico. As of the date of this report, no political party holds a simple majority in either house of the Mexican Congress.

Mexico has experienced a period of increasing criminal violence and such activities could affect our operations.

Recently, Mexico has experienced a period of increasing criminal violence, primarily due to the activities of drug cartels and related criminal organizations. In response, the Mexican Government has implemented various security measures and has strengthened its military and police forces. Despite these efforts, drug-related crime continues to exist in Mexico. These activities, their possible escalation and the violence associated with them, in an extreme case, may have a negative impact on our financial condition and results of operations.

Risk Factors Related to Our Relationship with the Mexican Government

The Mexican Government controls us and it could limit our ability to satisfy our external debt obligations or could reorganize or transfer us or our assets.

Each of Petróleos Mexicanos and the subsidiary entities is a decentralized public entity of the Mexican Government, and therefore the Mexican Government controls us, as well as, as of the date of this report, our

annual budget, which is approved by the Cámara de Diputados (Chamber of Deputies). The Energy Reform Decree provides that by December 2015, Petróleos Mexicanos will be converted from a decentralized public entity to a productive state-owned company. Moreover, the proposed secondary legislation implementing the Energy Reform Decree provides us with, among other things, additional technical, managerial and budgetary autonomy designed to increase our production and allow us to compete effectively with other oil and gas companies that enter the Mexican energy sector. See “Item 4—Information on the Company—History and Development—Energy Reform.” Notwithstanding this increased autonomy and our conversion to a productive state-owned company, Petróleos Mexicanos will continue to remain under the Mexican Government’s control, as the Mexican Government has (and, following the implementation of the Energy Reform Decree and related proposed secondary legislation, will continue to have, albeit to a lesser extent) the power to intervene directly or indirectly in our commercial and operational affairs. Intervention by the Mexican Government could adversely affect our ability to make payments under any securities issued by us. Although Petróleos Mexicanos is (and following its conversion to a productive state-owned company will remain) under the Mexican Government’s control, its financing obligations do not constitute obligations of and are not guaranteed by the Mexican Government.

The Mexican Government’s agreements with international creditors may affect our external debt obligations. In certain past debt restructurings of the Mexican Government, Petróleos Mexicanos’ external indebtedness was treated on the same terms as the debt of the Mexican Government and other public sector entities. In addition, Mexico has entered into agreements with official bilateral creditors to reschedule public sector external debt. Mexico has not requested restructuring of bonds or debt owed to multilateral agencies.

The Energy Reform Decree contemplates the transfer of certain of Pemex-Gas and Basic Petrochemicals’ assets to another decentralized public entity of the Mexican Government that will be created in the future. The Mexican Government has the power, in connection with the implementation of the secondary legislation relating to the Energy Reform Decree or if the Mexican Constitution and federal law were further amended, to reorganize us, including a transfer of all or a portion of Petróleos Mexicanos and the subsidiary entities or their assets to an entity not controlled by the Mexican Government. The reorganization and transfer of assets contemplated by the Energy Reform Decree or any other reorganization or transfer that the Mexican Government may effect, could adversely affect our production, cause a disruption in our workforce and our operations and cause us to default on certain obligations. See “—Considerations Related to Mexico” above in this Item 3.

Petróleos Mexicanos and the subsidiary entities pay special taxes and duties to the Mexican Government, which may limit our capacity to expand our investment program.

We pay a substantial amount of taxes and duties to the Mexican Government, particularly on the revenues of Pemex-Exploration and Production, which may limit our ability to make capital investments. In 2013, approximately 53.8% of our sales revenues was used to pay taxes and duties to the Mexican Government. These special taxes and duties constitute a substantial portion of the Mexican Government’s revenues. For further information, see “Item 4—Information on the Company—Taxes and Duties” and “Item 5—Operating and Financial Review and Prospects—IEPS Tax, Hydrocarbon Duties and Other Taxes.” The Energy Reform Decree contemplates that the secondary legislation implementing it will include a new fiscal regime applicable to us. See “—Considerations Related to Mexico—The effects of the Energy Reform Decree and its implementation are uncertain but likely to be material” above in this Item 3.

The Mexican Government has imposed price controls in the domestic market on our products.

The Mexican Government has from time to time imposed price controls on the sales of natural gas, liquefied petroleum gas (LPG), gasoline, diesel, gas oil intended for domestic use, fuel oil and other products. As a result of these price controls, we have not been able to pass on all of the increases in the prices of our product purchases to our customers in the domestic market. We do not control the Mexican Government’s domestic policies and the Mexican Government could impose additional price controls on the domestic market in the future. The imposition of such price controls would adversely affect our results of operations. For more information, see

“Item 4—Information on the Company—Business Overview—Refining—Pricing Decrees” and “Item 4—Information on the Company—Business Overview—Gas and Basic Petrochemicals—Pricing Decrees.”

The Mexican nation, not us, owns the hydrocarbon reserves located in the subsoil of Mexico and our right to continue to exploit these reserves is subject to the approval of the Ministry of Energy.

The Mexican Constitution provides that the Mexican nation, not us, owns all petroleum and other hydrocarbon reserves located in the subsoil of Mexico.

Following the adoption of the Energy Reform Decree, Article 27 of the Mexican Constitution provides that the Mexican Government will carry out exploration and extraction activities through agreements with private sector companies and through assignments to and agreements with us. Once the secondary legislation related to the Energy Reform Decree is fully implemented, we and other oil and gas companies will have the right to exploit the petroleum and other hydrocarbon reserves located in the subsoil of Mexico, subject to assignment of these rights by the Ministry of Energy and entry into agreements pursuant to a competitive bidding process.

On March 21, 2014, as part of Round Zero, we submitted to the Ministry of Energy a request that we be assigned the right to continue to explore and develop areas that together contain 96% of Mexico’s estimated proved reserves of crude oil and natural gas as of December 31, 2013. The transitional articles of the Energy Reform Decree provide that the Ministry of Energy will take the following factors into consideration when determining whether to grant us an assignment:

The Ministry of Energy has a deadline of September 17, 2014 to respond to our request. The Ministry of Energy may not approve the assignment of certain of the proved oil and gas reserves we requested.

Access to crude oil and natural gas reserves is essential to an oil and gas company’s sustained production and generation of income, and our ability to generate income would be materially and adversely affected if we do not receive a significant percentage of the proved oil and gas reserves that we have requested pursuant to Round Zero or if the Mexican Government were to restrict or prevent us from exploiting any crude oil and natural gas reserves that it assigns to us. For more information, see “Item 4—Information on the Company—History and Development—Energy Reform—Round Zero.”

Information on Mexico’s hydrocarbon reserves in this report is based on estimates, which are uncertain and subject to revisions.

The information on oil, gas and other reserves set forth in this report is based on estimates. Reserves valuation is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner; the accuracy of any reserves estimate depends on the quality and reliability of available data, engineering and geological interpretation and subjective judgment. Additionally, estimates may be revised based on subsequent results of drilling, testing and production. These estimates are also subject to certain adjustments based on changes in variables, including crude oil prices. Therefore, proved reserves estimates may differ materially from the ultimately recoverable quantities of crude oil and natural gas. See “—Risk Factors Related to Our Operations—Crude oil and natural gas prices are volatile and low crude oil and natural gas prices adversely affect our income and cash flows and the amount of Mexico’s hydrocarbon reserves that we have the right to extract and sell.” Pemex-Exploration and Production revises its estimates of Mexico’s hydrocarbon reserves that it is entitled to extract and sell annually, which may result in material

revisions to our estimates of Mexico’s hydrocarbon reserves it is entitled to extract and sell. Our ability to maintain our long-term growth objectives for oil production depends on our ability to successfully develop our reserves, and failure to do so could prevent us from achieving our long-term goals for growth in production.

We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, any proved hydrocarbon reserves that may be assigned to us pursuant to Round Zero. Mexican Government budget cuts, reductions in our income and inability to obtain financing may limit our ability to make capital investments.

Our ability to maintain, as well as increase, our oil production levels is highly dependent upon our ability to successfully develop existing hydrocarbon reserves and, in the long term, upon our ability to obtain the right to develop additional reserves.

We continually invest capital to enhance our hydrocarbon recovery ratio and improve the reliability and productivity of our infrastructure. Despite these investments, the replacement rate for proved hydrocarbon reserves decreased to 67.8% in 2013, representing a significant decline in proved hydrocarbon reserves. Pemex-Exploration and Production’s crude oil production decreased by 1.0% from 2010 to 2011, by 0.2% from 2011 to 2012 and by 1.0% from 2012 to 2013, primarily as a result of the decline of production in the Cantarell and Delta del Grijalva projects.

The development of the reserves that are assigned to us pursuant to Round Zero, particularly any reserves in the deep waters of the Gulf of Mexico and in shale oil and gas fields in the Burgos basin, will demand significant capital investments and will pose significant operational challenges. We cannot guarantee that we will have or will be able to obtain, in the time frame that we expect, sufficient resources necessary to exploit the reserves that the Mexican Government assigns to us as part of Round Zero, or that it may grant to us in the future. In addition, increased competition in the oil and gas sector in Mexico may increase the costs of obtaining additional acreage in bidding rounds for the rights to new reserves.

Our ability to make capital expenditures is limited by the substantial taxes and duties that we pay to the Mexican Government and cyclical decreases in our revenues primarily related to lower oil prices. Budget cuts imposed by the Mexican Government and the availability of financing may limit our ability to make capital investments that are necessary to maintain current production levels and increase the proved hydrocarbon reserves we are entitled to exploit. For more information, see “Item 4—Information on the Company—History and Development—Capital Expenditures and Investments” and “—Energy Reform.”

Increased competition in the Mexican energy sector may have a negative impact on our results of operations and financial conditions.

Once the secondary legislation related to the Energy Reform Decree is fully implemented, we and other oil and gas companies will have the right to carry out certain activities related to the energy sector in Mexico, including exploration and extraction activities. The Mexican Government will carry out exploration and extraction activities through agreements with private sector companies and through allocations to or agreements with us. Any oil and gas fields that we do not request or are not assigned to us pursuant to Round Zero will be subject to a competitive bidding process open to participation by private sector companies in which we will not have a preferential right. We will also likely face competition for the right to develop new oil and gas fields in Mexico, as well as in connection with certain refining, transportation and processing activities. For more information, see “Item 4—Information on the Company—History and Development—Energy Reform.” If we are unable to compete successfully with private sector companies in the energy sector in Mexico, our results of operations and financial condition may be adversely affected.

We may claim some immunities under the Foreign Sovereign Immunities Act and Mexican law, and your ability to sue or recover may be limited.

Petróleos Mexicanos and the subsidiary entities are decentralized public entities of the Mexican Government. Accordingly, you may not be able to obtain a judgment in a U.S. court against us unless the U.S.

court determines that we are not entitled to sovereign immunity with respect to that action. In addition, Mexican law does not allow attachment prior to judgment or attachment in aid of execution upon a judgment by Mexican courts upon the assets of Petróleos Mexicanos or the subsidiary entities. As a result, your ability to enforce judgments against us in the courts of Mexico may be limited. We also do not know whether Mexican courts would enforce judgments of U.S. courts based on the civil liability provisions of the U.S. federal securities laws. Therefore, even if you were able to obtain a U.S. judgment against us, you might not be able to obtain a judgment in Mexico that is based on that U.S. judgment. Moreover, you may not be able to enforce a judgment against our property in the United States except under the limited circumstances specified in the Foreign Sovereign Immunities Act of 1976, as amended. Finally, if you were to bring an action in Mexico seeking to enforce our obligations under any of our securities, satisfaction of those obligations may be made in pesos, pursuant to the laws of Mexico.

Our directors and officers, as well as some of the experts named in this Form 20-F, reside outside the United States. Substantially all of our assets and those of most of our directors, officers and experts are located outside the United States. As a result, you may not be able to effect service of process on our directors or officers or those experts within the United States.

Risk Factors Related to Our Operations

Crude oil and natural gas prices are volatile and low crude oil and natural gas prices adversely affect our income and cash flows and the amount of Mexico’s hydrocarbon reserves.reserves that we have the right to extract and sell.

International crude oil and natural gas prices are subject to global supply and demand and fluctuate due to many factors beyond our control. These factors include competition within the oil and natural gas industry, the prices and availability of alternative sources of energy, international economic trends, exchange rate fluctuations, expectations of inflation, domestic and foreign laws and government regulations, or international laws, political and other events in major oil and natural gas producing and consuming nations and actions taken by Organization of the Petroleum Exporting Countries (OPEC) members and other oil exporting countries, trading activity in oil and natural gas and transactions in DFIsderivative financial instruments (which we refer to as DFIs) related to oil and gas.

When international crude oil, andpetroleum product and/or natural gas prices are low, we generally earn less export sales revenue and, therefore, generate lower cash flows and earn less income before taxes and duties because our costs remain roughly constant. Conversely, when crude oil, petroleum product and natural gas prices are high, we earn more export sales revenue and our income before taxes and duties increases. Crude oil export prices, which had generally traded above U.S. $75.00 per barrel since October 2009 and traded above U.S. $100.00 per barrel as of July 30, 2014, began to fall in August 2014. After a gradual decline that resulted in per barrel prices falling to U.S. $91.16 at September 30, 2014, this decline sharply accelerated in October 2014 and prices fell to U.S. $53.27 per barrel at the end of 2014, with a weighted average price for the year of 2014 of U.S. $86.00 per barrel. During 2015, the weighted average Mexican crude oil export price was approximately U.S. $44.17 per barrel and fell to U.S. $26.54 per barrel by the end of December 2015. In 2016, the weighted average Mexican crude oil export price was approximately U.S. $35.63 per barrel, falling to U.S. $18.90 per barrel on January 20, 2016, the lowest in twelve years, before rebounding to U.S. $46.53 per barrel on December 28, 2016. This decline in crude oil prices had a direct effect on our results of operations and financial condition for the year ended December 31, 2016. During the first three months of 2017, the weighted average Mexican crude oil price was U.S. $44.11 per barrel, an increase of U.S. $8.48 per barrel as compared to the 2016 weighted average Mexican crude oil export price. As of April 27, 2017, the weighted average Mexican crude oil export price was U.S. $42.25 per barrel, a result, future fluctuationsslight decrease from the first three months of 2017, but an increase of U.S. $6.62 per barrel as compared to the 2016 weighted average Mexican crude oil export price. Future declines in international crude oil and natural gas prices will have a direct effectsimilar negative impact on our results of operations and financial condition, andcondition. These fluctuations may also affect estimates of the amount of Mexico’s hydrocarbon reserves estimates.that we have the right to extract and sell. See “—Risk Factors Related to Ourour Relationship with the Mexican Government—Information on Mexico’s hydrocarbon reserves in this report is based on estimates, which are uncertain and subject to revisions” above in this Item 3below and “Item 11—Quantitative and Qualitative Disclosures about About Market Risk—Changes in Exposure to Main Risks—Market Risk—Hydrocarbon Price Risk.”

We have a substantial amount of indebtedness and other liabilities and are exposed to liquidity constraints, which could make it difficult for us to obtain financing on favorable terms and could adversely affect our financial condition, results of operations and ability to repay our debt and, ultimately, our ability to operate as a going concern.

We have a substantial amount of debt, which we have incurred primarily to finance the capital expenditures needed to carry out our capital investment projects. Due to our heavy tax burden, our cash flow from operations in recent years has not been sufficient to fund our capital expenditures and other expenses and, accordingly, our debt has significantly increased and our working capital has decreased. The sharp decline in oil prices that began in late 2014 has had a negative impact on our ability to generate positive cash flows, which, together with our continued heavy tax burden and increased competition from the private sector, has further exacerbated our ability to fund our capital expenditures and other expenses from cash flow from operations. Therefore, in order to develop our hydrocarbon reserves and amortize scheduled debt maturities, we will need to raise significant amounts of financing from a broad range of funding sources.

As of December 31, 2016, our total indebtedness, including accrued interest, was approximately U.S. $96.0 billion (Ps. 1,983.1 billion), in nominal terms, which represents a 10.6% increase (a 32.8% increase in peso terms) compared to our total indebtedness, including accrued interest, of approximately U.S. $86.8 billion (Ps. 1,493.4 billion) as of December 31, 2015. 23.5% of our existing debt as of December 31, 2016, or U.S. $22.5 billion, is scheduled to mature in the next three years. As of December 31, 2016, we had negative working capital of U.S. $3.4 billion. Our level of debt may increase further in the short or medium term and may have an adverse effect on our financial condition, results of operations and liquidity position. To service our debt and to raise funds for our capital expenditures, we have relied and may continue to rely on a combination of cash flows provided by our operations, the divestment ofnon-strategic assets, drawdowns under our available credit facilities and the incurrence of additional indebtedness. See “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Overview—Changes to Our Business Plan.”

Certain rating agencies have expressed concerns regarding: (1) our heavy tax burden, (2) the total amount of our debt; (3) the significant increase in our indebtedness over the last several years; (4) our negative free cash flow during 2016, primarily resulting from our significant capital investment projects and the low price of oil; (5) the natural decline of certain of our oil fields and lower quality of crude oil; (6) our substantial unfunded reserve for retirement pensions and seniority premiums, which was equal to U.S. $59.1 billion as of December 31, 2016; and (7) the resilience of our operating expenses notwithstanding the sharp decline in oil prices that began in late 2014. On January 29, 2016, Standard & Poor’s (S&P) rating agency downgraded ourstand-alone credit profile from “BB+” to “BB,” and on August 23, 2016 downgraded our credit outlook from stable to negative. On December 23, 2016, S&P affirmed our global foreign currency rating of “BBB+.” On March 31, 2016, Moody’s Investors Service announced the revision of our global foreign currency and local currency credit ratings from “Baa1” to “Baa3” and changed the outlook for our credit ratings to negative. On December 9, 2016, Fitch Ratings affirmed our “BBB+” global credit rating, but revised the outlook for our credit ratings from stable to negative.

Any further lowering of our credit ratings may have adverse consequences on our ability to access the financial markets and/or our cost of financing. If we were unable to obtain financing on favorable terms, this could hamper our ability to obtain further financing, invest in projects financed through debt and meet our principal and interest payment obligations with our creditors. As a result, we may be exposed to liquidity constraints and may not be able to service our debt or make the capital expenditures required to maintain our current production levels and to maintain, and increase, the proved hydrocarbon reserves assigned to us by the Mexican Government, which may adversely affect our financial condition and results of operations. See “—Risk Factors Related to our Relationship with the Mexican Government—We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our ability to make capital investments” below.

If such constraints occur at a time when our cash flow from operations is less than the resources necessary to fund our capital expenditures or to meet our debt service obligations, in order to provide additional liquidity to our operations, we could be forced to further reduce our planned capital expenditures, implement further austerity measures and/or sell additionalnon-strategic assets in order to raise funds. A reduction in our capital expenditure program could adversely affect our financial condition and results of operations. Additionally, such measures may not be sufficient to permit us to meet our obligations.

Our consolidated financial statements have been prepared under the assumption that we will continue as a going concern. However, our independent auditors have stated in their most recent report that there is important uncertainty and significant doubt concerning our ability to continue operating as a result of recurring net losses, negative working capital, negative equity and negative cash flows from operating activities for the year ended December 31, 2016. Our consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty. If the actions we are taking to improve our financial condition, which are described in detail under “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital

Resources—Overview—Changes to Our Business Plan,” are not successful, we may not be able to continue operating as a going concern.

We are an integrated oil and gas company and are exposed to production, equipment and transportation risks, blockades to our facilities and criminal acts and deliberate acts of terror.

We are subject to several risks that are common among oil and gas companies. These risks include production risks (fluctuations in production due to operational hazards, natural disasters or weather, accidents, etc.), equipment risks (relating to the adequacy and condition of our facilities and equipment) and transportation risks (relating to the condition and vulnerability of pipelines and other modes of transportation). More specifically, our business is subject to the risks of explosions in pipelines, refineries, plants, drilling wells and other facilities, oil spills, hurricanes in the Gulf of Mexico and other natural or geological disasters and accidents, fires and mechanical failures. Criminal attempts to divert our crude oil, natural gas or refined products from our pipeline network and facilities for illegal sale have resulted in explosions, property and environmental damage, injuries and loss of life.

Our facilities are also subject to the risk of sabotage, terrorism, blockades and cyber attacks. In July 2007, twocyber-attacks. For example, widespread demonstrations, including blockades, as a result of the Mexican Government’s recent increase in fuel prices, have prevented us from accessing certain of our pipelines were attacked. In September 2007, six different sites were attackedrefined products supply terminals and 12 of our pipelines were affected.caused critical gasoline shortages at retail service stations in at least three Mexican states. The occurrence of any of these events or of accidents connected withincidents related to the production, processing and transportingtransportation of oil and oilgas products could result in personal injuries, loss of life, environmental damage with resultingfrom the subsequent containment,clean-up and repair expenses, equipment damage and damage to our facilities. A shutdown of the affected facilities could disrupt our production and increase our production costs. As of the date of this report, there have been no similar occurrences since 2007. Although we have established an information security program, which includes cybersecurity systems and procedures to protect our information technology, and have not yet suffered a cyber attack,cyber-attack, if the integrity of our information technology were ever compromised due to a cyber attack,cyber-attack, or due to the negligence or misconduct of our employees, our business operations could be disrupted and our proprietary information could be lost or stolen. As a result of these risks, we could face, among other things, regulatory action, legal liability, damage to our reputation, a significant reduction in revenues, an increase in costs, a shutdown of operations, or loss of our investments in affected areas.

We purchase comprehensive insurance policies covering most of these risks; however, these policies may not cover all liabilities, and insurance may not be available for some of the consequential risks. There can be no assurance that accidents, sabotage or acts of terror will not occur in the future, that insurance will adequately cover the entire scope or extent of our losses or that we may not be found directly liable in connection with claims arising from theseaccidents or other similar events. See “Item 4—Information on the Company—Business Overview—PEMEX Corporate Matters—Insurance.”

We have aDevelopments in the oil and gas industry and other factors may result in substantialwrite-downs of the carrying amount of liabilities thatcertain of our assets, which could adversely affect our operating results and financial condition.

We evaluate on an annual basis, or more frequently where the circumstances require, the carrying amount of our assets for possible impairment. Our impairment tests are performed by a comparison of the carrying amount of an individual asset or acash-generating unit with its recoverable amount. Whenever the recoverable amount of an individual asset orcash-generating unit is less than its carrying amount, an impairment loss is recognized to reduce the carrying amount to the recoverable amount.

Changes in the economic, regulatory, business or political environment in Mexico or other markets where we operate, such as the gradual liberalization of fuel prices pursuant to energy reform and the significant decline in international crude oil and gas prices, among other factors, may result in the recognition of impairment charges in certain of our assets. Due to the decline in oil prices, we have performed impairment tests of ournon-financial assets (other than inventories and deferred taxes) at the end of each quarter. As of December 31, 2015, we recognized an impairment charge of Ps. 477,945 million. As of December 31, 2016, we recognized a net reversal of impairment in the amount of Ps. 331,314 million. See Note 12(d) to our consolidated financial

statements for further information about the impairment of certain of our assets. Future developments in the economic environment, in the oil and gas industry and other factors could result in further substantial impairment charges, adversely affecting our operating results and financial condition.

Increased competition in the energy sector due to the current legal framework in Mexico could adversely affect our business and financial performance.

The Political Constitution of the United Mexican States (the “Mexican Constitution”) and theLey de Hidrocarburos (Hydrocarbons Law) allows other oil and gas companies, in addition to us, to carry out certain activities related to the energy sector in Mexico, including exploration and extraction activities, and the import and sale of gasoline. As a result, we face competition for the right to explore and develop new oil and gas reserves in Mexico. We will also likely face competition in connection with certain refining, transportation and processing activities. In addition, increased competition could make it difficult for us to hire and retain skilled personnel. For more information, see “Item 4—Information on the Company—History and Development—Energy Reform.” If we are unable to compete successfully with other oil and gas companies in the energy sector in Mexico, our results of operations and financial condition may be adversely affected.

We are subject to Mexican and internationalanti-corruption,anti-bribery andanti-money laundering laws. Our failure to comply with these laws could result in penalties, which could harm our reputation, prevent us from obtaining governmental authorizations needed to carry out our operations and have an adverse effect on our business, results of operations and financial condition.

We are subject to Mexican and internationalanti-corruption,anti-bribery andanti-money laundering laws. See “Item 4—Information on the Company—General Regulatory Framework.” Although we maintain policies and processes intended to comply with these laws, including the review of our internal control over financial reporting, we are subject to the risk that our employees, contractors or any person doing business with us may engage in fraudulent activity, corruption or bribery, circumvent or override our internal controls and procedures or misappropriate or manipulate our assets for their personal or business advantage to our detriment. We have in place a number of systems for identifying, monitoring and mitigating these risks, but our systems may not be effective and we cannot ensure that these compliance policies and processes will prevent intentional, reckless or negligent acts committed by our officers or employees.

If we fail to comply with any applicableanti-corruption,anti-bribery oranti-money laundering laws, we and our officers and employees may be subject to criminal, administrative or civil penalties and other remedial measures, which could have material adverse effects on our business, financial condition and results of operations.

We have Any investigation of potential violations ofanti-corruption,anti-bribery oranti-money laundering laws by governmental authorities in Mexico or other jurisdictions could result in an inability to prepare our consolidated financial statements in a substantial amount of debt. As of December 31, 2013,timely manner. This could adversely impact our total indebtedness, excluding accrued interest, was approximately U.S. $63.6 billion, in nominal terms, which is a 6.4% increase as compared to our total indebtedness, excluding accrued interest, of approximately U.S. $59.8 billion at December 31, 2012. Our level of debt may increase further in the near or medium term and may have an adverse effect on our financial condition and results of operations.

To service our debt, we have relied and may continue to rely on a combination of cash flows provided by operations, drawdowns under our available credit facilities and the incurrence of additional indebtedness. Certain rating agencies have expressed concerns regarding the total amount of our debt, our increase in indebtedness over the last several years and our substantial unfunded reserve for retirement pensions and seniority premiums, which as of December 31, 2013 was equal to approximately U.S. $85.6 billion. Due to our heavy tax burden, we have resorted to financings to fund our capital investment projects. Any lowering of our credit ratings may have adverse consequences on ourreputation, ability to access the financial markets and/or our cost of financing. If we were unable to obtain financing on favorable terms, this could hamper ourand ability to obtain further financing as well as hamper investmentcontracts, assignments, permits and other government authorizations necessary to participate in projects financed through debt. As a result, we may not be able to make the capital expenditures needed to maintain our current production levels and to maintain, as well as increase, Mexico’s proved hydrocarbon reserves,industry, which, may adversely affectin turn, could have adverse effects on our financial condition andbusiness, results of operations. See “—Risk Factors Related to Our Relationship with the Mexican Government—We must make significant capital expenditures to maintain our current production levels,operations and to maintain, as well as increase, any proved hydrocarbon reserves that may be assigned to us pursuant to Round Zero. Mexican Government budget cuts, reductions in our income and inability to obtain financing may limit our ability to make capital investments.”financial condition.

Our compliance with environmental regulations in Mexico could result in material adverse effects on our results of operations.

A wide range of general andindustry-specific Mexican federal and state environmental laws and regulations apply to our operations; these laws and regulations are often difficult and costly to comply with and carry substantial penalties fornon-compliance. This regulatory burden increases our costs because it requires us to make significant capital expenditures and limits our ability to extract hydrocarbons, resulting in lower revenues. For an estimate of our accrued environmental liabilities, see “Item 4—Information on the Company—Environmental Regulation—Environmental Liabilities.” Growing international concern over greenhouse gas emissions and climate change could result in new laws and regulations that could adversely affect our results of

operations and financial condition. International agreements, including the Paris Agreement approved by the Mexican Government, contemplate coordinated efforts to combat climate change. We may become subject to market changes, including carbon taxes, efficiency standards,cap-and-trade and emission allowances and credits. These measures could increase our operating and maintenance costs, increase the price of our hydrocarbon products and possibly shift consumer demand tolower-carbon sources. See “Item 4—Environmental Regulation—Climate Change” for more information on the Mexican Government’s current legal and regulatory framework for combatting climate change.

Risk Factors Related to Mexico

Economic conditions and government policies in Mexico and elsewhere may have a material impact on our operations.

A deterioration in Mexico’s economic condition, social instability, political unrest or other adverse social developments in Mexico could adversely affect our business and financial condition. Those events could also lead to increased volatility in the foreign exchange and financial markets, thereby affecting our ability to obtain new financing and service our debt. Additionally, the Mexican Government announced budget cuts in November 2015, February 2016, and September 2016 in response to declines in international crude oil prices, and it may cut spending in the future. See “—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government controls us and it could limit our ability to satisfy our external debt obligations or could reorganize or transfer us or our assets” below. These cuts could adversely affect the Mexican economy and, consequently, our business, financial condition, operating results and prospects.

In the past, Mexico has experienced several periods of slow or negative economic growth, high inflation, high interest rates, currency devaluation and other economic problems. These problems may worsen or reemerge, as applicable, in the future and could adversely affect our business and ability to service our debt. A worsening of international financial or economic conditions, such as a slowdown in growth or recessionary conditions in Mexico’s trading partners, including the United States, or the emergence of a new financial crisis, could have adverse effects on the Mexican economy, our financial condition and our ability to service our debt.

Changes in Mexico’s exchange control laws may hamper our ability to service our foreign currency debt.

The Mexican Government does not currently restrict the ability of Mexican companies or individuals to convert pesos into other currencies. However, we cannot provide assurances that the Mexican Government will maintain its current policies with regard to the peso. In the future, the Mexican Government could impose a restrictive exchange control policy, as it has done in the past. Mexican Government policies preventing us from exchanging pesos into U.S. dollars could hamper our ability to service our foreign currency obligations, including our debt, the majority of which is denominated in currencies other than pesos.

Political conditions in Mexico could materially and adversely affect Mexican economic policy and, in turn, our operations.

Political events in Mexico may significantly affect Mexican economic policy and, consequently, our operations. Enrique Peña Nieto, a member of thePartido Revolucionario Institucional(Institutional Revolutionary Party or PRI), was elected President of Mexico and took office on December 1, 2012. As of the date of this annual report, no political party holds a simple majority in either house of the Mexican Congress.

Presidential and federal congressional elections in Mexico will be held in July 2018. The Mexican presidential election will result in a change in administration, as presidential reelection is not permitted in Mexico. As a result, we cannot predict whether changes in Mexican governmental policy will result from the change in administration. Political events in Mexico could adversely affect economic conditions and/or the oil and gas industry and, by extension, our results of operations and financial position.

Mexico has experienced a period of increasing criminal activity, which could affect our operations.

In recent years, Mexico has experienced a period of increasing criminal activity, primarily due to the activities of drug cartels and related criminal organizations. In addition, the development of the illicit market in fuels in Mexico has led to increases in theft and illegal trade in the fuels that we produce. In response, the Mexican Government has implemented various security measures and has strengthened its military and police forces, and we have agreedalso established various strategic measures aimed at decreasing incidents of theft and other criminal activity directed at our facilities and products. See “Item 8—Financial Information—Legal Proceedings—Actions Against the Illicit Market in Fuels.” Despite these efforts, criminal activity continues to exist in Mexico, some of which may target our facilities and products. These activities, their possible escalation and the violence associated with third partiesthem, in an extreme case, may have a negative impact on our financial condition and results of operations.

Economic and political developments in the United States may adversely affect PEMEX.

Changes in economic, political and regulatory conditions in the United States or in U.S. laws and policies governing foreign trade and foreign relations could create uncertainty in the international markets and could have a negative impact on the Mexican economy. Economic conditions in Mexico are highly correlated with economic conditions in the United States due to the high degree of economic activity between the two countries generally, including the trade facilitated by the North American Free Trade Agreement (“NAFTA”). In addition, political developments in the United States, including changes in the administration and governmental policies, can also have an impact on the exchange rate between the U.S. dollar and the Mexican peso, economic conditions in Mexico and the global capital markets.

Following the U.S. elections in November 2016 and the change in the U.S. administration, there is uncertainty regarding future U.S. policies with respect to matters of importance to Mexico and its economy. In particular, the U.S. administration has raised the possibility ofre-negotiating, or withdrawing from, NAFTA and taking actions related to trade, tariffs, immigration and taxation that could affect Mexico.

Since 2003, exports of petrochemical products from Mexico to the United States have enjoyed azero-tariff rate under NAFTA and, subject to limited exceptions, exports of crude oil and petroleum products have also been free or exempt from tariffs. During 2016, our export sales to the United States amounted to Ps. 138.2 billion, representing 12.8% of total sales and 35.0% of export sales for the year. Any increase of import tariffs could make investmentsit economically unsustainable for U.S. companies to reduceimport our carbon dioxide emissions.petrochemical, crude oil and petroleum products if they are unable to transfer those additional costs onto consumers, which would increase our expenses and decrease our revenues, even if domestic and international prices for our products remain constant. Higher tariffs on products that we export to the United States could also require us to renegotiate our contracts or lose business resulting in a material adverse impact on our business and results of operations.

Because the Mexican economy is heavily influenced by the U.S. economy, there-negotiation, or even termination, of NAFTA and/or other U.S. government policies that may be adopted by the U.S. administration may adversely affect economic conditions in Mexico. These developments could in turn have an adverse effect on our financial condition, results of operations and ability to repay our debt.

Risk Factors Related to our Relationship with the Mexican Government

The Mexican Government controls us and it could limit our ability to satisfy our external debt obligations or could reorganize or transfer us or our assets.

We are controlled by the Mexican Government and our annual budget may be adjusted by the Mexican Government in certain respects. Pursuant to the Petróleos Mexicanos Law, Petróleos Mexicanos was transformed from a decentralized public entity to a productivestate-owned company on October 7, 2014. The Petróleos Mexicanos Law establishes a special regime governing, among other things, our budget, debt levels,

administrative liabilities, acquisitions, leases, services and public works. This special regime provides Petróleos Mexicanos with additional technical and managerial autonomy and, subject to certain restrictions, with additional autonomy with respect to our budget. Notwithstanding this increased autonomy, the Mexican Government still controls us and has the power to adjust our financial balance goal, which represents our targeted net cash flow for the fiscal year based on our projected revenues and expenses, and our annual wage and salary expenditures, subject to the approval of theCámara de Diputados (Chamber of Deputies).

The adjustments to our annual budget mentioned above may compromise our ability to develop the reserves assigned to us by the Mexican Government and to successfully compete with other oil and gas companies that enter the Mexican energy sector. See “Item 4—Information on the Company—Environmental Regulation—Global Climate ChangeHistory and Carbon Dioxide Emissions Reduction.Development—Capital Expenditures” for more information about our February 2016 budget adjustment and “—General Regulatory Framework” for more information about the Mexican Government’s authority with respect to our budget. In addition, the Mexican Government’s control over us could adversely affect our ability to make payments under any securities issued by Petróleos Mexicanos. Although Petróleos Mexicanos is wholly owned by the Mexican Government, our financing obligations do not constitute obligations of and are not guaranteed by the Mexican Government.

The Mexican Government’s agreements with international creditors may affect our external debt obligations. In certain past debt restructurings of the Mexican Government, Petróleos Mexicanos’ external indebtedness was treated on the same terms as the debt of the Mexican Government and other public sector entities, and it may be treated on similar terms in any future debt restructuring. In addition, Mexico has entered into agreements with official bilateral creditors to reschedule public sector external debt. Mexico has not requested restructuring of bonds or debt owed to multilateral agencies.

The Mexican Government has the power, if the Mexican Constitution and federal law were further amended, to further reorganize our corporate structure, including a transfer of all or a portion of our assets to an entity not controlled, directly or indirectly, by the Mexican Government. See “—Risk Factors Related to Mexico” above.

We pay significant taxes and duties to the Mexican Government, and, if certain conditions are met, to pay a state dividend, which may limit our capacity to expand our investment program or negatively impact our financial condition generally.

We are required to make significant payments to the Mexican Government, including in the form of taxes and duties, which may limit our ability to make capital investments. In 2016, approximately 32.0% of our sales revenues was used for payments to the Mexican Government in the form of taxes and duties, which constituted a substantial portion of the Mexican Government’s revenues.

The Secondary Legislation includes changes to the fiscal regime applicable to us, particularly with respect to the exploration and extraction activities that we carry out in Mexico. As of 2016, we have the obligation, subject to the conditions set forth in the Petróleos Mexicanos Law, to pay a state dividend to the Mexican Government. We were not required to pay a state dividend in 2016 and are not required to do so in 2017. See “Item 8—Financial Information—Dividends” for more information. Although the changes to the fiscal regime applicable to us are designed in part to reduce the Mexican Government’s reliance on payments made by us, we cannot provide assurances that we will not be required to continue to pay a large proportion of our sales revenue to the Mexican Government. See “Item 4—Information on the Company—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime.” In addition, the Mexican Government may change the applicable rules in the future.

The Mexican Government has historically imposed price controls in the domestic market on our products.

The Mexican Government has from time to time imposed price controls on the sales of natural gas, liquefied petroleum gas, gasoline, diesel, gas oil intended for domestic use, fuel oil and other products. As a result of these

price controls, we have not been able to pass on all of the increases in the prices of our product purchases to our customers in the domestic market when the peso depreciates in relation to the U.S. dollar. A depreciation of the peso increases our cost of imported oil and petroleum products, without a corresponding increase in our revenues unless we are able to increase the price at which we sell products in Mexico. In accordance with theLey de Ingresos de la Federación para el Ejerecicio Fiscal de 2017 (2017 Federal Revenue Law), the Mexican Government will gradually remove price controls on gasoline and diesel over the course of 2017 and 2018 as part of the liberalization of fuel prices in Mexico. On December 27, 2016, the Ministry of Finance and Public Credit announced maximum gasoline and diesel prices to be applied in each of the regions of Mexico where prices are not determined based on market conditions. For more information, see “Item 4—Information on the Company—Business Overview—Industrial Transformation.”

We do not control the Mexican Government’s domestic policies and the Mexican Government could impose additional price controls on the domestic market in the future. The imposition of such price controls would adversely affect our results of operations. For more information, see “Item 4—Information on the Company—Business Overview—Refining—Pricing” and “Item 4—Information on the Company—Business Overview—Gas and Basic Petrochemicals—Pricing.”

The Mexican nation, not us, owns the hydrocarbon reserves located in the subsoil in Mexico and our right to continue to extract these reserves is subject to the approval of the Ministry of Energy.

The Mexican Constitution provides that the Mexican nation, not us, owns all petroleum and other hydrocarbon reserves located in the subsoil in Mexico.

Article 27 of the Mexican Constitution provides that the Mexican Government will carry out exploration and production activities through agreements with third parties and through assignments to and agreements with us. The Secondary Legislation allows us and other oil and gas companies to explore and extract the petroleum and other hydrocarbon reserves located in Mexico, subject to assignment of rights by the Ministry of Energy and entry into agreements pursuant to a competitive bidding process.

Access to crude oil and natural gas reserves is essential to an oil and gas company’s sustained production and generation of income, and our ability to generate income would be materially and adversely affected if the Mexican Government were to restrict or prevent us from exploring or extracting any of the crude oil and natural gas reserves that it has assigned to us or if we are unable to compete effectively with other oil and gas companies in future bidding rounds for additional exploration and production rights in Mexico. For more information, see “—We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our ability to make capital investments” below.

Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions.

The information on oil, gas and other reserves set forth in this annual report is based on estimates. Reserves valuation is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner; the accuracy of any reserves estimate depends on the quality and reliability of available data, engineering and geological interpretation and subjective judgment. Additionally, estimates may be revised based on subsequent results of drilling, testing and production. These estimates are also subject to certain adjustments based on changes in variables, including crude oil prices. Therefore, proved reserves estimates may differ materially from the ultimately recoverable quantities of crude oil and natural gas. Downward revisions in our reserve estimates could lead to lower future production, which could have an adverse effect on our results of operations and financial condition. See “—Risk Factors Related to Our Operations—Crude oil and natural gas prices are volatile and low crude oil and natural gas prices adversely affect our income

and cash flows and the amount of hydrocarbon reserves that we have the right to extract and sell” above. We revise annually our estimates of hydrocarbon reserves that we are entitled to extract and sell, which may result in material revisions to these estimates. Our ability to maintain ourlong-term growth objectives for oil production depends on our ability to successfully develop our reserves, and failure to do so could prevent us from achieving ourlong-term goals for growth in production.

We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our ability to make capital investments.

Because our ability to maintain, as well as increase, our oil production levels is highly dependent upon our ability to successfully develop existing hydrocarbon reserves and, in the long term, upon our ability to obtain the right to develop additional reserves, we continually invest capital to enhance our hydrocarbon recovery ratio and improve the reliability and productivity of our infrastructure. During 2016, our total proved reserves had a net increase of 40 million barrels of oil equivalent after accounting for discoveries, extensions, revisions, and delimitations. This amount, however, was less than production in 2016. Accordingly, our total proved reserves decreased by 11.1%, from 9,632 million barrels of crude oil equivalent as of December 31, 2015 to 8,562.8 million barrels of crude oil as of December 31, 2016. See “Item 4—Information on the Company—Business Overview—Exploration and Production—Reserves” for more information about the factors leading to this decline, including the results of Round Zero. Our crude oil production decreased by 1.0% from 2012 to 2013, by 3.7% from 2013 to 2014 and by 6.7% from 2014 to 2015 and by 5.0% from 2015 to 2016 primarily as a result of the decline of the Cantarell,Tsimín-Xux, Antonio J. Bermúdez, Chuc and Crudo Ligero projects.

Pursuant to energy reform in Mexico, the Mexican Government outlined a process, commonly referred to as Round Zero, for the determination of our initial allocation of rights to continue to carry out exploration and production activities in Mexico. On August 13, 2014, the Ministry of Energy granted us the right to continue to explore and develop areas that together contain 95.9% of Mexico’s estimated proved reserves of crude oil and natural gas. The development of the reserves that were assigned to us pursuant to Round Zero, particularly the reserves in the deep waters of the Gulf of Mexico and in shale oil and gas fields in the Burgos basin, will demand significant capital investments and will pose significant operational challenges. Our right to develop the reserves assigned to us through Round Zero is conditioned on our ability to develop such reserves in accordance with our development plans, which were based on our technical, financial and operational capabilities at the time. We cannot provide assurances that we will have or will be able to obtain, in the time frame that we expect, sufficient resources or the technical capacity necessary to explore and extract the reserves that the Mexican Government assigned to us as part of Round Zero, or that it may grant to us in the future. The decline in oil prices has forced us to make adjustments to our budget, including a significant reduction of our capital expenditures. Unless we are able to increase our capital expenditures, we may not be able to develop the reserves assigned to us in accordance with our development plans. We would lose the right to continue to extract these reserves if we fail to develop them in accordance with our development plans, which could adversely affect our operating results and financial condition. In addition, increased competition in the oil and gas sector in Mexico may increase the costs of obtaining additional acreage in bidding rounds for the rights to new reserves.

Our ability to make capital expenditures is limited by the substantial taxes and duties that we pay to the Mexican Government, the ability of the Mexican Government to adjust certain aspects of our annual budget, cyclical decreases in our revenues primarily related to lower oil prices and any constraints on our liquidity. The availability of financing may limit our ability to make capital investments that are necessary to maintain current production levels and increase the proved hydrocarbon reserves that we are entitled to extract. The energy reform has provided us with opportunities to enter into strategic alliances and partnerships, which may reduce our capital commitments and allow us to participate in projects for which we are more competitive. However, no assurance can be provided that these strategic alliances and partnerships will be successful or reduce our capital commitments. For more information, see “Item 4—Information on the Company—History and Development—

Capital Expenditures” and “—Energy Reform.” For more information on the liquidity constraints we are exposed to, see “—We have a substantial amount of indebtedness and other liabilities and are exposed to liquidity constraints, which could make it difficult for us to obtain financing on favorable terms and could adversely affect our financial condition, results of operations and ability to repay our debt and, ultimately, our ability to operate as a going concern” above.

We may claim some immunities under the Foreign Sovereign Immunities Act and Mexican law, and your ability to sue or recover may be limited.

We arepublic-sector entities of the Mexican Government. Accordingly, you may not be able to obtain a judgment in a U.S. court against us unless the U.S. court determines that we are not entitled to sovereign immunity with respect to that action. Under certain circumstances, Mexican law may limit your ability to enforce judgments against us in the courts of Mexico. We also do not know whether Mexican courts would enforce judgments of U.S. courts based on the civil liability provisions of the U.S. federal securities laws. Therefore, even if you were able to obtain a U.S. judgment against us, you might not be able to obtain a judgment in Mexico that is based on that U.S. judgment. Moreover, you may not be able to enforce a judgment against our property in the United States except under the limited circumstances specified in the Foreign Sovereign Immunities Act of 1976, as amended. Finally, if you were to bring an action in Mexico seeking to enforce our obligations under any securities issued by Petróleos Mexicanos, satisfaction of those obligations may be made in pesos, pursuant to the laws of Mexico.

Our directors and officers, as well as some of the experts named in this annual report, reside outside the United States. Substantially all of our assets and those of most of our directors, officers and experts are located outside the United States. As a result, investors may not be able to effect service of process on our directors or officers or those experts within the United States.

Item 4.

Information on the Company

HISTORY AND DEVELOPMENT

We are the largest company in Mexico according to the June 2016 special edition ofExpansiónmagazine, and according to the November 18, 201321, 2016 issue ofPetroleum Intelligence Weekly,, we were the seventh largesteighthlargest crude oil producer and the eleventh largest oileighteenth largestoil and gas company in the world based on data from the year 2012. In 1938, President Lázaro Cárdenas del Río nationalized the foreign-owned oil companies which were then operating in Mexico, and the Mexican Congress established Petróleos Mexicanos by a decree effective on July 20, 1938. Since 1938, Mexican federal laws and regulations have entrusted Petróleos Mexicanos with a central role in the planning and management of Mexico’s petroleum industry. On July 17, 1992, the Mexican Congress created the subsidiary entities out of operations that had previously been directly managed by Petróleos Mexicanos. Petróleos Mexicanos and its four subsidiary entities, Pemex-Exploration and Production, Pemex-Refining, Pemex-Gas and Basic Petrochemicals andPemex-Petrochemicals, are decentralized public entities of the Mexican Government, and each is a legal entity empowered to own property and carry on business in its own name.2015.

Our executive offices are located at Avenida Marina Nacional No. 329, Colonia Petróleos Mexicanos,Verónica Anzures, Ciudad de México D.F. 11311,11300, México. Our telephone number is(52-55) 1944-2500.

As ofIn March 1938, President Lázaro Cárdenas del Río nationalized the date of this report,foreign-owned oil companies that were then operating in Mexico, and the activities ofMexican Congress established Petróleos Mexicanos and its subsidiary entities are regulated primarily by:

We anticipate (Decree that creates the regulatory regime applicable to the activities ofentity Petróleos Mexicanos and its subsidiary entities will be modified significantly pursuant to the changes contemplated by the Energy Reform Decree. See “—Information on the Company—History and Development—Energy Reform” below in this Item 4.

The Regulatory Law and the Petróleos Mexicanos Law grant Petróleos Mexicanos and certain of its subsidiary entities the right to:

The operating activities of Petróleos Mexicanos are allocated among the four subsidiary entities, each of which has the characteristics of a subsidiary of Petróleos Mexicanos. The principal business linesOfficial Gazette of the subsidiary entities are as follows:Federation and took effect on July 20, 1938.

Under the Petróleos Mexicanos Law, which replacedIn July 1992, theLey Orgánica de Petróleos Mexicanos y Organismos Subsidiarios (Organic Law of Petróleos Mexicanos and the Subsidiary Entities), took effect and, among other things, created Pemex-Exploration and Production, Pemex-Refining,Pemex-Gas and Basic Petrochemicals and Pemex-Petrochemicals as decentralized public entities of the Mexican Government with the legal authority to own property and conduct business in their own names. Each of the subsidiary entities were to continue to conduct business in accordance with their mandates under existing law untilhad the Presidentcharacteristics of Mexico issued a reorganization decree, based on a proposal by the Board of Directorssubsidiary of Petróleos Mexicanos. The Boardprincipal lines of Directorsbusiness of Petróleos Mexicanos submitted a proposalthose subsidiary entities were as follows:

In November 2008, the Petróleos Mexicanos Law was adopted by the Mexican Congressstored, distributed and severalmarketed other laws were adopted or amended, as part of what we refer to as the 2008 Energy Reform. None of these laws included any amendment to the Mexican Constitution.

As a result of the 2008 Energy Reform, we are authorized to offer cash incentives to contractors that provide us with access to new technologies, faster execution or greater profits, subject to the requirements that our payment obligations under construction and services contracts must always be satisfied in cash and that in no case may we grant ownership rights over hydrocarbons to our contractors. See “Item 4—Information on the Company—Business Overview—Exploration and Production—Integrated Exploration and Production Contracts.”

Energy Reform

Energy Reform Decree

On December 12,20, 2013, the Permanent Commission of the Mexican Congress approved amendments to Articles 25, 27 and 28 of the Mexican Constitution which were subsequently approved by a majority of Mexico’s state legislatures and signed into law by President Enrique Peña Nieto. On December 20, 2013, the Energy Reform Decree wasNieto and published in the Official Gazette of the FederationFederation. We refer to this as the Energy Reform Decree. The Energy Reform Decree, which includes transitional articles setting forth the general framework and timeline for the related secondary legislation, took effect on December 21, 2013. The Energy Reform Decree includes transitional articles that set forth the general framework for

Secondary Legislation

On August 11, 2014, the secondary legislation or implementing laws, which have not been enacted as of the date of this report.

We describe below the key features ofwas published pursuant to the Energy Reform Decree that relatein the Official Gazette of the Federation. We refer in this annual report to this legislation as the hydrocarbons sector in Mexico andSecondary Legislation. The Secondary Legislation includes nine new laws, of which the following are most relevant to our operations:

•

Ownership by Mexican Nation: Solid, liquidHydrocarbons Law, which took effect on August 12, 2014 and gaseous hydrocarbons located inrepealed the subsoil of Mexico remain the propertyLey Reglamentaria del Artículo 27 Constitucional en el Ramo del Petróleo(Regulatory Law to Article 27 of the Mexican nation.Constitution Concerning Petroleum Affairs, which we refer to as the Regulatory Law); and

Together, the Hydrocarbons Law and the Hydrocarbons Revenue Law establish the legal framework for the exploration and production of oil and gas through assignments and contracts, as well as the new fiscal regime through which the Mexican Government will collect revenues from participants in the Mexican oil and gas industry. The Hydrocarbons Law empowers the Ministry of Energy to determine the appropriate contract model for each area that is subject to a competitive bidding process, while the Ministry of Finance and Public Credit is responsible for determining the economic and fiscal terms of each contract. The following arrangements comprise the new contractual regime established by the Secondary Legislation for upstream activities:

The Mexican Government will havefiscal terms of each contract for exploration and production are to be established in accordance with the flexibility to combine elements of these contractual frameworks in order to maximize the income attributableHydrocarbons Revenue Law. See “—Taxes, Duties and Other Payments to the Mexican nationGovernment—Fiscal Regime” below in this Item 4.

For midstream and thereby help ensure its long-term development. In addition, the Energy Reform Decree specifies the process by which the Mexican Government grants any such contract will be governed by rules that ensure its transparency, and information about payments made or taxes paid under any such contract will be made publicly available.

provides that the corporate purpose of a productive state-owned company will be to create economic value and increase the income of the Mexican nation while adhering to principles of equity as well as social and environmental responsibility, and we will be granted technical, managerial and budgetary autonomy, subject to certain controls. The Mexican Government will continue to control Petróleos Mexicanos once it is converted to a productive state-owned company. As a productive state-owned company, Petróleos Mexicanos’ Chief Executive Officer will be appointed by the President of Mexico and its Board of Directors will consist of five representatives of the Mexican Government,downstream activities, including the Secretary of Energy (who will serve as Chairperson of the Board), and five independent members.

supervise the decommissioning and abandonment of facilities. Relatedly, companies participating in the hydrocarbons sector will be subject to regulations intended to reduce greenhouse gas emissions and help ensure that energy and natural resources are used efficiently.

The impactnew Board of the Energy Reform Decree on us will largely depend on how it is implemented by the secondary legislation. On April 30, 2014, President Enrique Peña Nieto submitted to the Mexican Congress bills proposing secondary legislation intended to implement certain provisionsDirectors of the Energy Reform Decree. Among other things, these proposed bills provide us with additional technical, managerial and budgetary autonomy designed to increase our production and allow us to compete effectively with other oil and gas companies that enter the Mexican energy sector.

As of the date of this report, the proposed bills are subject to review, debate and revision by the Mexican Congress, and therefore we do not know what the final scope and terms of any approved bill will be. Accordingly, we cannot currently predict the effects of the Energy Reform DecreePetróleos Mexicanos was performing its duties and the new framework it contemplates, although such effects are likely to be materialmechanisms for our oversight, transparency and impact our structure, results of operations and financial position.

Round Zero

Transitional article six of the Energy Reform Decree, which outlines the Round Zero process, required us to submit a proposal toaccountability had been implemented, the Ministry of Energy requesting that we be assigned the right to explore and develop areas in which we currently operate based on our technical, financial and operational capabilities. Accordingly, on March 21, 2014, we submitted to the Ministry of Energy a request that we retain rights that we believe will allow us to maintain our current production and provide sufficient exploration opportunities to increase our productionformally announced in the future. Together,Official Gazette of the areasFederation that we requested contain 96% of Mexico’s estimated proved reserves of crude oil and natural gas as of December 31, 2013.the

Exploration Areas. With respect to our exploration activities, we requested rights that we believe will allow our oil and gas production to continue to grow. Our submission sought to ensure that we maintain a number of areas that would allow us to continue our investment program in exploratory activities. Specifically, we requested to retain the right to explore offshore and onshore areas

special regime provided for in the Southeastern basins inPetróleos Mexicanos Law, which we have identified opportunities that would allow usgoverns Petróleos Mexicanos’ activities relating to increase productionproductive state-owned subsidiaries, affiliates, compensation, assets, administrative liabilities, budget, debt levels and the state dividend, had taken effect. On June 10, 2015, theDisposiciones Generales de Contratación para Petróleos Mexicanos y Sus Empresas Productivas Subsidiarias (General Provisions for Contracting for Petróleos Mexicanos and its Productive State-Owned Subsidiaries) were published in the short-term. We also requested the right to continue to explore certain deepwater areas and areas containing unconventional deposits that we believe will allow us to increase production in the medium and long-term. The primary consideration used to determine which exploration areas to request was the continuity of our exploration strategy. Other factors that we considered included the potential hydrocarbons content and expected monetary valueOfficial Gazette of the area, as well asFederation, and on June 11, 2015, the risks (both technicalspecial regime for acquisitions, leases, services and geological) involved.

Our proposal grouped the exploration areas that we requested according to the following criteria:Corporate Reorganization

Production Fields. With respect to our production activities, we requested the right to continue operating our most profitable fields in order to help ensure the maintenance of our production. We also requested the right to continue developing complex and capital-intensive areas, such as deepwater fields, that we believe we can successfully operate by entering into strategic partnerships with the private sector. Altogether, we requested the right to continue operating all of the fields that are currently in production, as well as many of the fields that are being developed or are close to being developed.

Our proposal grouped the production fields that we requested according to the following criteria:

Initial Assignments. The Ministry of Energy will take the following factors into consideration when determining whether to grant us an assignment:

Although the Ministry of Energy has, inIn accordance with the transitional articles of the Energy Reform Decree, until September 17,Petróleos Mexicanos Law, on November 18, 2014, the Board of Directors of Petróleos Mexicanos approved the Director General’s proposal for our corporate reorganization. In our corporate reorganization, the four existing subsidiary entities of Petróleos Mexicanos were transformed into two new productive state-owned subsidiaries—Pemex Exploration and Production and Pemex Industrial Transformation—and five new productive state-owned subsidiaries—Pemex Drilling and Services, Pemex Logistics, Pemex Cogeneration and Services, Pemex Fertilizers and Pemex Ethylene—were created. Each of these productive state-owned subsidiaries is a legal entity empowered to respondown property and carry on business in its own name and has technical and operational autonomy, subject to the central coordination and strategic direction of Petróleos Mexicanos.

On March 27, 2015, the Board of Directors of Petróleos Mexicanos adoptedacuerdos de creación (creation resolutions) for each of the new productive state-owned subsidiaries, all of which were subsequently published in the Official Gazette of the Federation on April 28, 2015.

The principal lines of business of the new productive state-owned subsidiaries are as follows:

it is possible that its responses may be issued in multiple stages, beginning with areas in which we currently operate. Any areas that we do not request or are not assigned

Capital Expenditures and Investments

The following table shows our capital expenditures, excludingnon-capitalizable maintenance, for each of the fivethree years ended December 31, 2013,2016, and the budget for suchthese expenditures for 2014 and 2015.2017. Capital expenditure amounts are derived from our budgetary records, which record such amountsare prepared on a cash basis. Accordingly, these capital expenditure amounts do not correspond to capital expenditure amounts included in our consolidated financial

statements prepared in accordance with IFRS. The following table presents our capital expenditures by subsidiary. For the year ended December 31, 2015, we have included capital expenditures made by the subsidiary entities prior to our recent corporate reorganization, and for the new productive state-owned subsidiaries, capital expenditures made after their creation. For the year ended December 31, 2016 and for the 2017 budget, we have included capital expenditures made by, or expected to be made by, the new productive state-owned subsidiaries.

Capital Expenditures and Budget by Subsidiary

Note: Numbers may not total due to rounding.

Source: Petróleos Mexicanos.

Total Capital Expenditures

The following table sets forthshows our total capital expenditures, excludingnon-capitalizable maintenance, by project, excluding maintenance,segment for the five years ended December 31, 2013, as well as2015 and 2016 and the budget for suchthese expenditures for 2014.in 2017.

Capital Expenditures by Segment

		Year ended December 31,(1)(2)																				Budget 2014(3)
		2009				2010				2011				2012				2013
		(in millions of pesos)(4)
Conservation of Operational Reliability at Poza Rica GPC			294				166				92				126				56				22
Modernization of Systems for Monitoring, Control and Supervision of Transportation by Pipeline			—				—				24				79				36				352
Integral Maintenance of Pipeline Systems for Ethane, Basic Petrochemicals and Secondary Petrochemicals			—				—				—				—				13				311
Integral Project of Electric Reliability at GPCs			—				—				—				—				—				226
Refurbishment and Modernization of Natural Gas Turbocompressors of the Cryogenic Plants at the Nuevo Pemex GPC			—				—				—				—				—				195
Integral Maintenance of Pipeline Systems for Natural Gas and LPG Stage II			—				—				—				—				—				174
Operational Reliability of the Pipeline Division Assets			—				—				—				—				—				57
Refurbishment and Modernization of the Processing Systems and Equipment of La Venta GPC			—				—				—				—				—				41
Petrochemical Pipelines via Agave 2004			—				2				—				—				—				—
Infrastructure for Transportation of Petrochemical Products from Nuevo Pemex-Cactus to Coatzacoalcos			—				2				—				—				—				—
Modular Cryogenic Plants in Station 19 in Reynosa GPC			275				—				—				—				—				—
Others			2,119				1,264				1,369				2,845				3,490				5,170
Total			3,941				3,887				3,019				4,468				5,405				7,548
Pemex-Petrochemicals
Modernization and Expansion of Production Capacity of Aromatics Train I at Cangrejera PC			442				1,354				941				777				495				10
Maintaining Production Capacity of Ethylene Plant at Cangrejera PC			—				—				—				20				375				125
Maintaining Production Capacity of Ethane Derivatives Chain IV at Morelos PC			—				4				78				206				288				34
Modernization and Expansion of Production Capacity of Ethane Derivatives Chain I at Morelos PC			284				56				86				5				208				318
Maintaining Production Capacity of Ethane Derivatives Chain II at Morelos PC			218				224				78				125				163				131
Maintaining Production Capacity of Ethane Derivatives Chain II at Cangrejera PC			16				3				50				65				98				—
Modernization and Optimization of Auxiliary Services Infrastructure I at Morelos PC			57				57				45				—				85				—
Maintaining Production Capacity, Storage and Distribution of Ammonia at the Cosoleacaque PC			—				—				110				441				65				18
Maintaining Production Capacity of Auxiliary Services Infrastructure I at Pajaritos PC			3				7				41				125				64				—
Rehabilitation of Facilities for Physical Security at Morelos PC			—				6				1				73				51				1
Maintaining Production Capacity of Aromatics Train II at Cangrejera PC			73				53				30				29				16				10
Expansion of Styrene Plant at Cangrejera PC			1				—				—				—				—				—
Others			958				698				966				1,025				2,095				4,749
Total			2,053				2,462				2,426				2,892				4,003				5,396
Petróleos Mexicanos
Total			560				206				717				943				1,707				2,189
Total capital expenditures		Ps.	205,587			Ps.	224,029			Ps.	208,378			Ps.	231,048			Ps.	253,465			Ps.	286,711

Note: Numbers may not total due to rounding.

GPC = Gas Processing Complex.

PC = Petrochemical Complex.

(8)	As of January 1, 2013, the Och-Uech-Kax project was merged into the Crudo Ligero Marino project.

(9)	As of January 1, 2013, the Caan project was merged into the Chuc project.

(10)	As of January 1, 2013, the Carmito Artesa project was merged into the Cactus-Sitio Grande project.

(11)	As of January 1, 2012, the Cárdenas project was merged into the Bellota-Chinchorro project.

(12)

As of January 1, 2012, the Campeche Oriente exploratory project (a project formerly supported by Ku-Maloob-Zaap project resources) and the Comalcalco exploratory project (a project formerly supported by Bellota-Chinchorro project resources) were designated as separate projects and funds were allocated to them as stand-alone projects.

(13)	As of January 1, 2013, the Alosa, Chalabil, Cuichapa, Han, Holok, Lebranche, Oyamel, Pakal, Área Perdido, Tlancanán and Uchukil exploratory projects were designated as separate projects and funds were allocated to them as stand-alone projects.2015.

Source: Petróleos Mexicanos.

Capital Expenditures Budgetexpenditures and budget by project are described under each segment below in this Item 4.

The following table sets forthSincemid-2014, the international reference prices of crude oil have fluctuated significantly. During January 2016, the Mexican crude oil export price fell to U.S. $18.90 per barrel and the weighted average price for the year was U.S. $35.63 per barrel. Based on its estimate that the weighted average Mexican crude oil export price would be U.S. $42.00 per barrel, the Mexican Congress approved our approvedPs. 204.6 billion capital expenditures budget, including maintenance, for 20142017.

In light of the oil and estimates forgas market and global economic conditions, on December 14, 2016 the years 2015 through 2017. These figures are subjectChamber of Deputies approved a 2017 budget of Ps. 391.9 billion, which included a financial balance goal (which we define as sales after deducting costs and expenses, investment expenses, taxes and duties, and financial debt service) of Ps. 93.8 billion. On December 14, 2016, the budget was presented to change in accordance with our future investment plans and the provisionsBoard of subsequent budgetary approvals.

Approved Capital Expenditures Budget