UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

for the fiscal year ended December 31, 20172019

Commission File Number0-99

PETRÓLEOS MEXICANOS

(Exact name of registrant as specified in its charter)

Avenida Marina Nacional No. 329

Colonia Verónica Anzures

11300 Ciudad de México, México

(Address of principal executive offices)

Jaime José del Río CastilloLucero Angélica Medina González

(5255) 1944 97009126-2940

ri@pemex.com

Avenida Marina Nacional No. 329

Torre Ejecutiva, Piso 38 Colonia Verónica Anzures

11300 Ciudad de México, 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

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

☐Yes  ☐    ☒No  ☒

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  ☒

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  ☒    ☐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).

☒Yes  ☒    ☐No  ☐

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

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.  

☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

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  ☒                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☒

EXPLANATORY NOTE

As previously reported by Petróleos Mexicanos in its current report on Form6-K as filed with the U.S. Securities and Exchange Commission on April 30, 2020, the filing of this annual report on Form20-F for the period ended December 31, 2019 was delayed due to circumstances related toCOVID-19. As a result of theCOVID-19 pandemic, PEMEX and the Mexican Government have adopted a range of measures intended to help mitigate the spread ofCOVID-19, such as theAcuerdo por el que se establecen acciones extraordinarias para atender la emergencia sanitaria generada por el virus SARS-CoV2 (Agreement establishing extraordinary actions to attend the health emergency caused by the SARS-CoV2 virus) adopted on March 31, 2020. These measures include, among others, restrictions on the movement and gathering of people, as well as restrictions and limitations on the ability of PEMEX’s workforce to access our facilities. Such measures, including the limited access to PEMEX’s facilities, hampered the ability of Petróleos Mexicanos to prepare and file this annual report on a timely basis. Petróleos Mexicanos is relying on the U.S. Securities and Exchange Commission Order Under Section 36 of the Securities Exchange Act of 1934 Granting Exemptions from Specified Provisions of the Exchange Act and Certain Rules Thereunder (SEC ReleaseNo. 34-88318) dated March 4, 2020, as amended, on March 25, 2020 (SEC ReleaseNo. 34-88465) to file this annual report on the date hereof.

TABLE OF CONTENTS

i

Petróleos Mexicanos and its sevenfour subsidiary entities, which we refer to as the subsidiary entities,Pemex Exploración y Producción (Pemex Exploration and Production),Pemex Transformación Industrial (Pemex Industrial Transformation),Pemex Perforación y Servicios (Pemex Drilling and Services),Pemex Logística (Pemex Logistics),Pemex Cogeneración y Servicios (Pemex Cogeneration and Services),Pemex Fertilizantes (Pemex Fertilizers) andPemex Etileno (Pemex Ethylene), comprise the state oil and gas company of the United Mexican States, which we refer to as Mexico. Petróleos Mexicanos is a productivestate-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 45 to our consolidated financial statements incorporated in Item 18, which we refer to as our subsidiary companies, are incorporated into the consolidated financial statements; these subsidiary companies are also identified with their 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”Corporate Structure” 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”“pounds sterling” or “£” are to the legal currency of the United Kingdom. References herein to “Swiss francs” 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” 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, or the CNBV) and theBolsa Mexicana de Valores, S.A.B. de C.V.(Mexican Stock Exchange), 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, which we refer to as U.S. GAAP. Accordingly, while we have in the past reconciled our consolidated financial statements prepared in accordance withNormas de Información Financiera Mexicanas(Mexican Financial Reporting Standards) 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. 19.786718.8452 = U.S. $1.00, which is the exchange rate that the Secretaría de Hacienda y Crédito Público (Ministry of Finance and Public Credit) instructed us to use on December 31, 2017.2019. 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.

PRESENTATION OF INFORMATION CONCERNING RESERVES

The proved hydrocarbon reserves included in this report for the year ended December 31, 20172019 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 and the assignments we have received in subsequent bidding rounds conducted by the Mexican Government. See “Item 4—Information on the Company—History and Development—Energy Reform” for a description of the Round Zero process.

The estimates of our proved reserves of crude oil and natural gas for the five years ended December 31, 20172019 included in this report have been calculated according to the technical definitions required by the SEC. 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.GLJ Petroleum Consultants Ltd. (which we refer to as Ryder Scott)GLJ) conducted reserves audits of our estimates of our proved hydrocarbon reserves as of December 31, 20172019 or January 1, 2018,2020, as applicable. All reserves estimates involve some degree of uncertainty. For a description of the risks relating to reserves and reserves estimates, see “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government— Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions,” “—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” and “—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 MinistrySecretaría de Energía (Ministry of Energy.Energy or SENER).”

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:

Changes in the economic, regulatory, business or political environment in Mexico or other markets where we operate, such as the liberalization of fuel prices pursuant to energy reform and theor a significant decline in international crude oil and gas prices, in recent years, 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, 20152017 and 2016,2018, we recognized a net reversal of impairment of Ps. 151,444.6 million and an impairment charge of Ps. 477,945(21,419.0) million, and a net reversalrespectively. As of December 31, 2019, we recognized an impairment in the amount of Ps. 331,314 million, respectively. As of December 31, 2017, we recognized an impairment charge of Ps. 151,444(97,082.2) million. See Note 12(e)13 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.

TheConstitución Política de los Estados Unidos Mexicanos(PoliticalTheMexican Constitution of the United Mexican States or the “Mexican Constitution”) and theLey de Hidrocarburos (Hydrocarbons Law) allowsallow other oil and gas companies, in addition to us, to carry out certain activities related to the energy sector in Mexico, including exploration and production 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, increasedIncreased 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.” While we have not yet experienced significant adverse effects from increased competition, we expect competition to increase further and there can be no assurances that we will not experience such adverse effects in the future. 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 increasingly participatingparticipate in strategic alliances, joint ventures and other joint arrangements. These arrangements may not perform as expected, which could harm our reputation and have an adverse effect on our business, results of operations and financial condition.

In response to the energy reform, weWe have entered into and may in the future enter into strategic alliances, joint ventures and other joint arrangements. These arrangements are intended to reduce risks in exploration and production, refining, transportation and processing activities. Our partners in such arrangements may, as a result of financial or other difficulties, be unable or unwilling to fulfill their financial or other obligations under our agreements, threatening the viability of the relevant project. In addition, our partners may have inconsistent or opposing economic or business interests and take action contrary to our policies or objectives, which could be to our overall detriment. If our strategic alliances, joint ventures and other joint arrangements do not perform as expected, our reputation may be harmed and our business, financial condition and results of operations could 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 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 a corporate compliance program that includes policies and processesprocedures intended to complymonitor our compliance with these laws, including the review of our internal control over financial reporting, we are subject to the risk that our management, 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 benefit or business advantageof third parties to our detriment. WeThis risk is heightened by the fact that we have in

place a large number of complex, valuable contracts with local and foreign third parties. Although we have systems in place for identifying, monitoring and mitigating these risks, but our systems may not be effective and we cannot ensure that these compliance policies and processesprocedures will prevent intentional, reckless or negligent acts committed by our officersmanagement, employees, contractors or employees.any person doing business with us. Any failure – failure—real or perceived – perceived—by our officersmanagement, employees, contractors or employeesany person doing business with us to comply with applicable governance or regulatory obligations could harm our reputation, limit our ability to obtain financing and otherwise have a material adverse effect on our business, financial condition and results of operations.

If we fail to comply with any applicableanti-corruption,anti-bribery oranti-money laundering laws, we and our officers andmanagement, employees, contractors or any person doing business with us may be subject to criminal, administrative or civil penalties and other measures, which could have material adverse effects on our reputation, business, financial condition and results of operations. 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 timely manner and could adversely impact our reputation, ability to access financial markets and ability to obtain contracts, assignments, permits and other government authorizations necessary to participate in our industry, which, in turn, could have adverse effects on our business, results of operations and financial condition.

Our management has identified material weaknesses in our internal control over financial reporting in each of the four years ended December 31, 2018. Although our management has concluded that our internal control over financial reporting was effective as of December 31, 2019, if we fail to establish and maintain effective internal control over financial reporting in the future, the accuracy and timeliness of our financial reporting may be adversely affected, which may have a material adverse result on our results of operation and financial condition.

Our management identified material weaknesses in our internal control over financial reporting in connection with the preparation of our consolidated financial statements as of and for each of the years ended December 31, 2015, 2016, 2017 and 2018. In light of the identified material weaknesses, our management concluded that our internal control over financial reporting was not effective at December 31 of each of those years. We disclosed the circumstances giving rise to these material weaknesses—which were generally different from one year to the next—in our annual reports on Form20-F for the years 2015, 2016, 2017 and 2018, respectively. As of the date of this annual report, we believe that each of these material weaknesses has been remediated.

We cannot be certain that additional material weaknesses will not develop or be discovered in the future. If other material weaknesses exist, we may be unable to report our results of operations for future periods accurately and in a timely manner and make our required filings with government authorities, including the SEC. There is also a risk that there could be accounting errors in our financial reporting, and we cannot be certain that in the future additional material weaknesses will not exist or otherwise be discovered. Any of these occurrences could adversely affect our results of operation and financial condition.

Our compliance with environmental regulations in Mexico, including in connection with efforts to address climate change, could result in material adverse effects on our results of operationsoperations..

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—4 — Environmental Regulation —Climate Change” for more information on the Mexican Government’s current legal and regulatory framework for combatting climate change.

Discontinuation, reform or replacement of the London Interbank Offered Rate (or LIBOR) or other benchmark interest rates, or uncertainty related to the potential for any of the foregoing, may impact our business.

As of December 31, 2019, we had Ps. 151.6 billion (U.S. $8.0 billion) of variable rate indebtedness linked to LIBOR or other benchmark rates. In July 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced its intention to phase out the use of LIBOR by the end of 2021. In addition, other regulators have suggested reforming or replacing other benchmark rates. As there is not yet definitive information regarding thephase-out of LIBOR, we cannot currently predict the effect of the discontinuation, reform or replacement of LIBOR. However, the phase out of LIBOR and the discontinuation, reform or replacement of other benchmark rates may have an unpredictable impact on, or cause disruption to, the broader financial markets or borrowing costs to borrowers. These developments may in turn increase the cost of our variable rate indebtedness or otherwise have an adverse effect on our results of operations and financial condition.

Risk Factors Related to Mexico

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

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 announced budget cuts in response to declines in international crude oil prices, and, while the Mexican Government did not reduce our budget in 2017 and announced a budget increase in each of December of 2018 and 2019, it may cut spendingreduce our budget 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. Any new budget cuts could adversely affect the Mexican economy and, consequently, our business, financial condition, operating results and prospects.

In addition, many countries around the world, including Mexico, are suffering significant economic and social crises as a result of the ongoingCOVID-19 pandemic as well as oil price volatility, and these events may continue for a sustained period of time. In addition to these economic effects, if theCOVID-19 pandemic, or any future pandemic or epidemic, were to impact the places where we operate or our workforce, it could significantly disrupt our operations. If the impact of theCOVID-19 pandemic continues for an extended period of time, it could adversely affect our ability to operate our business in the manner and on the timelines previously planned. The extent to whichCOVID-19 or other health pandemics or epidemics may impact Mexico and the Mexican economy and, in turn, our results of operations will depend on future developments, which are highly uncertain and cannot be predicted.

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 ofdeterioration in 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 debtdebt..

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.

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

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 also 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 them, in an extreme case, may have a negative impact on our financial condition and results of operations.

Economic and political developments in Mexico and the United States may adversely affect Mexican economic policy and, in turn, PEMEX’s operations.

Political events in Mexico may significantly affect Mexican economic policy and, consequently, our operations. Presidential and federal congressional elections in Mexico were held on July 1, 2018. Mr. Andrés Manuel López Obrador, a member of theMovimiento Regeneración Nacional (National Regeneration Movement, or MORENA), was elected President of Mexico and took office on December 1, 2018, replacing Mr. Enrique Peña Nieto, a member of thePartido Revolucionario Institucional(Institutional Revolutionary Party, or PRI), was. The current President’s term will expire on September 30, 2024. The elected Presidentmembers of Mexico andthe Mexican Congress took office on DecemberSeptember 1, 2012.2018. As of the date of this annual report, no politicalthe MORENA party holds a simplean absolute majority in either housetheCámara de Diputados (Chamber of Deputies).

The current administration and the Mexican Congress.

PresidentialCongress have the power to revise the legal framework that governs us, and federal congressional electionsthe current administration and the Mexican Congress are discussing a number of reforms that could affect economic conditions or the oil and gas industry 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. Until any reform has been adopted and implemented, we cannot predict how these policies could impact our results of operation and financial position. We cannot provide any assurances that political developments in Mexico will not have an adverse effect on the Mexican economy or oil and gas industry and, in turn, our business, results of operations and financial condition, including our ability to repay our debt.

Economic conditions in Mexico are highly correlated with economic conditions in the United States due to the physical proximity and the high degree of economic activity between the two countries generally, including the trade facilitated by the North American Free Trade Agreement, (“NAFTA”).or NAFTA. As a result, 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.

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 2017,2019, our export sales to the United States amounted to Ps. 302.9372.1 billion, representing 21.7%26.5% of total sales and 59.6%63.5% of export sales for the year. In August 2017,On November 30, 2018, the presidents of Mexico, the United

States and Canada commenced renegotiation of NAFTA.signed the UnitedStates-Mexico-Canada Agreement, or the USMCA. As of the date of this annual report, the extent or outcomelegislatures of the renegotiations, as well asthree countries have ratified the USMCA. Therefore, pending notification by all three countries that all internal procedures have been completed and a three month waiting period, the USMCA is expected timing for their completion, is uncertain. Any increaseto effectively replace NAFTA. While the USMCA provides that exports of import tariffs resultingpetrochemical products fromre-negotiated NAFTA terms could make it economically unsustainable for U.S. companies to import our 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 Mexico to the United States will continue to enjoy azero-tariff rate, any shift in the trade relationships between Mexico and the United States and Canada as a result of the implementation of the USMCA could also require us to renegotiate our contracts or lose business, resulting in a material adverse impact on our business and results of operations.

BecauseIn addition, 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. administrationgovernment 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 assetsassets..

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 Chamber of Deputies).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 may enter the Mexican energy sector. See “Item 4—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 iswe are wholly owned by the Mexican Government, our financing obligations do not constitute obligations of and are not guaranteed by the Mexican Government. See “—Risk Factors Related to the Relationship with the Mexican Government—Our financing obligations are not guaranteed by the Mexican Government” below.

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 otherpublic-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 reschedulepublic-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, we may be required to pay a state dividend, which may limit our capacity to expand our investment program or negatively impact our financial condition generallygenerally..

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 2017, approximately 31.7%For the year ended December 31, 2019, our total taxes and duties were Ps. 412.0 billion, or 29.4% 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 production activities thatIn addition, we carry out in Mexico. As of 2016, we have the obligation,are generally required, 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, or 2017, 2018 and are2019, and we will not be required to do sopay a state dividend in 2018.2020. See “Item 8—Financial Information—Dividends” for more information. Although the Mexican Government has on occasion indicated a willingness to reduce its reliance on payments made by us and recent changes to the fiscal regime applicable to us are designed in part to reduce such reliance by the Mexican Government’s reliance on payments made by us,Government, 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 entered into agreements with other nations to limit production.

Although Mexico is not a member of OPEC, from time to time it enters into agreements with OPEC andnon-OPEC countries to reduce global crude oil supply. Most recently, on April 12, 2020, Mexico entered into an agreement with OPEC+ pursuant to which it has agreed to reduce its crude oil production by 100,000 barrels per day for a period of two months beginning on May 1, 2020. We do not control the Mexican Government’s international affairs and the Mexican Government could enter into further agreements with OPEC, OPEC+ or other countries to reduce our crude oil production or exports in the future. A reduction in our oil production or exports may have an adverse effect on our business, results of operations and financial condition. For more information, see “Item 4—Trade Regulation, Export Agreements and Production Agreements.”

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

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. We and other oil and gas companies are allowed to explore and extract the petroleum and other hydrocarbon reserves located in Mexico, subject to assignment of rights by the SENER 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.

TheComisión Nacional de Hidrocarburos (National Hydrocarbon Commission, or CNH) has the authority to review and approve our estimated hydrocarbon reserves estimates and may require us to make adjustments to these estimates. A request to adjust these reserves estimates could result in our inability to prepare our consolidated financial statements in a timely manner. This could adversely impact our ability to access financial markets, obtain contracts, assignments, permits and other government authorizations necessary to participate in the crude oil and natural gas industry, which, in turn, could have an adverse effect on our business, results of operations and financial condition.

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.

The development of the reserves that were assigned to us by the Mexican Government will demand significant capital investments and will pose significant operational challenges. Our right to develop the reserves assigned to us 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, or that it may grant to us in the future. In the past, we have reduced our capital expenditures in response to declining oil prices, and 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 potential future 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 decrease the proved hydrocarbon reserves that we are entitled to extract. 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.

In addition, we have entered into and continue to enter into, strategic alliances, joint ventures and other joint arrangements with third parties in order to develop our reserves. If we were unable to find partners for such joint arrangements, or if our partners were to significantly default on their obligations to us, we may be unable to maintain production levels or extract from our reserves. Moreover, we cannot assure you that these strategic alliances, joint ventures and other joint arrangements will be successful or reduce our capital commitments. For more information, see “—Risk Factors Related to Pemex’s Operations—We participate in strategic alliances, joint ventures and other joint arrangements. These types of arrangements may not perform as expected, which could harm our reputation and have an adverse effect on our business, results of operations and financial condition” above and “Item 4—Information on the Company—History and Development—Capital Expenditures.”

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 gas 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 Ejercicio Fiscal de 2017 (2017 Federal Revenue Law), during 2017 the Mexican Government gradually removed price controls on gasoline and diesel as part of the liberalization of fuel prices in Mexico. As of the date of this annual report, sales prices of gasoline and diesel have been fully liberalized and are determined by the free market. For more information, see “Item 4—Information on the Company—Business Overview—Industrial Transformation.” However, 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”Pricing Decrees” and “Item 4—Information on the Company—Business Overview—Gas and Basic Petrochemicals—Pricing.Aromatics—Pricing Decrees.”

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.

TheComisión Nacional de Hidrocarburos(National Hydrocarbon Commission, or CNH) has the authority to review and approve our estimated hydrocarbon reserves estimates and may require us to make adjustments to these estimates. A request to adjust these reserves estimates could result in our inability to prepare our consolidated financial statements in a timely manner. This could adversely impact our ability to access financial markets, obtain contracts, assignments, permits and other government authorizations necessary to participate in the crude oil and natural gas industry, which, in turn, could have an adverse effect on our business, results of operations and financial condition.

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 2017, our total proved reserves decreased by 868.1 million barrels of oil equivalent, or 10.1%, after accounting for discoveries, extensions, revisions, and delimitations, from 8,562.8 million barrels of crude oil equivalent as of December 31, 2016 to 7,694.7 million barrels of crude oil equivalent as of December 31, 2017. See “Item 4—Information on the Company—Business Overview––Exploration and Production––Reserves” for more information about the factors leading to this decline. Our crude oil production decreased by 1.0% from 2012 to 2013, by 3.7% from 2013 to 2014, by 6.7% from 2014 to 2015, by 5.0% from 2015 to 2016 and by 9.5% from 2016 to 2017, primarily as a result of the decline of the Cantarell, Crudo Ligero Marino, El Golpe-Puerto Ceiba, Bellota-Chinchorro, Antonio J. Bermúdez, Cactus-Sitio Grande, Ixtal-Manik, Chuc, Costero Terreste andTsimín-Xux 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 and subsequent bidding rounds, 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 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. See “Item 4—History and Development—Energy Reform—Assignment of Exploration and Production Rights.” 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, or that it may grant to us in the future. We have reduced our capital expenditures in prior years in response to declining oil prices, and 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 decrease the proved hydrocarbon reserves that we are entitled to extract. 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.

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. We have since entered into, and continue to enter into, strategic alliances, joint ventures and other joint arrangements with third parties in order to develop our reserves. If we are unable to find partners for such joint arrangements, or if our partners were to significantly default on their obligations to us, we may be unable to maintain production levels or extract from our reserves. Moreover, we cannot assure you that these strategic alliances, joint ventures and other joint arrangements will be successful or reduce our capital commitments. For more information, see “—Risk Factors Related to Pemex’s Operations—We are increasingly participating in strategic alliances, joint ventures and other joint arrangements. These arrangements may not perform as expected, which could harm our reputation and have an adverse effect on our business, results of operations and financial condition” above and “Item 4—Information on the Company—History and Development—Capital Expenditures” and “—Energy Reform.”

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

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.

HISTORY AND DEVELOPMENT

We are the largest company in Mexico according to the June 20172019 edition ofExpansiónmagazine, and according to the November 20, 201722, 2019 issue ofPetroleum Intelligence Weekly,we were the eighthlargesttenthlargest crude oil producer and the eighteenthtwentieth largestoil and gas company in the world based on data from the year 2016.2018.

Our executive offices are located at Avenida Marina Nacional No. 329, Colonia Verónica Anzures, 11300, Alcandía Miguel Hildalgo, Ciudad de México, 11300, México. Our telephone number is(52-55) 1944-2500.9126-8700.

In March 1938, President Lázaro Cárdenas del Río nationalized theforeign-owned oil companies that were then operating in Mexico, and the Mexican Congress established Petróleos Mexicanos through theDecreto que crea la Institución Petróleos Mexicanos (Decree that creates the entity Petróleos Mexicanos), which was published in the Official Gazette of the Federation and took effect on July 20, 1938.

In July 1992, theLey Orgánica de Petróleos Mexicanos y Organismos Subsidiarios (Organic Law of Petróleos Mexicanos and 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 had the characteristics of a subsidiary of Petróleos Mexicanos.

Energy Reform

Energy Reform DecreeLegal Regime

On December 20,21, 2013, amendments to Articles 25, 27 and 28 of the Mexican Constitution were signed into law by President Enrique Peña Nieto and published in the Official Gazette of the Federation. We refer to this as the Energy Reform Decree. The Energy Reform Decree, which includestook effect, including transitional articles setting forth the general framework and timeline for implementing legislation relating to the related secondary legislation, took effect on December 21, 2013.

Secondary Legislationenergy sector.

On August 11, 2014, the secondarythis implementing legislation was published pursuant to the Energy Reform Decree in the Official Gazette of the Federation. We refer in this annual report to thisThe implementing legislation as the Secondary Legislation. The Secondary Legislation includes nine new laws, of which the following are most relevant to our operations:

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 collectcollects revenues from participants in the Mexican oil and gas industry. The Hydrocarbons Law empowers the Ministry of EnergySENER 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. See “—Taxes, Duties and Other

Payments to the Mexican Government—Fiscal Regime” below in this Item 4. The following arrangements comprise the new contractual regime established by the Secondary Legislationcurrent legal framework for upstream activities:

For midstream and downstream activities, including oil refining and natural gas processing, the Hydrocarbons Law establishes a permit regime that is granted by the Ministry of EnergySENER and theComisión Reguladora de Energía (Energy Regulatory Commission, or CRE), as applicable. The Hydrocarbons Law also sets forth the process by which entities may apply for these permits. The CRE began issuinghas issued permits for the retail sale of gasoline and diesel fuel insince 2016.

Legal Regime for Petróleos Mexicanos

As part of energy reform, Petróleos Mexicanos was transformed from a decentralized public entity into a productive state-owned company on October 7, 2014—

Under the day on which the new Petróleos Mexicanos Law, took effect, with the exception of certain provisions. As a productive state-owned company, Petróleos Mexicanos remainsis a productivestate-owned company, wholly owned by the Mexican Government, and has the corporate purpose of generating economic value and increasing the income of the Mexican nation while adhering to principles of equity, as well as social and environmental responsibility.

On December 2, 2014, upon its determination that the new Board of Directors of Petróleos Mexicanos was performing its duties and the mechanisms for our oversight, transparency and accountability had been implemented, the Ministry of Energy formally announced in the Official Gazette of the Federation that the special regime provided for in the Petróleos Mexicanos Law, which governs Petróleos Mexicanos’ activities relating to productivestate-owned subsidiaries, affiliates, compensation, assets, administrative liabilities, budget, debt levels and the state dividend, had takentook 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 ProductiveState-Owned Subsidiaries) were published in the Official Gazette of the Federation, and on June 11, 2015, the special regime for acquisitions, leases, services and public works became effective.

Corporate ReorganizationStructure

In accordance with the transitional articlesThe principal lines of business of the Petróleos Mexicanos Law,productivestate-owned subsidiaries are as follows:

Each of these productivestate-owned subsidiaries is a legal entity empowered to own 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.

Prior to July 27, 2018,Pemex Cogeneración y Servicios (Pemex Cogeneration and Services) operated as an additional productive state-owned subsidiary. On March 27, 2015,July 13, 2018, the Board of Directors of Petróleos Mexicanos adoptedissued theacuerdosDeclaratoria de creacióLiquidación y Extinción de Pemex Cogeneración y Servicios (creation resolutions) for each(Declaration of Liquidation and Extinction of Pemex Cogeneration and Services), which was published in the Official Gazette of the newFederation and became effective on July 27, 2018. As of July 27, 2018, all of the assets, liabilities, rights and obligations of Pemex Cogeneration and Services were automatically assumed by, and transferred to, Pemex Industrial Transformation, and Pemex Industrial Transformation became, as a matter of Mexican law, the successor to Pemex Cogeneration and Services. Pemex Cogeneration and Services was in turn dissolved effective as of July 27, 2018.

Prior to July 1, 2019,Pemex Perforación y Servicios (Pemex Drilling and Services) andPemex Etileno (Pemex Ethylene) operated as additional productive state-owned subsidiaries, allsubsidiaries. On July 25, 2019, the Board of Directors of Petróleos Mexicanos issued the Declaratoria de Extinción de Pemex Perforación y Servicios (Declaration of Extinction of Pemex Drilling and Services) and the Declaratoria de Extinción de Pemex Etileno (Declaration of Extinction of Pemex Ethylene), both of which were subsequently published in the Official Gazette of the Federation on April 28, 2015.

The principal linesJuly 30, 2019 and became effective on July 1, 2019. As of businessJuly 1, 2019, all of the new productive state-owned subsidiaries are as follows:

Capital Expenditures

The following table shows our capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2017, and2019, as well as the budget for these expenditures for 2018.2020. Capital expenditure amounts are derived from our budgetary records, which are 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 2017, and for the 2018 budget, we have included capital expenditures made by, or expected to be made by theeach productivestate-owned subsidiaries. subsidiary.

Capital Expenditures and Budget by Subsidiary

Source: Petróleos Mexicanos.

The following table shows our capital expenditures, excludingnon-capitalizable maintenance, by segment for the years ended December 31, 20162018 and 20172019 and the budget for these expenditures in 2018.2020.

Capital Expenditures by Segment

Source: Petróleos Mexicanos.

Capital Expenditures Budget

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

Sincemid-2014, the international reference prices of crude oil have fluctuated significantly. After falling to a twelve-year low on January 20, 2016 of U.S. $18.90 per barrel, the Mexican crude oil export price rose to U.S. $46.53 at the end of 2016, and further to U.S. $56.19 per barrel on December 29, 2017. The weighted average Mexican crude oil export price for 20172019 was U.S. $46.73$55.63 per barrel. Based on its estimate that the weighted average Mexican crude oil export price would be U.S. $48.50$49.00 per barrel, the Mexican Congress approved our Ps. 204.6 billion capital expenditures budget, includingnon-capitalizable maintenance, for 2018. Our capital expenditures budget net ofnon-capitalizable maintenance is Ps. 113.2 billion.

In light of the oil and gas market and global economic conditions, on November 9, 2017 the Chamber of Deputies approved a 20182020 budget of Ps. 391.9523.4 billion, including operational expenses and a financial balance goal (which we define as sales after deducting costs and expenses, investment expenses,capital expenditures, taxes and duties, and financial debt service)cost of debt) of Ps. 79.462.6 billion. With this budget, our management expects that we will be able to maintain ourmedium- andlong-term growth plans without the need to incur more indebtedness than the amount included in our approved financing program for 2018.2020 of Ps. 35.0 billion. The budget was based on the guiding principles of: stabilizing our crude oil and gas production levels in the medium and long-term; maintaining the industrial safety and reliability of our facilities; taking advantage of the new contractual models provided by the energy reform in order to attract third-party investment;our ongoing contracts with third parties; and meeting our labor and financial obligations; and stabilizing our crude oil and gas production levels in the medium and long-term.obligations.

Our budget for 20182020 includes a total of Ps. 113.2332.6 billion for capital expenditures.expenditures, including 94.1 billion fornon-capitalizable maintenance and 41.3 billion for the construction of our new Dos Bocas refinery, led by PTI Infraestructura de Desarrollo, S.A. de C.V.). Our net capital expenditures budget is Ps. 197.2 billion. We expect to direct Ps.81.8Ps. 175.7 billion (or 72.2% of our total capital expenditures)89.1%) to exploration and production programs in 2018.2020. This investment in exploration and production activities reflects our focus on maximizing the potential of our hydrocarbon reserves and our most productive projects, the promotion ofprojects. In addition, in 2020 we expect to direct Ps. 17.0 billion (or 8.6%) to ourfarm-out program, which we believe will allow

us to sustain and increase our production levels while decreasing our corresponding capital expenditures, and our intention to take advantage of the opportunities provided by the energy reform. The energy reform provides us with opportunities to form new strategic partnerships to enhance our financial, technical and operational capabilities along our entire value chain. See “—Energy Reform” above in this Item 4. industrial transformation segment. We continuously review our capital expenditures portfolio in accordance with our current and future business plans and upcoming opportunities. In the upcoming years, we expect to receive financial resources from third parties who may partner with us on certain projects, a collaboration made possible following the implementation of the Secondary Legislation. See “—Energy Reform” above in this Item 4 for more information about these new opportunities.plans.

Our main objectives for upstream investment are to maximize ourlong-term economic value, and to increase and improve the quality of the oil and gas reserves assigned to us, enhance Pemex Exploration and Production’s reserves recovery ratio, improve the reliability of its production and transportation infrastructure for crude oil and natural gas operations and continue to emphasize industrial safety and compliance with environmental regulations. Our 20182020 budget objectives include maintaining crude oil production at levels sufficient to satisfy domestic demand and have a surplus available for export and maintaining natural gas production levels.

Our downstream investment program seeks to increase our refining capacity, to improve the quality of our product selection and the reliability of our logistics and distribution services, to achieve a level of efficiency similar to that of our international competitors and to continue to emphasize industrial safety and environmental compliance.

BUSINESS OVERVIEW

Overview by Business Segment

Exploration and Production

Our exploration and production segment operates through the productivestate-owned subsidiary Pemex Exploration and Production and explores for and produces crude oil and natural gas, primarily in the northeastern and southeastern regions of Mexico and offshore in the Gulf of Mexico. In nominal peso terms, our capital expenditures in exploration and production activities decreasedincreased by 37.7%38.9% in 2017.2019. As a result of ourthese investments, in previous years, our total hydrocarbon production reached a level of approximately 999.3884.0 million barrels of oil equivalent in 2017.2019. Despite these investments, our crude oil production decreased by 9.5%7.6% from 20162018 to 2017,2019, averaging 1,948.31,684 thousand barrels per day in 2017,2019, primarily as a result of the decline of the Cantarell, Yaxché-Xanab, Crudo Ligero Marino, El Golpe-Puerto Ceiba, Bellota-Chinchorro, Antonio J. Bermúdez, Cactus-Sitio Grande, Ixtal-Manik, Chuc, Costero Terrestre, andTsimín-Xux projects, which was partially offset by development of the Integral YaxchéTekel project’s XanabAyatsil field and by repairs, stimulationsimprovements and diversification of artificial systems at our onshore fields that helped maintain production levels.

Our natural gas production (excluding natural gas liquids) decreased by 12.5%increased 0.3% from 20162018 to 2017,2019, averaging 5,068.04,816 million cubic feet per day in 2017.2019. This decreaseincrease in natural gas production resulted primarily from decreasedthe increased volumes in the Burgos, Crudo Ligero Marino, Ixtal-Manik, Integral Veracruz Basin, Cactus-Sitio Grande, Integral Macuspana Basin and Ogarrio-SáOgarrio Sánchez Magallanes projects. Exploration drilling activity increased by 14.3%21.1% from 20162018 to 2017,2019, from 2119 exploratory wells completed in 20162018 to 2423 exploratory wells completed in 2017.2019. Development drilling activity decreasedincreased by 57.0%38.5% from 20162018 to 2017,2019, from 128143 development wells completed in 20162018 to 55198 development wells completed in 2017.2019. In 2017,2019, we completed the drilling of 79221 wells in total. OurIn 2019, our exploration drilling activity in 2017was focused on the shallow waters of the Gulf of Mexico and onshore regions and the development drilling activity was focused on increasing the production of crude oil and associated gas in theAyatsil-Tekel, Chuc, Crudo Ligero Marino, El Golpe-Puerto Ceiba,Ku-Maloob-Zaap,Tsimín-Xux, Yaxché-Xanab, Antonio J. Bermúdez, Aceite Terciario del Golfo andOgarrio-Sánchez Magallanes projects.

In advance of 2019, we planned to invest in 20 new developments: 16 in shallow water and four onshore fields. During 2019, we incorporated the Onel and Yaxché shallow water fields into our development plan, bringing our total investment in new developments to 22 fields, 18 in shallow water and four onshore fields. As of December 31, 2019, we had begun production in five of these 22 fields. These five fields had an average production of 6.4 thousand barrels per day of crude oil and 42.2 million cubic feet per day of naturalgas in 2019.

Our primary objectives in 2018for 2020 include: (i) maximizing profitability to ensurestrengthening our financial condition; (ii) ensuring our sustainability by accelerating the sustainabilityincorporation of the company; (ii) increasingly taking advantage of the opportunitieshydrocarbon reserves; and flexibility provided by the energy reform; (iii) improvingadapting and modernizing our performance in industrial safety and environmental protection; and (iv) increasing productivity and efficiency.production infrastructure. We aim to meet these objectives through the following:following strategies: (1) establishmentaccelerating the incorporation of anhydrocarbon reserves by prioritizing our exploration model that allows usactivities onshore, in conventional shallow waters and in adjacent blocks; (2) accelerating secondary and enhanced recovery processes to growincrease the recovery factor for hydrocarbon reserves in our proven, probable and possible reserves; (2) further development of business plans formature fields; (3) expediting the development of shale; (3) containment and reversal of production decline and increase of profitability of assignments migrated without third party participation;newly discovered fields; (4) entering intoprioritizing and developing existing strategic alliances, partnertships and other arrangements to attract additional investment and to expand exploration activities; (5) focus on maintenance toactivities that improve the safetyreclassification of possible and probable reserves into proved reserves; (5) increasing our operations;production ofnon-associated gas and (6) improved operationalenhancing our operations efficiency and cost control;optimizing our exploration and (7) an increase in sales ofproduction costs.

Entering 2020, our hydrocarbons. Our production goals for 20182020 include producing crude oil at a level of approximately 1,930.41,866.5 thousand barrels per day and maintaining natural gas production above 4,6565,331.9 million cubic feet per day. However, as a result of the OPEC+ production agreement entered into by Mexico on April 12, 2020, we are revising our crude oil production goals for 2020 taking into account the amendments in progress to our annual budget. For more information regarding this OPEC+ production agreement, see “Item 4—Trade Regulation, Export Agreements and Production Agreements.” We aim to meet these production goals through exploration and development activities, increasing inventory reserves through new discoveries and reclassifications and managing the decline in field production by increasingfocusing our participationexploration and production activities in future bidding roundsareas where we have greater experience and higher historical success rates, such as secondary and tertiary recovery systems. In addition, we intend tore-allocate resources away fromdeep-water projects, which tend to be expensive andlong-term activities, and towardsshallow-water and onshore projects, which have the potential fornear-term results. We plan to continue the development of 22 new fields in order2020, 18 of which are in shallow waters and four of which are onshore. We expect that these 22 fields will be able to enterproduce an aggregate of up to 144.6 thousand barrels per day of crude oil during 2020. Despite these production reductions as a result of the current circumstances of the market and the global economic conditions, we continue to prepare our infrastructure for an increase in our crude oil and gas production once the market conditions are favorable.

Drilling and Services

Prior to July 1, 2019, Pemex Drilling and Services operated as an additional productive state-owned subsidiary. As of July 1, 2019, as a result of corporate reorganization, Pemex Drilling and Services was merged into new partnershipsPemex Exploration and farm-outs.Production. Therefore, our drilling and services segment operated through the productive state-owned subsidiary Pemex Drilling and Services until July 1, 2019 and through the productive state-owned subsidiary Pemex Exploration and Production as a line of business after July 1, 2019. Prior to July 1, 2019, Pemex Drilling and Services mainly provided services to Pemex Exploration and Production.

In 2019, our drilling and services business provided drilling, completion, workover and well services in onshore and offshore fields both to us and to our external client Marinsa de México S.A. de C.V. (Marinsa). Beginning July 1, 2019, such services were provided through Pemex Exploracion and Production.

Industrial Transformation

Our industrial transformation segment is comprised of twothree principal activities: (i) refining, and (ii) gas and aromatics:aromatics and (iii) since July 1, 2019, ethylene and derivatives:

Refining

Pemex Industrial Transformation converts crude oil into gasoline, jet fuel, diesel, fuel oil, asphalts and lubricants. We also distribute and market most of these products throughout Mexico. During 2017,2019, atmospheric

distillation refining increased to 1,627.0capacity remained stable at 1,640.0 thousand barrels per day, which represents anfollowing a capacity increase of 1.6% as compared to 1,602 thousand barrels per day during 2016. 0.8% in 2018.

In 2017, we produced 786.2 thousand barrels per daythe first nine months of refined products as compared to 977.2 thousand barrels per day of refined products in 2016. This decrease in refined products production was mainly due to the effects of tropical storm “Calvin” and the earthquakes that occurred in Mexico, which affected2019, our crude oil processing in the Salina Cruz refinery. See “—Health, Safety and Environmental Performance” in this Item 4. Refined products production also decreasedlevels increased as a result of maintenance carried out in our refineries beginning in March 2019. Such maintenance was financed with operating cash flow. However, in the implementationlast quarter of a generalthe year, crude oil processing decreased due to increased refinery maintenance program atactivities that temporarily reduced our Madero refinery, which began on August 23, 2017. As a result of operational problems and natural disasters,refining capacity. Therefore, in 2019, processing of crude oil by the National Refining System decreased 17.8 %,by 3.2%, from 933.1 million611.9 thousand barrels per day in 20162018 to 767.0 million592.0 thousand barrels per day in 2017.2019. In 2019, Pemex Industrial Transformation produced 625.6 thousand barrels per day of refined products, a 0.5% decrease as compared to 628.5 thousand barrels per day in 2018.

Our primary goalgoals for 2018 is2020 include: prioritizing attention to become profitable by focusing on maximizingcritical risks, implementing steps to counteract low availability of ethane and wet gas for process in our petrochemical complexes and gas processing complexes and reaching the value of our distillate production. We also intend to continue to take advantagegoals of the opportunities provided by the energy reform to enter into new strategic alliances and partnerships to improve the operational performance of our plants. In addition, through an increased focus on the maintenance of our facilities, we are looking to achieve higher levels of crude oil processing and to increase the production of higher value refined products.National Refining System Rehabilitation Program.

Gas and Aromatics

Our gas and aromatics business processes wet natural gas to produce dry natural gas, ethane, liquefied petroleum gas (LPG) and other natural gas liquids, along with aromatic derivatives chain products such as toluene, benzene and xylene. In 2017,2019, our total sour natural gas processing capacity remained at 2016 levels of 4,5234,523.0 cubic feet per day. We

In 2019, our supply of sour wet gas from Pemex Exploration and Production stabilized, particularly towards the end of the year. Despite this trend, we processed 3,2372,826.3 million cubic feet of wet natural gas per day in 2017, an 11.8%2019, a 4.3% decrease from the 3,672as compared to 2,951.9 million cubic feet per day of wet natural gas processed in 2016. We2018. In 2019, we produced 280221.3 thousand barrels per day of natural gas liquids, in 2017, a 9.1%7.8% decrease from the 308as compared to 240.1 thousand barrels per day of natural gas liquids produced in 2016. We2018. In 2019, we also produced 2,6672,305.0 million cubic feet per day of dry gas (which is natural gas with a methane content of more than 90.0%), a 4.8% decrease as compared 2,421.7 million cubic feet per day in 2017, 13.2% less than the 3,0742018. Our highest dry gas production level for 2019 was 2,369.0 million cubic feet of dry gas per day, which we reached during the third quarter of 2019. In 2019, we produced in 2016. We produced 622919.6 thousand tons of aromatics and derivatives, a 33.8%61.5% increase as compared to 570.0 thousand tons in 2018. This increase was primarily due to stable operations of aromatics production.

Our primary goal for 2020 is to improve the utilization of our complex gas processors.

Ethylene and Derivatives

Prior to July 1, 2019, Pemex Ethylene operated as an additional productive state-owned subsidiary. As of July 1, 2019, as a result of corporate reorganization, Pemex Ethylene was merged into Pemex Industrial Transformation. Therefore, our ethylene segment operated through the productive state-owned subsidiary Pemex Ethylene until July 1, 2019 and through the productive state-owned subsidiary Pemex Industrial Transformation as a line of business after July 1, 2019.

This line of business’s main objectives include the production, distribution and marketing of ethane and propylene derivatives. In 2019, we produced a total of 1,610.8 thousand tons of petrochemical products, a 12.0% decrease from 2016. The decreasesthe 1,830.3 thousand tons of petrochemical products produced in our gas and aromatics production2018. This decrease was mainly due to a decrease in the national supply of sour wet gas fromethane, which impacted the production of ethylene and its derivatives, including ethylene oxide, glycols and high-density polyethylene.

Our ethylene line of business manufactures several petrochemical products, including:

The primary goal for our Marineethylene line of business in 2020 is to enable our ethane derivatives production by adapting our infrastructure at the Pajaritos refrigerated ethylene shipping terminal in order to increase our shipping, vaporization and Southern regions, as well as the limited supply of sweet wet gas from the Burgos basin.

In 2018, we expect to have a lower supply of natural gas from our fields, which would require us to import higher volumes of natural gas to satisfy domestic demand. In addition, we are evaluating several alternativesstorage capacity for the use of our sour wet gas with high nitrogen content.imported ethane.

Fertilizers

Our fertilizers segment operates through the productivestate-owned subsidiary Pemex Fertilizers and integrates the ammonia production chain up to the point of sale of fertilizers, including urea (produced at our Pajaritos petrochemical complex), agricultural and industrial nitrates, phosphate fertilizers and acids (produced by Grupo Fertinal, S.A. de C.V., which we refer to as Fertinal). We also expect that our subsidiaryPro-Agroindustria, S.A. de C.V., which we refer to asPro-Agroindustria, will be able to begin producing urea in the second quarter of 2020.

Our strategiesIn 2020, we intend to focus our strategy on: (1) increasing the economic valuenational production of our segment by generating diverse investment opportunities infertilizers at competitive prices; (2) contributing to the strengthening of the agricultural sector in Mexico and (2)through the supply of fertilizers; (3) ensuring a reliable supply of raw materialsnatural gas for the operation of our plants through a long-term contract that sustains operations atplants; and (4) continuing to make capital expenditure investments to improve the operational reliability of our four ammonia plants.

Ethylene

Our ethylene segment operates through the productive state-owned subsidiary Pemex Ethylene and takes advantage of the integration of the ethylene production chain. In 2017, we produced a total of 1,884.0 thousand tons of petrochemical products, a 25.5% decrease from the 2,528.7 thousand tons of petrochemical products produced in 2016.

The primary goals for our ethylene segment are to streamline our operations and improve our operational reliability, and to secure a steady and reliable supply of raw materials, which will allow us to improve margins and achieve profitability.

Drilling and Services

Our drilling and services segment operates through the productive state-owned subsidiary Pemex Drilling and Services and provides drilling, completion, work-over and other services for wells in offshore and onshore fields. In 2017, this segment mainly provided completion, work-over and other drilling services to Pemex Exploration and Production, but also provided services to external clients such asComisión Nacional del Agua (CONAGUA), Marinsa de México S.A. de C.V. (“Marinsa”), Constructora y Perforadora Latina S.A. de C.V. (“Latina”), Fieldwood Energy LLC (“Fieldwood”) and Key Energy Services (“Key Energy”).

Our well drilling activities during 2017 led to onshore discoveries. Our main discoveries were of crude oil reserves located in the Southeastern and Veracruz basins, specifically in the Northern and Southern regions. Exploration activity in the Northern region also led to the discovery of additionalnon-associated gas reserves in the Burgos basin. We are currently working on development plans for these new reserves.

Logistics

Our logistics segment operates through the productivestate-owned subsidiary Pemex Logistics and provides land, maritime and pipeline transportation, storage and distribution services to ussome of our subsidiary entities and other companies, including theComisión FederalTesoro Mexico Supply & Marketing, S. de Electricidad (Federal Electricity Commission or CFE)R.L. de C.V. (an affiliate of Marathon Petroleum Corporation),Aeropuertos y Servicios Auxiliares, which we refer to as Tesoro, CENAGAS, local gas stations and distributors.

During 2017,2019, we injected approximately 1,8871,299.4 thousand barrels per day of crude oil and petroleum products into our pipelines, representing a 10.9%17.8% decrease as compared to 20162018 when we injected approximately 2,1171,581.5 thousand barrels per day, mainly due to a reduction in crude oil processed in the National Refining System and the illicit marketto controlled operations aimed at reducing losses from fuel subtractions in fuels that caused temporary closures of certain pipelines. Of the total amount of crude oil and petroleum products that we transportedpipelines transportation systems in 2017, 77.1% was transported by pipeline, 7.8% by tanker and the remaining 15.1% by land transport.accordance with our strategy to combat fuel theft.

During 2017,2019, we transported 137.9injected 132.7 thousand barrels per day of LPG, representing a 3.5%4.6% decrease as compared to the 142.9139.1 thousand barrels per day transportedof LPG injected in 2016.2018, due to a decrease in Pemex Industrial Transformation’s sales. In addition, we transported 2.3injected 4.3 thousand barrels per day of petrochemicals a decreasein 2019, an increase of 30.3%79.2% as compared to the 3.32.4 thousand barrels per day we transportedinjected in 2016. These decreases were2018. This increase was mainly due to an increase in imports of isobutane as a decrease inresult of a higher gasoline production at the volumeMinatitlán and Salina Cruz refineries.

In 2019, we transported a total of LPG2,069.3 thousand barrels per day of petroleum products: 1,436.4 thousand barrels per day (69.4%) were injected by pipeline systems, 431.8 thousand barrels per day (20.9%) were transported to Pemex Industrial Transformation, primarily due toby land transport and the importation of LPGremaining 201.1 thousand barrels per day (9.7%) were transported by private companies, as well as decreased production of natural gas by Pemex Exploration and Production.tankers.

As of 2016, natural gas transportation is carried out by CENAGAS, with the support of Pemex Logistics through an operation and maintenance contract. During 2017,2019, we transported approximately 5,1965,059.1 million cubic feet per day of natural gas, a 4.5%0.2% decrease as compared to the 5,4405,070.9 million cubic feet per day we transported in 2016, mainly due to a decrease in natural gas transported to CFE and Pemex Industrial Transformation.2018.

Cogeneration and Services

Our cogeneration and services segment operates through the productive state-owned subsidiary Pemex Cogeneration and Services and uses thermal heat and steam from our industrial processes to produce the electricity required by us, as well as to generate surplus electricity to sell to third parties in Mexico.

Our cogeneration and services segment designs construction, financing and development structures for cogeneration through alliances with third parties in close geographic proximity to our productive work centers.

As of the date of this annual report, we have transferred certain assets of our cogeneration and services segment to Pemex Industrial Transformation.

International Trading

The international trading segment whichprovides us with international trading, distribution, risk management, insurance and transportation services. This segment operates through P.M.I. Comercio Internacional, S.A. de C.V. (which we refer to as PMI), P.M.I. Trading Designated Activity Company (formerly P.M.I. Trading, Ltd., which we refer to as P.M.I. Trading DAC), P.M.I. Norteamérica, S.A. de C.V., (which we refer to asPMI-NASA, and, together with PMI and P.M.I. Trading DAC, we collectively refer to as the “PMI Subsidiaries”)PMI Subsidiaries) and Mex Gas International, Ltd.,S.L. (which, together with the PMI Subsidiaries, we collectively refer to as the “Trading Companies”) provides us with international trading, distribution, risk management, insurance and transportation services.Trading Companies). Certain of the Trading Companies sell, buy and transport crude oil, refined products and petrochemicals in world markets, and provide related risk management, insurance, transportation and storage services. The Trading Companies have offices in Mexico City, Houston Amsterdam, Singapore and Madrid.Singapore. Export sales are made through PMI to approximately 3223 major customers in various foreign markets.

In 2017,2019, our crude oil exports decreased in volume by 1.7%6.8%, from 1,194.31,184.0 thousand barrels per day in 20162018 to 1,174.01,103.7 thousand barrels per day in 2017.2019. Natural gas imports decreased by 8.7%26.6% in 2017,2019, from 1,933.91,316.5 million cubic feet per day in 20162018 to 1,766.0965.9 million cubic feet per day in 2017.2019. In 2017,2019, our exports of petrochemical products decreased 51.6%increased by 24.5%, from 124.757.8 thousand metric tons in 20162018 to 60.471.9 thousand metric tons in 2017, while2019, and our imports of petrochemical products increased 19.6%5.5%, from 278.2831.8 thousand metric tons in 20162018 to 332.8877.3 thousand metric tons in 2017.2019. In 2017,2019, our exports of other petroleum products decreased 14.8%12.7%, from 185.5132.8 thousand barrels per day in 20162018 to 158.0116.0 thousand barrels per day in 2017, while2019, and our imports of other petroleum products and liquefied petroleum gas increased 17.0%decreased 14.1%, from 800.4985.9 thousand barrels per day in 20162018 to 936.2846.9 thousand barrels per day in 2017.2019. As a major supplier of crude oil to the United States, our international trading segment’s crude oil exports to the United States totaled U.S. $10.5$22.4 billion in 2017, an increase2019, a decrease of U.S. $3.0 billion from 2016.$4.1 billion.

Infrastructure of PEMEX

Exploration and Production

Following our 2015 corporate reorganization, certain business units and assets that were operated by our exploration and production segment were transferred to our drilling and services segment upon the formation of Pemex Drilling and Services on August 1, 2015. For the year ended December 31, 2015, we have not presented separately the operating results of our drilling and services segment in this Item 4 and, accordingly, the results of our exploration and production segment include the results of that segment for this period. Operating results for both the exploration and production and drilling and services segments are presented separately for periods beginning January 1, 2016. For a detailed description of the financial results of each segment, see our consolidated financial statements included herein.

Exploration and Drilling

We seek to identify new oil reservoirs through our exploration program in order to increase the future replacement rate of proved reserves. From 1990 to 2017,2019, we completed 13,22913,612 exploration and development wells. During 2017,2019, our average success rate for exploratory wells was 62.5%52.2%, an 18.5%a 22.9% increase as compared to 20162018 and our average success rate for development wells was 92.9%93.9%, an 8.1% increasea 1.9% decrease as compared to 2016.2018. From 20132015 to 2017,2019, we discovered 1512 new crude oil fields, and 7two new natural gas fields and three new gas and condensate fields, bringing the total number of our crude oil and natural gas producing fields to 397319 at the end of 2017.2019.

Our 20172019 exploration program was comprised of exploration in both onshore and offshore regions, including the deep waters of the Gulf of Mexico. These exploratory activities yielded 246104.9 million barrels of oil equivalent of proved reserves resulting from the discovery of one oil producing field and twothree gas and condensate

producing fields. We continued our main seismic data acquisition activities,fields, as well as from the drilling of one appraisal well in particular, those related toone existing field. In addition, in 2019 we acquired licensing for three-dimensional seismic data. In 2017, we acquired 14,276multi-client data for 5,080 square kilometers of three-dimensional seismic data in deep and shallow waters.

The following table summarizes our drilling activity for the five years ended December 31, 2017,2019, all of which occurred in Mexican territory.

Source: Pemex Exploration and Production.

Extensions and Discoveries

During 2017,2019, our exploratory activity in the shallow waters of the Gulf of Mexico and onshore regions resulted in the discovery of six new discoveries of light crude oil in the offshore Suuk field in June 2017fields: two onshore fields (the Quesqui and Vinik gas and condensate discoveriesfields) and four offshore fields (the Koban gas and condensate field and the Itta, Tema and Tlamatini crude oil fields). In addition, extension activities in our Nobilis and Teca fields led to the onshore Valerianaincorporation of additional reserves. Together, these extensions and Ixachi fields in August and November of 2017, respectively. These discoveries led to the incorporation of approximately 246115.6 million barrels of oil equivalent in three fields.equivalent.

On November 3, 2017, we announced the discovery of onshore light crude oil and gas reservoirs at theIxachi-1 well in the state of Veracruz, Mexico, which we believe may contain over 1.5 billion barrels of oil equivalent. We believe that this discovery represents our largest onshore discovery in 15 years and that production can be accelerated due to the proximity of the reservoirs to existing infrastructure and to the Sistema Nacional de Gasoductos (National Gas Pipeline System).

Reserves

Under the Mexican Constitution, all oil and other hydrocarbon reserves located in the subsoil of Mexico are owned by the Mexican nation and not by us. As of December 31, 2014, Pemex-Exploration and Production was assigned rights through Round Zero corresponding to areas that together contained 95.2% of Mexico’s total proved reserves. Pemex Exploration and Production, as the successor to Pemex-Exploration and Production has the right to extract, but not own, thesethe reserves granted to us by the Mexican Government and to sell the resulting production. As of the date of this report, the exploration and development activities of Petróleos Mexicanos and the subsidiary entities are limited to reserves located in Mexico.

Proved oil and natural gas reserves are those estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations.

Proved reserves estimates as of December 31, 20172019 were prepared by our exploration and production segment and were reviewed by the Independent Engineering Firms (as defined below), which audit its estimates of our oil and gas reserves. In addition, pursuant to theReglamientoLineamientos que Regulan los Procedimientos de Cuantificación y Certificación de Reservas de la Ley de HidrocarburosNación (Regulations under(Guidelines for Regulating the Hydrocarbons Law)Nation’s Reserves Quantification and Certification Procedures), the CNH reviewedwas required to review and approve the proved reserves reports estimates as of December 31, 20172019 by the second week of April. However, due to theCOVID-19 pandemic, the CNH has suspended the deadlines and, approved them on March 28, 2018.as of the date of this annual report, has not issued the resolution in connection with the reports of Pemex fields. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government— Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions.”

We estimate reserves based on generally accepted petroleum engineering and evaluation methods and procedures, which are based primarily on applicable SEC regulations and, as necessary, the Society of Petroleum Engineers’ (which we refer to as the SPE) publication entitledStandards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information,, dated February 19, 2007 and other SPE publications, as amended, including the SPE’s publication entitledPetroleum Resources Management System,, as well as other technical sources, includingEstimation and Classification of Reserves of Crude Oil, Natural Gas, and Condensate,, by Chapman

Cronquist, andDetermination of Oil and Gas Reserves, Petroleum Society Monograph Number 1,, published by the Canadian Institute of Mining and Metallurgy & Petroleum. The choice of method or combination of methods employed in the analysis of each reservoir is determined by:

Reserves data set forth herein represent only 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 of available data, engineering and geological interpretation and professional judgment. As a result, estimates of different engineers may vary. In addition, the results of drilling, testing and producing subsequent to the date of an estimate may lead to the revision of an estimate.

During 2017,2019, we did not record any material increase in our proved oil and gas reserves as a result of the use of new technologies.

In order to ensure the reliability of our reserves estimation efforts, we have undertaken the internal certification of our estimates of reserves since 1996. We have established certain internal controls in connection with the preparation of our proved reserves estimates. Initially, teams of geoscientists from our exploration and production business units (with each of these units covering several projects) prepare the reserves estimates, using distinct estimation processes for valuations relating to new discoveries and developed fields, respectively. Subsequently, the regional reserves offices collect these reserves estimates from the units and request that theGerencia de Recursos y Certificación de Reservas de Hidrocarburos (Office of Resources and Certification of Hydrocarbon Reserves), the central hydrocarbon reserves management body of Pemex Exploration and Production, review and certify such valuations and the booking of the related reserves. This internal certification process is undertaken in accordance with internal guidelines for estimating and classifying proved reserves, which are based on the SEC’s rules and definitions. The Office of Resources and Certification of Hydrocarbon Reserves, which additionally oversees and conducts an internal audit of the process described above, consists entirely of professionals with geological, geophysical, petrophysical and reservoir engineering backgrounds. Additionally, the engineers who participate in our reserves estimation process are experienced in: reservoir numerical simulation; well drilling and completion; pressure, volume and temperature (PVT) and analytical tools used in forecasting the performance of the various elements comprising the production system; and design strategies in petroleum field development. Furthermore, all of our personnel have been certified by theSecretaría de Educación Pública(Ministry (Ministry of Public Education), most have earned master’s degrees in areas of study such as petroleum engineering, geology and geophysical engineering and they possess an average of over fifteen years of professional experience.

In addition to this internal review process, our exploration and production segment’s final reserves estimates are audited by independent engineering firms. Three independent engineering firms audited our estimates of proved reserves as of December 31, 2017:2019 or January 1, 2020, as applicable. Netherland Sewell;Sewell, DeGolyer and MacNaughton;MacNaughton and Ryder ScottGLJ (we refer to these firms together as the Independent Engineering Firms). The reserves estimates reviewed by the Independent Engineering Firms totaled 97.0%96.7 % of our estimated proved reserves. The remaining 3.0%3.3 % of our estimated proved reserves consisted mainly of reserves located in certain areas in whichthat have been shared with third parties provide us with drilling services.parties. Netherland Sewell audited the reserves in the Aceite Terciario de Golfo, Poza Rica-AltamiraCantarell,Ku-Maloob-Zaap, Cinco Presidentes and the Litoral de TabascoMacuspana-Muspac business units.units, DeGolyer and MacNaughton audited reserves in the Burgos and Veracruz business units and Ryder Scott audited the reserves in the Bellota-Jujo, Cinco Presidentes, Macuspana-Muspac, Samaria-Luna,PozaRica-Altamira,Abkatún-Pol-Chuc Cantarelland Litoral de Tabasco business units and GLJ audited the reserves in the Burgos, Veracruz,Bellota-Jujo andKu-Maloob-ZaapSamaria-Luna business units. The audits conducted by the Independent Engineering Firms consisted primarily of: (1) analysis of historical static and dynamic reservoir data that we have provided; (2) construction or updating of the Independent Engineering Firms’ own

static and dynamic reservoir characterization models of some of our fields; (3) economic analysis of fields; and (4) review of our production forecasts and reserves estimates.

Since reserves estimates are, by definition, only estimates, they cannot be reviewed for the purpose of verifying exactness. Instead, the Independent Engineering Firms conducted a detailed review of our reserves estimates so that they could express an opinion as to whether, in the aggregate, the reserves estimates we furnished were reasonable and had been estimated and presented in conformity with generally accepted petroleum engineering and evaluation methods and procedures.

All questions, including any suggested modifications to proved reserves estimates, that arose during the Independent Engineering Firms’ review process were resolved by our exploration and production segment to the satisfaction of the Independent Engineering Firms. The Independent Engineering Firms have concluded that our estimated total proved oil and natural gas reserve volumes set forth in this report are, in the aggregate, reasonable and have been prepared in accordance with Rule4-10(a) of RegulationS-X of the SEC, as amended (which we refer to as Rule4-10(a)), are consistent with international reserves reporting practice and are in accordance with the revised oil and gas reserves disclosure provisions of ASC Topic 932.

Our total proved developed and undeveloped reserves of crude oil, condensates and liquefiable hydrocarbons recoverable from field processing plants decreasedincreased by 11.0%3.0% in 2017,2019, from 7,2195,786.0 million barrels at December 31, 2016in 2018 to 6,4275,960.6 million barrels at December 31, 2017.in 2019. This increase was due to discoveries, developments, delineations and revisions of our proved reserves, in particular the development of the Ayatsil and Balam fields and the discovery of the Koban, Quesqui and Vinik gas and condensate fields. Our proved developed reserves of crude oil, condensates and liquefiable hydrocarbons recoverable from processing plants decreased by 14.7%0.1% in 2017,2019, from 4,8863,587.6 million barrels at December 31, 2016in 2018 to 4,1663,585.0 million barrels at December 31, 2017.These decreases were principally due to a decrease in oil production in 2017, a decrease in field development and, following bidding rounds conducted by the Mexican Government, the transfer to third parties of rights to certain fields included in our 2016 reserves.2019. The amount of our proved reserves of crude oil, condensate and liquefiable hydrocarbon reserves added in 20172019 was insufficientsufficient to offset the level of production in 2017,2019, which amounted to 805687.6 million barrels of crude oil, condensates and liquefiable hydrocarbons.

Our total proved developed and undeveloped dry gas reserves decreased by 5.6%0.3% in 2017,2019, from 6,9846,370 billion cubic feet at December 31, 20162018 to 6,5936,351.7 billion cubic feet at December 31, 2017.2019. Our proved developed dry gas reserves decreasedincreased by 10.8%6.8% in 2017,2019, from 4,5133,380 billion cubic feet at December 31, 20162018 to 4,0263,608.5 billion cubic feet at December 31, 2017. These decreases were2019. This increase was principally due to a decreasean increase in oil production in 2017, a decrease in field development,proved developed dry gas reserves of the natural decline of fieldsPoza Rica and following bidding rounds conducted by the Mexican Government, the transfer to third parties of rights to certain fields included in our 2016 reserves.Burgos fields. The amount of dry gas reserves added in 20172019 was insufficient to offset the level of production in 2017,2019, which amounted to 999870.4 billion cubic feet of dry gas. Our proved undeveloped dry gas reserves increaseddecreased by 3.9%8.3% in 2017,2019, from 2,4712,990.0 billion cubic feet at December 31, 20162018 to 2,5672,743.1 billion cubic feet at December 31, 2017.2019. This decrease was primarily due to certain reserves of the Poza Rica and Burgos fields that were previously classified as undeveloped reserves being reclassified as proved developed reserves.

During 2017,2019, our exploratory activity in the shallow waters of the Gulf of Mexico and onshore regions resulted in the discovery of six new discoveries of light crude oil in the offshore Suuk field in June 2017fields: two onshore fields (the Quesqui and Vinik gas and condensate discoveriesfields) and four offshore fields (the Koban gas and condensate field and the Itta, Tema and Tlamatini crude oil fields). In addition, extension activities in our Teca and Nobilis fields led to the onshore Valerianaincorporation of additional proved reserves. Together, these extensions and Ixachi fields in August and November of 2017, respectively. These discoveries led to the incorporation of approximately 246115.6 million barrels of oil equivalent in three fields.equivalent.

In 2017,2019, our proved reserves increased by 174.21,026.5 million barrels of oil equivalent due to reclassifications, development, revisions and discoveries.

The following three tables of crude oil and dry gas reserves set forth our estimates of our proved reserves determined in accordance withRule4-10(a).

Summary of Oil and Gas⁽¹⁾ Proved Reserves as of December 31, 2017 2019

Based on Average Fiscal Year Prices

Source: Pemex Exploration and Production.

Crude Oil and Condensate Reserves

(including natural gas liquids)⁽¹⁾

Source: Pemex Exploration and Production.

Dry Gas Reserves