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)
Mexican Petroleum | United Mexican States | |
(Translation of registrant’s name into English) | (Jurisdiction of incorporation or organization) |
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
3.500% Notes due 2020 | ||
6.375% Notes due 2021 | ||
4.875% Notes due 2022 | ||
Floating Rate Notes due 2022 | ||
4.625% Notes due 2023 | ||
4.875% Notes due 2024 | ||
4.500% Notes due 2026 | 4.250% Notes due 2025 | |
9.50% Guaranteed Bonds due 2027 | 6.875% Notes due 2026 | |
9.50% Global Guaranteed Bonds due 2027 | ||
6.500% Notes | 5.350% Notes due 2028 | |
6.625% Guaranteed Bonds due 2038 | 6.625% Guaranteed Bonds due 2035 | |
6.500% Bonds due 2041 | ||
6.375% Bonds due 2045 | ||
6.750% Bonds due 2047 |
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):
Large accelerated filer | ☐ | Accelerated filer☐ | ||||||
Non-accelerated filer | ☒ | Emerging growth company | ☐ |
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 ☐
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.
Item 1. | 5 | |||||
Item 2. | 5 | |||||
Item 3. | 5 | |||||
Item 4. | 19 | |||||
Item 4A. | ||||||
Item 5. | ||||||
Item 6. | ||||||
Item 7. | ||||||
Item 8. | Financial Information Consolidated Statements and Other Financial Information | |||||
Item 9. | ||||||
Item 10. | ||||||
Item 11. | ||||||
Item 12. | ||||||
Item 13. | ||||||
Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds | |||||
Item 15. | ||||||
Item 16A. | ||||||
Item 16B. | ||||||
Item 16C. | ||||||
Item 16D. | �� | |||||
Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers | |||||
Item 16F. | ||||||
Item 16G. | ||||||
Item 16H. | ||||||
Item 17. | ||||||
Item 18. | ||||||
Item 19. |
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:
exploration and production activities, including drilling;
activities relating to import, export, refining, petrochemicals and transportation, storage and distribution of petrochemicals, petroleum, natural gas and oil products;
activities relating to our lines of business, including the generation of electricity;business;
projected and targeted capital expenditures and other costs, commitments and revenues;costs;
trends in international and Mexican crude oil and natural gas prices;
farm-outs, joint ventures and strategic alliances with other companies; and
the monetization of certain of our assets.
Actual results could differ materially from those projected in suchforward-looking statements as a result of various factors that may be beyond our control. These factors include, but are not limited to:
general economic and business conditions, including changes in international and Mexican crude oil and natural gas prices;prices, refining margins and prevailing exchange rates;
credit ratings and retain skilled personnel;
our ability to find, acquire or gain access to additional reserves and to develop, either on our own or with our strategic partners, the reserves that we obtain successfully;
the level of financial and other support we receive from the Mexican Government;
global or national health concerns, including the outbreak of pandemic or contagious disease, such as the ongoingCOVID-19, commonly known as coronavirus, pandemic;
effects on us from competition, including on our ability to successfully identify partnershire and enter into farm-outs, joint ventures and strategic alliances;retain skilled personnel;
technical difficulties;
significant developments in the global economy;
significant economic or political developments in Mexico and the United States;
developments affecting the energy sector; and
changes in, or failure to comply with, our legal regime or regulatory environment, including with respect to tax, environmental regulations, fraudulent activity, corruption and environmental regulations.bribery;
receipt of governmental approvals, permits and licenses;
natural disasters, accidents, blockades and acts of sabotage or terrorism;
the cost and availability of adequate insurance coverage; and
the effectiveness of our risk management policies and procedures.
Accordingly, you should not place undue reliance on theseforward-looking statements. In any event, these statements speak only as of their dates, and we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise.
For a discussion of important factors that could cause actual results to differ materially from those contained in anyforward-looking statement, see “Item 3—Key Information—Risk Factors.”
PART I
Item 1. | Identity of Directors, Senior Management and Advisers |
Not applicable.
Item 2. | Offer Statistics and Expected Timetable |
Not applicable.
Item 3. | Key Information |
SELECTED FINANCIAL DATA
The selected statement of comprehensive income (loss), statement of financial position and cash flows data set forth below as of and for the five years ended December 31, 20172019 have been derived from, and should be read in conjunction with, our consolidated financial statements as of December 31, 20162018 and 20172019 and for the years ended December 31, 2015, 20162017, 2018 and 2017,2019, which are included in Item 18 of this report. Our consolidated financial statements for each of the fiscal years ended December 31, 2013, 2014, 2015, 2016 and 2017 were audited by Castillo Miranda y Compañía, S.C. (which we refer to as BDO Mexico), an independent registered public accounting firm. Our consolidated financial statements for the fiscal year ended December 31, 2018 and 2019 were audited by KPMG Cárdenas Dosal, S.C. (which we refer to as KPMG Mexico), an independent registered public accounting firm. Certain amounts in the consolidated financial statements for the years ended December 31, 2013, 2014, 2015, 2016, 2017 and 20162018 have been reclassified to conform the presentation of the amounts in the consolidated financial statements for the year ended December 31, 2017.2019. These reclassifications are not significant to the consolidated financial statements and had no impact on our consolidated net income (loss). As of January 1, 2019, we adopted IFRS 16 “Leases,” without modifying financial information as of December 31, 2018 and 2017. See impacts from the adoption of IFRS 16 in Notes 4 and 17 to our consolidated financial statements included herein.
As detailed below, for the years ended December 31, 2015, 20162017, 2018 and 2017,2019, we recognized a net loss of Ps. 712.6280.9 billion, Ps. 191.1180.4 billion and Ps. 280.9347.9 billion, respectively. In addition, we had negative equity as of December 31, 20162018 and 20172019 of Ps. 1,233.01,459.4 billion and Ps. 1,502.41,997.2 billion, respectively, which resulted in a negative working capital of Ps. 68.4 billion and Ps. 25.6 billion, respectively; and cash flows from operating activities of Ps. 63.4 billion for the year ended December 31, 2017.respectively. This has led our independent auditorsus to state in their most recent audit reportour consolidated financial statements that there is material uncertainty that may castexists significant doubt onabout our ability to continue as a going concern. However, we have concluded that we continue to operate as a going concern. Accordingly, we have prepared our consolidated financial statements on a going concern basis, which assumes that we can meet our payment obligations. For more information on the actions that we are taking to face these negative trends, see “Item 5—Operating and Financial Review and Prospects—Overview” and “Item 5—5 — Operating and Financial Review and Prospects—LiquidityProspects —Liquidity and Capital Resources.”
Selected Financial Data of PEMEX
Year ended December 31,(1) | Year ended December 31,(1) | |||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2017(2) | 2015 | 2016 | 2017 | 2018 | 2019 | 2019(2) | |||||||||||||||||||||||||||||||||||||
(in millions of pesos, except ratios) | (in millions of U.S. dollars) | (in millions of pesos, except ratios) | (in millions of U.S. dollars) | |||||||||||||||||||||||||||||||||||||||||||||
Statement of Comprehensive Income (Loss) Data | ||||||||||||||||||||||||||||||||||||||||||||||||
Net sales | Ps. 1,608,205 | Ps. 1,586,728 | Ps. 1,161,760 | Ps. 1,074,093 | Ps. 1,397,030 | U.S.$ | 70,604 | Ps.1,161,760 | Ps.1,074,093 | Ps.1,397,030 | Ps.1,681,119 | Ps.1,401,971 | U.S. $ | 74,394 | ||||||||||||||||||||||||||||||||||
Operating income | 727,622 | 615,480 | (154,387 | ) | 424,350 | 104,725 | 5,293 | (154,387 | ) | 424,350 | 104,725 | 367,400 | 37,030 | 1,965 | ||||||||||||||||||||||||||||||||||
Financing income | 8,736 | 3,014 | 14,991 | 13,749 | 16,166 | 817 | 14,991 | 13,749 | 16,166 | 31,557 | 24,484 | 1,299 | ||||||||||||||||||||||||||||||||||||
Financing cost | (39,586 | ) | (51,559 | ) | (67,774 | ) | (98,844 | ) | (117,645 | ) | (5,946 | ) | (67,774 | ) | (98,844 | ) | (117,645 | ) | (120,727 | ) | (132,861 | ) | (7,050 | ) | ||||||||||||||||||||||||
Derivative financial instruments (cost) income—Net | 1,311 | (9,439 | ) | (21,450 | ) | (14,000 | ) | 25,338 | 1,281 | (21,450 | ) | (14,000 | ) | 25,338 | (22,259 | ) | (18,512 | ) | (982 | ) | ||||||||||||||||||||||||||||
Exchange (loss) gain—Net | (3,951 | ) | (76,999 | ) | (154,766 | ) | (254,012 | ) | 23,184 | 1,172 | (154,766 | ) | (254,012 | ) | 23,184 | 23,659 | 86,930 | 4,613 | ||||||||||||||||||||||||||||||
Net (loss) income for the period | (170,058 | ) | (265,543 | ) | (712,567 | ) | (191,144 | ) | (280,851 | ) | (14,194 | ) | ||||||||||||||||||||||||||||||||||||
Net (loss) for the period | (712,567 | ) | (191,144 | ) | (280,851 | ) | (180,420 | ) | (347,911 | ) | (18,462 | ) | ||||||||||||||||||||||||||||||||||||
Statement of Financial Position Data (end of period) | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 80,746 | 117,989 | 109,369 | 163,532 | 97,852 | 4,945 | 109,369 | 163,532 | 97,852 | 81,912 | 60,622 | 3,217 | ||||||||||||||||||||||||||||||||||||
Total assets | 2,047,390 | 2,128,368 | 1,775,654 | 2,329,886 | 2,132,002 | 107,749 | 1,775,654 | 2,329,886 | 2,132,002 | 2,075,197 | 1,918,448 | 101,800 | ||||||||||||||||||||||||||||||||||||
Long-term debt | 750,563 | 997,384 | 1,300,873 | 1,807,004 | 1,880,666 | 95,047 | 1,300,873 | 1,807,004 | 1,880,666 | 1,890,490 | 1,738,250 | 92,238 | ||||||||||||||||||||||||||||||||||||
Totallong-term liabilities | 1,973,446 | 2,561,930 | 2,663,922 | 3,136,704 | 3,245,227 | 164,011 | 2,663,922 | 3,136,704 | 3,245,227 | 3,086,826 | 3,363,453 | 178,478 | ||||||||||||||||||||||||||||||||||||
Total equity (deficit) | (185,247 | ) | (767,721 | ) | (1,331,676 | ) | (1,233,008 | ) | (1,502,352 | ) | (75,927 | ) | (1,331,676 | ) | (1,233,008 | ) | (1,502,352 | ) | (1,459,405 | ) | (1,997,208 | ) | (105,980 | ) | ||||||||||||||||||||||||
Statement of Cash Flows | ||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 148,492 | 143,075 | 167,951 | 150,439 | 156,705 | 7,920 | 167,951 | 150,439 | 156,705 | 153,382 | 137,187 | 7,280 | ||||||||||||||||||||||||||||||||||||
Acquisition of wells, pipelines, properties, plant and equipment(3) | 245,628 | 230,679 | 253,514 | 151,408 | 91,859 | 4,642 | 253,514 | 151,408 | 91,859 | (94,004 | ) | (109,654 | ) | (5,819 | ) | |||||||||||||||||||||||||||||||||
Other Financial Data | ||||||||||||||||||||||||||||||||||||||||||||||||
Ratio of earnings to fixed charges(4)(5) | — | — | — | — | — | — |
(1) | Includes Petróleos Mexicanos, the subsidiary entities and the subsidiary companies listed in Note |
(2) | Translations into U.S. dollars of amounts in pesos have been made at the exchange rate established by the Ministry of Finance and Public Credit for accounting purposes of Ps. |
(3) | Includes capitalized financing cost. See Note |
Source: PEMEX’s consolidated financial statements, prepared in accordance with IFRS, as it relates to the selected statements of comprehensive income, statement of financial position and statement of cash flows data; and Petróleos Mexicanos, as it relates to other financial data.
EXCHANGE RATES
The following table sets forth, for the periods indicated, the high, low, average andperiod-end exchange rates for the purchase of U.S. dollars, expressed in pesos per U.S. dollar. These rates have not been restated in constant currency units.
Period | Exchange Rate | |||||||||||||||
High | Low | Average(1) | Period End | |||||||||||||
Year Ended December 31, | ||||||||||||||||
2013 | 13.433 | 11.976 | 12.857 | 13.098 | ||||||||||||
2014 | 14.794 | 12.846 | 13.370 | 14.750 | ||||||||||||
2015 | 17.358 | 14.564 | 15.873 | 17.195 | ||||||||||||
2016 | 20.842 | 17.190 | 18.667 | 20.617 | ||||||||||||
2017 | 21.891 | 17.478 | 18.884 | 19.640 | ||||||||||||
November 2017 | 19.257 | 18.513 | 18.931 | 18.634 | ||||||||||||
December 2017 | 19.733 | 18.620 | 19.176 | 19.640 | ||||||||||||
2018 | ||||||||||||||||
January 2018 | 19.484 | 18.488 | 18.912 | 18.622 | ||||||||||||
February 2018 | 18.901 | 18.360 | 18.647 | 18.841 | ||||||||||||
March 2018 | 18.864 | 18.168 | 18.590 | 18.168 | ||||||||||||
April 2018(2) | 18.615 | 17.971 | 18.208 | 18.615 |
Source: Noon buying rate for cable transfers in New York reported by the Federal Reserve.
The noon buying rate for cable transfers in New York reported by the Federal Reserve on April 20, 2018 was Ps. 18.615 = U.S. $1.00.
RISK FACTORS
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.
International crude oil and natural gas prices are subject to global supply and demand and fluctuate due to many factors beyond our control. These factors include competition within the oil and natural gas industry, the prices and availability of alternative sources of energy, international economic trends, exchange rate fluctuations, expectations of inflation, domestic and foreign laws and government regulations, political and other events in major oil and natural gas producing and consuming nations and actions taken by oil exporting countries, trading activity in oil and natural gas and transactions in derivative financial instruments (which we refer to as DFIs) related to oil and gas.
When international crude oil, petroleum product and/or natural gas prices are low, we generally earn less revenue and, therefore, generate lower cash flows and earn less income before taxes and duties because our costs remain roughly constant. Conversely, when crude oil, petroleum product and natural gas prices are high, we earn more revenue and our income before taxes and duties increases. Crude oil export prices, which had generally traded above U.S. $75.00 per barrel since October 2009 and traded above U.S. $100.00 per barrel as of July 30, 2014, began to fall in August 2014. After a gradual decline that resulted in per barrel prices falling to U.S. $91.16 at September 30, 2014, this decline sharply accelerated in October 2014 and prices fell to U.S. $53.27 per barrel at the end of 2014. The weighted average Mexican crude oil export price fell further in subsequent years, down to U.S. $26.54 per barrel by the end of December 2015 and to U.S. $18.90 per barrel on January 20, 2016, the lowest in twelve years, before rebounding to U.S. $46.53 per barrel on December 28, 2016. In 2017, crude oil export prices began to stabilize and during 2017 the weighted average Mexican crude oil export price was approximately U.S. $46.73 per barrel, rising to U.S. $56.19 per barrel on December 29, 2017. During the first three months of 2018, the weighted average Mexican crude oil price was U.S. $56.82 per barrel, an increase of U.S. $10.94 per barrel as compared to the 2017 weighted average Mexican crude oil export price. As of April 27, 2018, the weighted average Mexican crude oil export price was U.S. $60.89 per barrel. While prices have begun to stabilize or even trend upwards, they still remain significantly lower than 2014 levels. Any future decline in international crude oil and natural gas prices will have a similar negative impact on our results of operations and financial condition. These fluctuations may also affect estimates of the amount of Mexico’s hydrocarbon reserves that we have the right to extract and sell, which could affect our future production levels. See “—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” below and “Item 11—Quantitative and Qualitative Disclosures About Market Risk—Changes in Exposure to Main Risks—Market Risk—Hydrocarbon Price Risk.”
We have a substantial amount of indebtedness and other liabilities and are exposed to liquidity constraints, which could make it difficult for us to obtain financing on favorable terms and could adversely affect our financial condition, results of operations and ability to repay our debt and, ultimately, our ability to operate as a going concern.
We have a substantial amount of debt, which we have incurred primarily to finance the capital expenditures needed to carry out our capital investment projects. Due to our heavy tax burden, our cash flow from operations in recent years has not been sufficient to fund our capital expenditures and other expenses and, accordingly, our debt has significantly increased and our working capital has decreased. The sharpRelatively low oil prices since 2014 and the rapid decline in oil prices that began in late 2014 hasearly 2020, as well as declining production have also had a negative impact on our ability to generate positive cash flows, which, together with our continued heavy tax burden and increased competition from the private sector, has further exacerbatedstrained our ability to fund our capital expenditures and other expenses from cash flow from operations. Therefore, in order to develop our hydrocarbon reserves and amortize scheduled debt maturities, we will need to raise financingobtain funds from a broad range of funding sources, in addition to implementing the efficiency andcost-cutting initiatives described in this annual report.
As of December 31, 2017,2019, our total indebtedness, including accrued interest, was approximately Ps. 2,037.91,983.2 billion (U.S. $103.0$105.2 billion), in nominal terms, which representsrepresented a 2.8% increase4.8% decrease compared to our total indebtedness, including accrued interest, of approximately Ps. 1,983.22,082.3 billion (U.S. $96.0$105.8 billion) as of December 31, 2016. 25.8%2018. As of December 31, 2019, 24.3% of our existing debt, as of December 31, 2017, or Ps. 526.5481.0 billion (U.S. $26.6$25.5 billion), is scheduled to mature in the next three years.years, including Ps. 244.9 billion (U.S. $13.0 billion) scheduled to mature in 2020. As of December 31, 2017,2019, we had a negative working capital of Ps. 25.6211.7 billion (U.S. $1.3$10.6 billion). Our level of debt may increase further in the short or medium term as a result of new financing activities or depreciation of the peso as compared to the U.S. dollar, and may have an adverse effect on our financial condition, results of operations and liquidity position. To service our debt, we have relied and may continue to rely on a combination of cash flows provided by our operations, drawdowns under our available credit facilities and the incurrence of additional indebtedness, including the refinancing of our existing indebtedness. See “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Overview—Changes to Our Business Plan.”
Certain rating agencies have expressed concerns regarding: (1) our heavy tax burden, (2) the total amount of our debt; (3) the significant increase in our indebtedness over the last several years; (4) our negative free cash flow during 2016, primarily resulting from our significant capital investment projects and the low price of oil; (5) the natural decline of certain of our oil fields and lower quality of crude oil; (6) our substantial unfunded reserve for retirement pensions and seniority premiums, which was equal to Ps. 1,258.4 billion (U.S. $63.6 billion) as of December 31, 2017; and (7) the resilience of our operating expenses notwithstanding the sharp decline in oil prices that began in late 2014. On August 3, 2017, Fitch Ratings affirmed our credit rating of “BBB+” in both global local and global foreign currency and modified its outlook from negative to stable. On December 18, 2017, Standard & Poor’s affirmed the outlook for our credit ratings as stable and affirmed our global foreign currency credit rating as “BBB+”, but lowered our global local currency credit rating from “A” to“A-”, citing revisions to its methodology for calculating sovereign ratings. On April 12, 2018, Moody’s Investors Service announced the revision of its outlook for our credit ratings from negative to stable.
Any lowering of our credit ratings may have adverse consequences on our ability to access the financial markets and/or our cost of financing. If we were unable to obtain financing on favorable terms, this could hamper our ability to obtain further financing, invest in projects financed through debt and meet our principal and interest payment obligations with our creditors. As a result, we may be exposed to liquidity constraints and may not be able to service our debt or make the capital expenditures required to maintain our current production levels and to maintain, and increase, the proved hydrocarbon reserves assigned to us by the Mexican Government, which may adversely affect our financial condition and results of operations. See “—Risk Factors Related to our Relationship with the Mexican Government—We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our ability to make capital investments” below.
If such constraints occur at a time when our cash flow from operations is less than the resources necessary to meet our debt service obligations, in order to provide additional liquidity to our operations, we could be forced to further reduce our planned capital expenditures, implement further austerity measures and/or sell additionalnon-strategic assets in order to raise funds. A reduction in our capital expenditure program could adversely affect our financial condition and results of operations. Additionally, such measures may not be sufficient to permit us to meet our obligations.
Our consolidated financial statements have been prepared under the assumption that we will continue as a going concern. However, our independent auditors have stated in their most recent report that there is material uncertainty that may cast significant doubt onabout our ability to continue operating as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty. If the actions we are taking to improve our financial condition, which are described in detail under “Item 5—5 — Operating and Financial Review and Prospects—LiquidityProspects —Liquidity and Capital Resources—Resources — Overview—Changes to Our Business Plan,” are not successful, we may not be able to continue operating as a going concern.
Downgrades in our credit ratings could negatively impact our access to the financial markets and cost of financing.
Ratings address our creditworthiness and the likelihood of timely payment of our long-term debt securities. Ratings are not a recommendation to purchase, hold or sell securities and may be changed, suspended or withdrawn at any time. Our current ratings and the rating outlooks depend, in part, on economic conditions and other factors that affect credit risk and are outside our control, as well as assessments of the creditworthiness of Mexico. Certain ratings agencies have recently downgraded Mexico’s credit ratings and their assessment of Mexico’s creditworthiness has and may further affect our credit ratings.
We currently have a “split rating,” with anon-investment grade credit rating from two rating agencies but investment grade credit ratings from other rating agencies. For information regarding our current credit ratings, please see “Item 5—Liquidity and Capital Resources—Overview.” While these downgrades do not constitute a default or event of default under our debt instruments, they have increased our cost of financing. Any further lowering of our credit ratings may have material adverse consequences on our ability to access the financial markets and the terms on which we may obtain financing, including our cost of financing. In turn, this could significantly harm our ability to meet our existing obligations, financial condition and results of operations. In addition, in connection with the entry into new financings or amendments to existing financing arrangements, our financial and operational flexibility may be reduced as a result of more restrictive covenants, requirements for security and other terms that may be imposed on split rated entities. Our split rating and any further credit rating downgrades could also negatively impact the prices of our debt securities and reduce our potential pool of investors and funding sources, among other consequences. There can be no assurance that we will be able to maintain or improve our current credit ratings or outlook.
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.
International crude oil and natural gas prices are subject to global supply and demand and fluctuate due to many factors beyond our control. These factors include competition within the oil and natural gas industry, the prices and availability of alternative sources of energy, international economic trends, exchange rate fluctuations, expectations of inflation, domestic and foreign laws and government regulations, political and other events in major oil and natural gas producing and consuming nations and actions taken by Organization of the Petroleum Exporting Countries (OPEC) members and other oil exporting countries, trading activity in oil and natural gas and transactions in derivative financial instruments (which we refer to as DFIs) related to oil and gas.
When international crude oil, petroleum product and/or natural gas prices are low, we generally earn less revenue and, therefore, generate lower cash flows and earn less income before taxes and duties because our costs remain roughly constant. Conversely, when crude oil, petroleum product and natural gas prices are high, we earn more revenue and our income before taxes and duties increases. Crude oil export prices, which had generally traded above U.S. $75.00 per barrel since October 2009 and traded above U.S. $100.00 per barrel as of July 30, 2014, began to fall in August 2014. The weighted average Mexican crude oil export price fell further in subsequent years, reaching U.S. $18.90 per barrel on January 20, 2016. In subsequent years, while prices have remained significantly below 2014 levels, average crude oil export prices stabilized, with the Mexican crude oil export price averaging of U.S. $62.29 per barrel in 2018 and U.S. $55.60 per barrel in 2019.
However, beginning in early March of 2020, the market experienced a precipitous decline in oil prices. This decline occurred in response to a substantial decline in demand for oil due to the economic impacts of the pandemic caused by the highly transmissible and pathogenic coronavirus known asCOVID-19, which caused an oversupply and in turn insufficient global storage capacity. The Mexican crude oil export price averaged U.S. $40.91 per barrel for the three month period ended March 31, 2020 and reached an unprecedented low of negative U.S. $7.33 per barrel on April 28, 2020 Prices continue to display significant volatility both in reaction to theCOVID-19 pandemic and actions taken by other oil producing countries.
On April 12, 2020, OPEC and othernon-OPEC oil exporting countries, including, among others, Mexico and Russia, reached an agreement to reduce world crude oil supply. Pursuant to this agreement, these countries, which are known as OPEC+, agreed to reduce their overall crude oil production by 9.7 million barrels per day from May 1, 2020 through June 30, 2020, by 7.7 million barrels per day from July 1, 2020 through December 31, 2020 and by 5.8 million barrels per day from January 1, 2021 through April 30, 2022. In particular, Mexico 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.
Any further or future production cuts or decline in international crude oil and natural gas prices will likely have a negative impact on our results of operations and financial condition. In addition, significant fluctuations may affect estimates of the amount of Mexico’s hydrocarbon reserves that we have the right to extract and sell, which could affect our future production levels. See “—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” below and “Item 11—Quantitative and Qualitative Disclosures About Market Risk—Changes in Exposure to Main Risks—Market Risk—Hydrocarbon Price Risk.”
The outbreak ofCOVID-19 has had and may continue to have an adverse effect on our business, results of operations and financial condition.
Since December 2019, a novel strain of coronavirus (2019-nCov, referred to asCOVID-19) has spread throughout the world. On March 11, 2020,COVID-19 was categorized as a pandemic by the World Health Organization. TheCOVID-19 pandemic has resulted in numerous deaths and the imposition of local, municipal and national governmental“shelter-in-place” and other quarantine measures, border closures and other travel restrictions, causing unprecedented commercial disruption in a number of jurisdictions, including Mexico. Many countries around the world, including Mexico, are suffering significant economic and social crises as a result of the ongoingCOVID-19 pandemic and measures taken to contain or mitigate it, which have had dramatic adverse consequences on demand, operations, supply chains and financial markets, as well as contributed to significant oil price volatility. While the nature and scope of the consequences to date are difficult to evaluate precisely, and their future course is impossible to predict with confidence, these events may continue for a sustained period of time.
As of the date of this annual report, the Mexican Government has adopted certain measures intended to help mitigate the spread ofCOVID-19 in Mexico, including the suspension of allnon-essential activities. However, we cannot predict the range of future policies that may be enacted by the Mexican Government, or any other government, or the impact these policies will have on our business and operations. Our business operation is generally considered a strategic area as defined in Articles 27 and 28 of theConstitución Política de los Estados Unidos Mexicanos (Political Constitution of the United Mexican States or the Mexican Constitution). Certain of our operations therefore remain active as of the date of this annual report – however, in accordance with our business continuity plan, we have limited our workforce’s access to our facilities, implemented alternating shifts and allowed a portion of our workforce to work remotely. In addition, we have implemented sanitizing measures to disinfect our facilities and the use of thermal cameras and other special equipment to monitor infection risks. Despite these precautions, theCOVID-19 pandemic, or any future pandemic or epidemic, has and may further impact the places where we operate or our workforce. In turn, this could significantly disrupt our operations and cause health restrictions to our workforce and, therefore, impact the operation of our facilities, including our platforms, refineries and terminals, among others. These conditions could adversely affect our business, results of operations and financial condition.
In addition to the operational impacts of theCOVID-19 pandemic, international prices for oil, oil products and natural gas are volatile and strongly influenced by conditions and expectations of world supply and demand. TheCOVID-19 pandemic has significantly decreased and is likely to continue to decrease worldwide oil demand in 2020, has led to significantly decreased oil prices and, consequently, has significantly adversely affected our business, 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, “Item 5—Overview” and Note 28 to our consolidated financial statements for further information about the impact on us ofCOVID-19 pandemic.
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. Further, it could have accounting consequences, such as decreases in our revenues and the value of our inventories, foreign exchange losses, impairments of fixed assets, and affect our ability to operate effective internal control over financial reporting.
The extent to whichCOVID-19 or other health pandemics or epidemics may continue to impact Mexico, the Mexican economy and the global economy and, in turn, our business, results of operations and financial condition is highly uncertain and will depend on numerous evolving factors that we cannot predict, including, but not limited to:
the duration, scope, and severity of theCOVID-19 pandemic;
ongoing reduced oil demand and oil price volatility;
the impact of travel bans, work-from-home policies, orshelter-in-place orders;
staffing shortages;
general economic, financial, and industry conditions, particularly conditions relating to liquidity, financial performance, which may be amplified by the effects ofCOVID-19; and
the long-term effects ofCOVID-19 on the national and global economy, including on consumer confidence and spending, financial markets and the availability of credit for us, our suppliers and our customers.
We are an integrated oil and gas company and are exposed to production, equipment and transportation risks, criminal acts, blockades to our facilities,cyber-attacks, failure in our information technology system blockades to our facilities and criminal acts and deliberate acts of terror that could adversely affect our business, results of operations and financial conditioncondition..
We are subject to several risks that are common among oil and gas companies. These risks include production risks (fluctuations in production due to operational hazards, natural disasters or weather, accidents, etc.), equipment risks (relating to the adequacy and condition of our facilities and equipment) and transportation risks (relating to the condition and vulnerability of pipelines and other modes of transportation). More specifically, our business is subject to the risks of explosions in pipelines, refineries, plants, drilling wells and other facilities, oil spills, hurricanes in the Gulf of Mexico and other natural or geological disasters and accidents, fires and mechanical failures. Criminal attempts
Our operations are also subject to the risk of criminal acts to divert our crude oil, natural gas or refined products from our pipeline network, including the theft, and facilities fortampering with the quality, of our products. We have experienced an increase in the illegal sale havetrade in the fuels that we produce and in the illegal “tapping” of our pipelines, which has resulted in explosions, property and environmental damage, injuries and loss of life.life, as well as loss of revenue from the stolen product.
In 2019, we discovered 10,316 illegal pipeline taps. We are also subject to the risk that some of our employees may, or may be perceived to, be participating in the illicit market in fuels. In addition, our facilities are subject to the risk of sabotage, terrorism and blockades. For example, in early 2017 we experienced widespread demonstrations, including blockades, as a result of the Mexican Government’s increase in fuel prices during 2017, which prevented us from accessing certain of our supply terminals and caused gasoline shortages at several retail service stations in Mexico. The occurrence of incidents such as these related to the production, processing and transportation of oil and gas products could result in personal injuries, loss of life, environmental damage from the subsequent containment,clean-up and repair expenses, equipment damage and damage to our facilities, which in turn could adversely affect our business, results of operations and financial condition.
Our operations depend onare supported by our information technology systems and therefore, cybersecurity plays a key role in protecting our operations. Cyber-threats and cyber-attacks are becoming increasingly sophisticated, coordinated and costly, and could be targeted at our operations. operations or information systems. Accordingly, we have established an information security policy in order to help us to prevent, detect and correct vulnerabilities. On November 10, 2019, we detected a ransomware cyber-attack that targeted certain computer software applications. The cyber-attack did not affect the operational continuity of our business. Following the cyber-attack and in accordance with our protocols, we implemented remedial measures intended to contain the extent of the attack and preserve the integrity of our proprietary information. We have also undertaken an investigation to identify the source and nature of the cyber-attack and identify the full extent of its impact.
Although we have established an information security program that helps us to prevent, detect and correct vulnerabilities, and we have not yet suffered a significant cyber-attack, if the integrity of our information technology system were to be compromised due to a anothercyber-attack, or due to the negligence or misconduct of our employees, our business operations could be disrupted or even paralyzed and our proprietary information could be lost or stolen. As a result of these risks, we could face, among other things, regulatory action, legal liability, damage to our reputation, a significant reduction in revenues, an increase in costs, a shutdown of operations, or loss of our investments in areas affected by suchcyber-attacks, which in turn could have a material adverse effect on our reputation, results of operations and financial condition.
Our facilities are also subject to the risk of sabotage, terrorism and blockades. For example, in early 2017 we experienced widespread demonstrations, including blockades, as a result of the Mexican Government’s increase in fuel prices during 2017, which prevented us from accessing certain of our supply terminals and caused gasoline shortages at several retail service stations in Mexico. The occurrence of these incidents related to the production, processing and transportation of oil and gas products could result in personal injuries, loss of life, environmental damage from the subsequent containment,clean-up and repair expenses, equipment damage and damage to our facilities, which in turn could adversely affect our business, results of operations and financial condition.
We purchase comprehensive insurance policies covering most of these risks; however, these policies may not cover all liabilities, and insurance may not be available for some of the consequential risks. There can be no assurance that significant incidents will not occur in the future, that insurance will adequately cover the entire scope or extent of our losses or that we we will not be held responsible for such incidents. The occurrence of a significant incident or unforeseen liability for which we are not fully insured or for which insurance recovery is significantly delayed could have a material adverse effect on our results of operations and financial condition. See “Item 4—Information on the Company—Business Overview—PEMEX Corporate Matters—Insurance.”
A continued decline in our proved hydrocarbon reserves and production could adversely affect our operating results and financial condition.
Some of our existing oil and gas producing fields are mature and, as a result, our reserves and production may decline as reserves are depleted. In prior years the replacement rate for our proved hydrocarbon reserves has been insufficient to prevent a decline in our proved reserves. However, during 2019, our total proved reserves increased by 171.7 million barrels of crude oil equivalent, or 2.4%, after accounting for discoveries, extensions, revisions, and delimitations, from 7,010.3 million barrels of crude oil equivalent as of December 31, 2018 to 7,182.0 million barrels of crude oil equivalent as of December 31, 2019. See “Item 4—Information on the Company—Business Overview––Exploration and Production—Reserves” for more information about the factors leading to this increase. Ourreserve-replacement ratio, or RRR, in 2019 was 120.1%, as compared to our RRR of 34.7% in 2018. Nevertheless, our crude oil production continued to decrease by 9.5% in 2017, by 6.4% in 2018 and by 7.6% in 2019, primarily as a result of the decline of the Cantarell,Yaxché-Xanab, Crudo Ligero Marino, ElGolpe-Puerto Ceiba,Bellota-Chinchorro, Antonio J. Bermúdez,Cactus-Sitio Grande,Ixtal-Manik, Chuc, Costero Terreste andTsimín-Xux projects. There can be no assurance that we will be able to stop or reverse the decline in our proved reserves and production, which could have an adverse effect on our business, results of operations and financial condition.
Developments in the oil and gas industry and other factors may result in substantialwrite-downs of the carrying amount of certain of our assets, which could adversely affect our operating results and financial condition.
We evaluate on an annual basis, or more frequently where the circumstances require, the carrying amount of our assets for possible impairment. Our impairment tests are performed by a comparison of the carrying amount of an individual asset or acash-generating unit with its recoverable amount. Whenever the recoverable amount of an individual asset orcash-generating unit is less than its carrying amount, an impairment loss is recognized to reduce the carrying amount to the recoverable amount.
Changes in the economic, regulatory, business or political environment in Mexico or other markets where we operate, such as the 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.
Our financing obligations are not guaranteed by the Mexican Government.
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.
Item 4. | Information on the Company |
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:
The new Petróleos Mexicanos Law, which took effect, with the exception of certain provisions, on October 7, 2014 and repealed the previous Petróleos Mexicanos2014;
Hydrocarbons Law, which had been effective as of November 29, 2008;took effect on August 12, 2014; and
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Ley de Ingresos sobre Hidrocarburos (Hydrocarbons Revenue Law). |
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:
licenses, pursuant to which a license holder is entitled to the oil and gas that are extracted from the subsoil;
production-sharing contracts, pursuant to which a contractor is entitled to receive a percentage of production;
profit-sharing contracts, pursuant to which a contractor is entitled to receive a percentage of the profit from the sale of the extracted oil and gas; and
service contracts, pursuant to which a contractor would receive cash payments for services performed (serviceperformed; and
service contracts, together with licenses,production-sharing contracts andprofit-sharing contracts are known as the contracts for the exploration and production of oil and gas, collectively referred to as contracts for exploration and production).production.
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:
• | Pemex Exploration and Production, formed on June 1, 2015 as a successor toPemex-Exploración y Producción(Pemex-Exploration and Production), explores for, extracts, transports, stores and markets crude oil and natural gas, as well as performs drilling and well repair services. |
Pemex Fertilizers, formed on November 18, 2014, the Board of Directors of Petróleos Mexicanos approved the Director General’s proposal for our corporate reorganization. In our corporate reorganization, the four existing subsidiary entities of Petróleos Mexicanos were transformed into two new productive state-owned subsidiaries—Pemex ExplorationAugust 1, 2015, produces, distributes and Productioncommercializes ammonia, fertilizers and Pemex Industrial Transformation—and five new productive state-owned subsidiaries—Pemex Drilling and Services, its derivatives, as well as provides related services;
Pemex Logistics, Pemex Cogenerationformed on October 1, 2015, provides transportation, storage and Services, Pemex Fertilizersrelated services for crude oil, petroleum products and Pemex Ethylene—were created. petrochemicals to us and other companies, through pipelines and maritime and terrestrial means, and provides guard and management services;
• | Pemex Industrial Transformation, formed on November 1, 2015 as a successor ofPemex-Refinación(Pemex-Refining),Pemex-Gas y Petroquímica Básica(Pemex-Gas and Basic Petrochemicals) andPemex-Petroquímica(Pemex-Petrochemicals), refines petroleum products and derivatives; processes natural gas, natural gas liquids, artificial gas and derivatives; engages in industrial petrochemical processes; generates, supplies and trades electric and thermal energy; and commercializes, distributes and trades in methane, ethane and propylene. |
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
Year ended December 31, | Budget 2018(1) | Year ended December 31, | Budget 2020(1) | |||||||||||||||||||||||||||||
2015 | 2016 | 2017 | 2017 | 2018 | 2019 | |||||||||||||||||||||||||||
(in millions of pesos)(2) | (in millions of pesos)(2) | |||||||||||||||||||||||||||||||
Pemex-Exploration and Production(3) | Ps. 153,110 | Ps. 137,242 | Ps. 85,491 | Ps. 81,765 | ||||||||||||||||||||||||||||
Pemex Exploration and Production | Ps. 85,491 | Ps. 71,107 | Ps. 98,763 | Ps. 175,743 | ||||||||||||||||||||||||||||
Pemex Industrial Transformation | 4,952 | 33,947 | 18,576 | 18,360 | 18,576 | 17,026 | 8,953 | (5) | 16,952 | |||||||||||||||||||||||
Pemex Logistics | 631 | 7,015 | 4,917 | 4,449 | 4,917 | 5,042 | 2,118 | 3,135 | ||||||||||||||||||||||||
Pemex Drilling and Services | — | 2,688 | 1,550 | 1,434 | 1,550 | 1,388 | 738 | n.a. | ||||||||||||||||||||||||
Pemex Ethylene | 426 | 746 | 618 | 1,786 | 618 | 975 | 164 | n.a. | ||||||||||||||||||||||||
Pemex Fertilizers | 205 | 379 | 264 | 444 | 264 | 331 | 203 | 1,069 | ||||||||||||||||||||||||
Pemex-Refining | 34,152 | n.a. | n.a. | n.a. | ||||||||||||||||||||||||||||
Pemex-Gas and Basic Petrochemicals | 5,070 | n.a. | n.a. | n.a. | ||||||||||||||||||||||||||||
Pemex-Petrochemicals | 2,604 | n.a. | n.a. | n.a. | ||||||||||||||||||||||||||||
Pemex Cogeneration and Services | — | — | — | — | ||||||||||||||||||||||||||||
Petróleos Mexicanos | 2,157 | 1,004 | 1,609 | 4,978 | 1,609 | 893 | 189 | 332 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total capital expenditures | Ps. 203,307 | Ps. 183,021 | Ps. 113,025 | Ps. 113,216 | Ps. 113,025 | Ps. 96,762 | Ps. 111,127 | Ps. 197,232 | ||||||||||||||||||||||||
|
|
|
|
Note: |
|
n.a. | Not |
(1) | Original budget published in the Official Gazette of the Federation on December 11, 2019. |
(2) | Figures are stated in nominal pesos. |
(3) | Prior to July 1, 2019, Pemex Drilling and Services operated as an additional productive state-owned subsidiary. As of July 1, 2019, Pemex Drilling and Services was merged into Pemex Exploration and Production. |
(4) | Prior to July 1, 2019, Pemex Ethylene operated as an additional productive state-owned subsidiary. As of July 1, 2019, Pemex Ethylene was merged into Pemex Industrial Transformation. |
(5) | Figures reflect a decrease caused by a budget adjustment authorized by the Board of Directors of Petróleos Mexicanos |
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
Year ended December 31, | Budget 2018(1) | Year ended December 31, | Budget 2020(1) | |||||||||||||||||||||
2016 | 2017 | 2018 | 2019 | |||||||||||||||||||||
(millions of pesos) | (millions of pesos)(2) | |||||||||||||||||||||||
Exploration and Production | Ps. | 137,242 | Ps. | 85,491 | Ps. | 81,765 | Ps. 71,107 | Ps. 98,763 | Ps. 175,743 | |||||||||||||||
Industrial Transformation | ||||||||||||||||||||||||
Refining | 30,501 | 15,988 | 14,376 | 14,119 | 8,409 | (5) | 12,500 | |||||||||||||||||
Gas and Aromatics | 3,446 | 2,587 | 3,984 | 2,907 | 489 | 2,000 | ||||||||||||||||||
Ethylene (3) | n.a. | 55 | 2,452 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total | 33,947 | 18,576 | 18,360 | 17,026 | 8,953 | 16,952 | ||||||||||||||||||
Logistics | 7,015 | 4,917 | 4,449 | 5,042 | 2,118 | 3,135 | ||||||||||||||||||
Drilling and Services | 2,688 | 1,550 | 1,434 | |||||||||||||||||||||
Ethylene | 746 | 618 | 1,786 | |||||||||||||||||||||
Drilling and Services(4) | 1,388 | 738 | n.a. | |||||||||||||||||||||
Ethylene(3) | 975 | 164 | n.a. | |||||||||||||||||||||
Fertilizers | 379 | 264 | 444 | 331 | 203 | 1,069 | ||||||||||||||||||
Cogeneration and Services | — | — | — | |||||||||||||||||||||
Corporate and other Subsidiaries | 1,004 | 1,609 | 4,978 | 893 | 189 | 332 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total Capital Expenditures | Ps. | 183,021 | Ps. | 113,025 | Ps. | 113,216 | Ps. 96,762 | Ps. 111,127 | Ps. 197,232 | |||||||||||||||
|
|
|
Note: |
|
n.a.: | Not applicable. |
(1) | Original budget published in the Official Gazette of the Federation on December 11, 2019. |
(2) | Figures are stated in nominal pesos. |
(3) | Prior to July 1, 2019, Pemex Ethylene operated as an additional productive state-owned subsidiary. As of July 1, 2019, Pemex Ethylene was merged into Pemex Industrial Transformation. |
(4) | Prior to July 1, 2019, Pemex Drilling and Services operated as an additional productive state-owned subsidiary. As of July 1, 2019, Pemex Drilling and Services was merged into Pemex Exploration and Production. |
(5) | Figures reflect a decrease caused by a budget adjustment authorized by the Board of Directors of Petróleos Mexicanos |
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.
Given the recent and ongoing impact of theCOVID-19 pandemic on our business and the global economy, our management expects to propose amendments to our 2020 budget to our Board of Directors. These amendments are expected to reflect the anticipated impact on our cash flows of the following developments: decreases in the prices and production of crude oil and derivatives, additional support from the Mexican Government in the form of contributions and tax benefits and changes to the U.S. dollar-peso exchange rate. The amendments are expected to represent an approximately Ps. 5.0 billion reduction in operating expenses and a Ps. 40.5 billion reduction in production capital expenditures (includingnon-capitalizable maintenance expenses). Once the Board of Directors approves the amendment budget, it will be required to be submitted to the Ministry of Finance and Public Credit for approval as part of its authority over our financial balance goal for the fiscal year. However, the budget information included in this report does not reflect any potential amendments as these remain subject to final approval by our Board of Directors as of the date of this report. For more information regarding the impact of theCOVID-19 pandemic to our budget, See “Item 5—Overview”.
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:
ethane derivatives, such as ethylene, polyethylene, ethylene oxide and glycols;
propylene and derivatives; and
others such as oxygen, nitrogen, hydrogen and butadiene, among other products.
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.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||||||||||||||||||
Wells initiated(1) | 705 | 474 | 274 | 93 | 70 | 274 | 93 | 70 | 166 | 182 | ||||||||||||||||||||||||||||||
Exploratory wells initiated(1) | 40 | 20 | 22 | 23 | 22 | 22 | 23 | 22 | 28 | 32 | ||||||||||||||||||||||||||||||
Development wells initiated(1) | 665 | 454 | 252 | 70 | 48 | 252 | 70 | 48 | 138 | 150 | ||||||||||||||||||||||||||||||
Wells drilled(2) | 817 | 535 | 312 | 149 | 79 | 312 | 149 | 79 | 162 | 221 | ||||||||||||||||||||||||||||||
Exploratory wells | 38 | 24 | 26 | 21 | 24 | 26 | 21 | 24 | 19 | 23 | ||||||||||||||||||||||||||||||
Productive exploratory wells(3) | 23 | 8 | 13 | 6 | 10 | 13 | 6 | 10 | 5 | 12 | ||||||||||||||||||||||||||||||
Dry exploratory wells | 15 | 16 | 13 | 15 | 14 | 13 | 15 | 14 | 14 | 11 | ||||||||||||||||||||||||||||||
Success rate % | 61 | 33 | 50 | 29 | 62.5 | 50 | 29 | 42 | 26 | 52 | ||||||||||||||||||||||||||||||
Development wells | 779 | 511 | 286 | 128 | 55 | 286 | 128 | 54 | 143 | 198 | ||||||||||||||||||||||||||||||
Productive development wells | 747 | 484 | 266 | 110 | 50 | 266 | 110 | 50 | 137 | 186 | ||||||||||||||||||||||||||||||
Dry development wells | 32 | 26 | 20 | 18 | 4 | 20 | 18 | 4 | 6 | 12 | ||||||||||||||||||||||||||||||
Success rate %(4) | 96 | 95 | 93 | 86 | 92.9 | 93 | 86 | 93 | 96 | 94 | ||||||||||||||||||||||||||||||
Producing wells (annual averages) | 9,836 | 9,558 | 9,363 | 8,750 | 6,699 | 9,363 | 8,749 | 6,699 | 7,671 | 7,400 | ||||||||||||||||||||||||||||||
Marine region | 559 | 581 | 544 | 539 | 443 | 544 | 539 | 443 | 519 | 520 | ||||||||||||||||||||||||||||||
Southern region | 1,340 | 1,420 | 1,403 | 1,244 | 931 | 1,403 | 1,244 | 931 | 1,029 | 1,012 | ||||||||||||||||||||||||||||||
Northern region | 7,937 | 7,557 | 7,416 | 6,966 | 5,325 | 7,416 | 6,966 | 5,325 | 6,123 | 5,868 | ||||||||||||||||||||||||||||||
Producing wells (at year end)(5) | 9,379 | 9,077 | 8,826 | 8,073 | 8,208 | 8,826 | 8,073 | 8,194 | 6,946 | 6,945 | ||||||||||||||||||||||||||||||
Crude oil | 6,164 | 5,598 | 5,374 | 4,912 | 4,956 | 5,374 | 4,912 | 4,956 | 4,321 | 4,323 | ||||||||||||||||||||||||||||||
Natural gas | 3,215 | 3,479 | 3,452 | 3,161 | 3,238 | 3,452 | 3,161 | 3,238 | 2,625 | 2,622 | ||||||||||||||||||||||||||||||
Producing fields | 454 | 428 | 434 | 405 | 398 | 434 | 405 | 398 | 356 | 319 | ||||||||||||||||||||||||||||||
Marine region | 42 | 45 | 41 | 43 | 43 | 41 | 43 | 43 | 43 | 43 | ||||||||||||||||||||||||||||||
Southern region | 102 | 97 | 97 | 88 | 91 | 97 | 88 | 91 | 83 | 76 | ||||||||||||||||||||||||||||||
Northern region | 310 | 286 | 296 | 274 | 264 | 296 | 274 | 264 | 230 | 200 | ||||||||||||||||||||||||||||||
Drilling rigs | 139 | 136 | 113 | 110 | 83 | 113 | 110 | 83 | 84 | 84 | ||||||||||||||||||||||||||||||
Kilometers drilled | 1,627 | 1,413 | 815 | 330 | 280 | 815 | 330 | 280 | 455 | 646 | ||||||||||||||||||||||||||||||
Average depth by well (meters) | 2,710 | 2,738 | 3,038 | 3,655 | 3,639 | 3,038 | 3,655 | 3,639 | 2,808 | 2,870 | ||||||||||||||||||||||||||||||
Discovered fields(6) | 10 | 2 | 6 | 1 | 3 | 6 | 1 | 3 | 4 | 3 | ||||||||||||||||||||||||||||||
Crude oil | 5 | — | 6 | 1 | 1 | 6 | 1 | 1 | 4 | — | ||||||||||||||||||||||||||||||
Natural gas | 5 | 2 | — | — | 2 | — | — | 2 | — | — | ||||||||||||||||||||||||||||||
Crude oil and natural gas output by well (barrels of oil equivalent per day) | 371 | 370 | 349 | 348 | 291 | |||||||||||||||||||||||||||||||||||
Total developed acreage (km2)(7) | 8,706 | 8,339 | 8,654 | 7,017 | (8) | 6,886 | (8) | |||||||||||||||||||||||||||||||||
Total undeveloped acreage (km2)(7) | 977 | 1,278 | 1,000 | 712 | (8) | 620 | (8) | |||||||||||||||||||||||||||||||||
Gas and condensate | — | — | — | — | 3 | |||||||||||||||||||||||||||||||||||
Average crude oil and natural gas output by well (barrels of oil equivalent per day) | 349 | 348 | 291 | 329 | 327 | |||||||||||||||||||||||||||||||||||
Total developed acreage (km2)(7) | 8,654 | 7,017 | (8) | 6,886 | (8) | 6,923 | (8) | 7,077 | (8) | |||||||||||||||||||||||||||||||
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Total undeveloped acreage (km2)(7) | 1,000 | 712 | (8) | 620 | (8) | 607 | (8) | 603 | (8) | |||||||||||||||||||||||||||||||
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Note: |
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(1) | “Wells initiated” refers to the number of wells the drilling of which commenced in a given year, regardless of when the well was or will be completed. |
(2) | “Wells drilled” refers to the number of wells the drilling of which was completed in a given year, regardless of when the drilling of the well commenced. |
(3) | Excludesnon-commercial productive wells. |
(4) | Excludes injector wells. |
(5) | For the |
(6) | Includes only fields with proved |
(7) | For the |
(8) | These values relate only to our current assignments. |
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:
experience in the area;
stage of development;
quality and completeness of basic data; and
production and pressure histories.
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
Crude Oil and Condensates(2) | Dry Gas(3) | Crude Oil and Condensates(2) | Dry Gas(3) | |||||||||||||
(in millions of barrels) | (in billions of cubic feet) | (in millions of barrels) | (in billions of cubic feet) | |||||||||||||
Proved developed and undeveloped reserves | ||||||||||||||||
Proved developed and undeveloped reserves | ||||||||||||||||
Proved developed reserves | 4,166 | 4,026 | 3,585.0 | 3,608.5 | ||||||||||||
Proved undeveloped reserves | 2,261 | 2,567 | 2,375.6 | 2,743.1 | ||||||||||||
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Total proved reserves | 6,427 | 6,593 | 5,960.6 | 6,351.7 | ||||||||||||
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Note: | Numbers may not total due to rounding |
(1) | We do not currently produce synthetic oil or synthetic gas, or other natural resources from which synthetic oil or synthetic gas can be produced. |
(2) | Crude oil and condensate reserves include the fraction of liquefiable hydrocarbons recoverable in natural gas processing plants located at fields. |
(3) | Reserve volumes reported in this table are volumes of dry gas, although natural gas production reported in other tables refers to sour wet gas. There is a shrinkage in volume when natural gas liquids and impurities are extracted to obtain dry gas. Therefore, reported natural gas volumes are greater than dry gas volumes. |
Source: Pemex Exploration and Production.
Crude Oil and Condensate Reserves
(including natural gas liquids)(1)
2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | (in millions of barrels) | |||||||||||||||||||||||||||||||||||
Proved developed and undeveloped reserves | (in millions of barrels) | |||||||||||||||||||||||||||||||||||||||
At January 1 | 11,424 | 11,079 | 10,292 | 7,977 | 7,219 | 10,292 | 7,977 | 7,219 | 6,427 | 5,786 | ||||||||||||||||||||||||||||||
Revisions(2) | 630 | 95 | (1,491 | ) | 189 | (95 | ) | (1,491 | ) | 189 | (95 | ) | 22 | 784 | ||||||||||||||||||||||||||
Extensions and discoveries | 62 | 119 | 111 | (55 | ) | 147 | 111 | (55 | ) | 147 | 140 | 78 | ||||||||||||||||||||||||||||
Production | (1,037 | ) | (1,001 | ) | (935 | ) | (891 | ) | (805 | ) | (935 | ) | (891 | ) | (805 | ) | (743 | ) | (688 | ) | ||||||||||||||||||||
Farm-outs and transfer of fields due to CNH bidding process | — | — | — | — | (38 | ) | — | — | (38 | ) | (59 | ) | — | |||||||||||||||||||||||||||
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At December 31 | 11,079 | 10,292 | 7,977 | 7,219 | 6,427 | 7,977 | 7,220 | 6,428 | 5,786 | 5,961 | ||||||||||||||||||||||||||||||
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Proved developed reserves at December 31 | 7,360 | 7,141 | 5,725 | 4,886 | 4,166 | 5,725 | 4,886 | 4,166 | 3,588 | 3,585 | ||||||||||||||||||||||||||||||
Proved undeveloped reserves at December 31 | 3,719 | 3,151 | 2,252 | 2,333 | 2,261 | 2,252 | 2,333 | 2,261 | 2,198 | 2,376 |
Note: |
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(1) | Crude oil and condensate reserves include the fraction of liquefiable hydrocarbons recoverable in natural gas processing plants located at fields. |
(2) | Revisions include positive and negative changes due to new data from well drilling, revisions made when actual reservoir performance differs from expected performance and the effect of changes in hydrocarbon prices. |
Source: Pemex Exploration and Production.
Dry Gas Reserves
2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | (in billions of cubic feet) | |||||||||||||||||||||||||||||||||||
Proved developed and undeveloped reserves | (in billions of cubic feet) | |||||||||||||||||||||||||||||||||||||||
At January 1 | 12,713 | 12,273 | 10,859 | 8,610 | 6,984 | 10,859 | 8,610 | 6,984 | 6,593 | 6,370 | ||||||||||||||||||||||||||||||
Revisions(1) | 1,010 | 4 | (955 | ) | (183 | ) | 169 | (955 | ) | (183 | ) | 169 | 3 | 656 | ||||||||||||||||||||||||||
Extensions and discoveries | 89 | 93 | 47 | (308 | ) | 468 | 47 | (308 | ) | 468 | 809 | 196 | ||||||||||||||||||||||||||||
Production(2) | (1,539 | ) | (1,511 | ) | (1,341 | ) | 1,134 | (999 | ) | (1,341 | ) | (1,134 | ) | (999 | ) | (887 | ) | (870 | ) | |||||||||||||||||||||
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Farm-outs and transfer of fields due to CNH bidding process | — | — | — | — | (29 | ) | — | — | (29 | ) | (148 | ) | — | |||||||||||||||||||||||||||
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At December 31 | 12,273 | 10,859 | 8,610 | 6,984 | 6,593 | 8,610 | 6,984 | 6,593 | 6,370 | 6,352 | ||||||||||||||||||||||||||||||
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Proved developed and undeveloped reserves | ||||||||||||||||||||||||||||||||||||||||
Proved developed reserves at December 31 | 7,461 | 6,740 | 6,012 | 4,513 | 4,026 | 6,012 | 4,513 | 4,026 | 3,380 | 3,609 | ||||||||||||||||||||||||||||||
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Proved undeveloped reserves at December 31 | 4,811 | 4,119 | 2,598 | 2,471 | 2,567 | 2,598 | 2,471 | 2,567 | 2,990 | 2,743 |
Note: |
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(1) | Revisions include positive and negative changes due to new data from well drilling, revisions made when actual reservoir performance differs from expected performance and the effect of changes in hydrocarbon prices. |
(2) | Production refers here to dry gas, although natural gas production reported in other tables refers to sour wet gas. There is a shrinkage in volume when natural gas liquids and impurities are extracted to obtain dry gas. Therefore, reported natural gas volumes are greater than dry gas volumes. |
Source: Pemex Exploration and Production.
The following table sets forth, as of December 31, 2017,2019, the volumes of proved developed and undeveloped reserves, the number of producing wells and the number of proved undeveloped locations for the fields that contained 95.1%95.4% of our proved reserves.
Reserves | ||||||||||||||||||||
Field | Proved(1) | Developed(1) | Undeveloped(1) | Number of Producing Wells | Number of Undeveloped Locations(2) | |||||||||||||||
(in millions of barrels of oil equivalent) | ||||||||||||||||||||
Ku-Maloob-Zaap | 2,225.1 | 1,845.6 | 379.5 | 168 | 28 | |||||||||||||||
Akal | 707.5 | 707.5 | — | 79 | — | |||||||||||||||
Ayatsil | 624.5 | 202.7 | 421.8 | 9 | 11 | |||||||||||||||
Aceite Terciario del Golfo(3) | 620.1 | 125.5 | 494.6 | 1,984 | 3,204 | |||||||||||||||
Onel | 200.1 | 140.8 | 59.3 | 8 | 7 | |||||||||||||||
Jujo-Tecominoacán | 189.7 | 97.8 | 91.9 | 34 | 18 | |||||||||||||||
Antonio J. Bermudez(4) | 184.1 | 118.5 | 65.6 | 230 | 25 | |||||||||||||||
Xikin | 148.5 | — | 148.5 | — | 5 | |||||||||||||||
Xanab | 114.9 | 90.7 | 24.2 | 14 | 4 | |||||||||||||||
Balam | 114.4 | 65.7 | 48.7 | 9 | 4 | |||||||||||||||
Ixachi | 97.9 | 21.3 | 76.6 | — | 6 | |||||||||||||||
Xux | 95.8 | 74.1 | 21.7 | 13 | 3 | |||||||||||||||
Ek | 82.6 | 16.6 | 66.0 | 11 | 7 | |||||||||||||||
Santuario | 67.7 | 20.2 | 47.6 | 30 | 33 | |||||||||||||||
Lakach | 63.5 | — | 63.5 | — | 3 | |||||||||||||||
Tekel | 59.9 | — | 59.9 | — | 4 | |||||||||||||||
Arenque | 57.6 | 23.9 | 33.7 | 14 | 9 | |||||||||||||||
Pokche | 56.9 | — | 56.9 | — | 4 | |||||||||||||||
Homol | 55.8 | 42.8 | 13.0 | 11 | — | |||||||||||||||
Tamaulipas Constituciones | 55.6 | 23.6 | 32.0 | 242 | 136 | |||||||||||||||
Tsimín | 52.7 | 52.7 | — | 15 | — |
Reserves | Number of Producing Wells | Number of Undeveloped Locations(2) | ||||||||||||||||||
Field | Proved(1) | Developed(1) | Undeveloped(1) | |||||||||||||||||
(in millions of barrels of oil equivalent) | ||||||||||||||||||||
Ku-Maloob-Zaap | 1,564.4 | 1,255.1 | 309.4 | 208 | 44 | |||||||||||||||
Ayatsil | 1,172.8 | 426.3 | 746.5 | 21 | 36 | |||||||||||||||
Akal | 633.0 | 633.0 | 0.0 | 77 | 0 | |||||||||||||||
Aceite Terciario del Golfo(3) | 565.6 | 85.6 | 480.0 | 3,288 | 3,446 | |||||||||||||||
Ixachi | 359.9 | 82.3 | 277.7 | 2 | 14 | |||||||||||||||
Balam | 196.4 | 158.7 | 37.7 | 16 | 3 | |||||||||||||||
Antonio J. Bermudez(4) | 144.1 | 94.9 | 49.2 | 222 | 24 | |||||||||||||||
Jujo-Tecominoacán | 102.0 | 67.4 | 34.6 | 28 | 9 | |||||||||||||||
Ek | 95.6 | 31.3 | 64.3 | 13 | 5 | |||||||||||||||
Onel | 93.5 | 77.7 | 15.8 | 15 | 3 | |||||||||||||||
Xikin | 86.2 | 11.7 | 74.5 | 1 | 4 | |||||||||||||||
Quesqui | 80.0 | 42.3 | 37.7 | 1 | 1 | |||||||||||||||
Yaxché | 71.1 | 28.9 | 42.2 | 9 | 12 | |||||||||||||||
Tamaulipas Constituciones | 67.3 | 46.7 | 20.6 | 279 | 96 | |||||||||||||||
Santuario | 64.3 | 16.7 | 47.6 | 29 | ND | |||||||||||||||
Teotleco | 63.5 | 44.5 | 19.0 | 8 | 3 | |||||||||||||||
Tekel | 60.8 | 0.0 | 60.8 | 0 | 8 | |||||||||||||||
Lakach | 60.2 | 0.0 | 60.2 | 0 | 3 | |||||||||||||||
Pokche | 55.3 | 0.0 | 55.3 | 0 | 6 | |||||||||||||||
Nejo | 44.7 | 28.4 | 16.3 | 209 | 63 | |||||||||||||||
Xux | 44.2 | 44.2 | 0.0 | 12 | 0 | |||||||||||||||
Arenque | 43.7 | 37.7 | 6.0 | 13 | 2 | |||||||||||||||
Utsil | 41.8 | 0.0 | 41.8 | 0 | 8 | |||||||||||||||
Xanab | 40.6 | 40.6 | 0.0 | 9 | 1 | |||||||||||||||
Etkal | 40.4 | 14.9 | 25.5 | 2 | 4 | |||||||||||||||
Sihil | 37.6 | 21.2 | 16.4 | 18 | 0 | |||||||||||||||
Suuk | 34.0 | 0.0 | 34.0 | 0 | 3 | |||||||||||||||
Ixtal | 32.3 | 32.3 | 0.0 | 14 | 0 | |||||||||||||||
Poza Rica | 31.3 | 23.3 | 8.0 | 193 | 23 | |||||||||||||||
Puerto Ceiba | 31.2 | 29.8 | 1.3 | 16 | 1 | |||||||||||||||
Tizón | 29.8 | 26.1 | 3.7 | 9 | 1 | |||||||||||||||
Giraldas | 28.7 | 28.7 | 0.0 | 8 | 0 | |||||||||||||||
Ayín | 28.5 | 0.0 | 28.5 | 0 | 3 | |||||||||||||||
Homol | 27.4 | 19.6 | 7.9 | 8 | 0 | |||||||||||||||
Rabasa | 27.3 | 17.3 | 10.1 | 40 | 17 | |||||||||||||||
Gasífero | 27.1 | 26.2 | 0.9 | 29 | 1 | |||||||||||||||
Kambesah | 24.6 | 24.6 | 0.0 | 4 | 0 | |||||||||||||||
Cuitláhuac | 22.7 | 19.1 | 3.6 | 189 | 6 | |||||||||||||||
Eltreinta | 22.5 | 20.1 | 2.4 | 16 | 3 | |||||||||||||||
Cárdenas-Mora | 20.2 | 13.4 | 6.8 | 9 | ND | |||||||||||||||
Bellota | 20.2 | 15.2 | 5.0 | 7 | 2 |
Reserves | ||||||||||||||||||||
Field | Proved(1) | Developed(1) | Undeveloped(1) | Number of Producing Wells | Number of Undeveloped Locations(2) | |||||||||||||||
(in millions of barrels of oil equivalent) | ||||||||||||||||||||
Teotleco | 49.1 | 25.6 | 23.6 | 12 | 3 | |||||||||||||||
Kab | 48.8 | 14.7 | 34.1 | 5 | 4 | |||||||||||||||
Tizón | 42.6 | 41.7 | 0.9 | 11 | 0 | |||||||||||||||
Utsil | 42.1 | 0.0 | 42.1 | — | 4 | |||||||||||||||
Ayín | 39.0 | 0.0 | 39.0 | — | 3 | |||||||||||||||
Kambesah | 36.6 | 36.6 | 0.0 | 4 | 0 | |||||||||||||||
Sihil | 36.5 | 36.5 | 0.0 | 13 | 0 | |||||||||||||||
Cárdenas | 36.0 | 24.3 | 11.7 | 8 | 4 | |||||||||||||||
Ébano Chapacao | 35.9 | 27.2 | 8.7 | 175 | 88 | |||||||||||||||
Costero | 35.3 | 35.3 | 0.0 | 12 | 0 | |||||||||||||||
Suuk | 35.0 | 0.0 | 35.0 | — | 3 | |||||||||||||||
Giraldas | 33.1 | 24.6 | 8.5 | 9 | 1 | |||||||||||||||
Poza Rica | 32.8 | 26.1 | 6.7 | 156 | 24 | |||||||||||||||
May | 31.7 | 31.7 | 0.0 | 12 | 0 | |||||||||||||||
Ixtal | 31.1 | 31.1 | 0.0 | 10 | 0 | |||||||||||||||
Ogarrio | 31.0 | 30.1 | 1.0 | 77 | 2 | |||||||||||||||
Puerto Ceiba | 30.8 | 19.5 | 11.2 | 13 | 5 | |||||||||||||||
Kuil | 29.4 | 13.4 | 16.0 | 9 | 4 | |||||||||||||||
Chinchorro | 27.3 | 20.7 | 6.7 | 5 | 2 | |||||||||||||||
Yaxché | 26.6 | 7.4 | 19.2 | 6 | 5 | |||||||||||||||
Gasífero | 26.3 | 21.7 | 4.6 | 23 | 7 | |||||||||||||||
Kax | 26.3 | 26.3 | 0.0 | 2 | 0 | |||||||||||||||
Nejo | 24.4 | 21.8 | 2.6 | 198 | 23 | |||||||||||||||
Chuc | 23.5 | 20.4 | 3.1 | 11 | 0 | |||||||||||||||
Bellota | 22.8 | 16.7 | 6.0 | 5 | 2 | |||||||||||||||
Rabasa | 22.4 | 21.1 | 1.3 | 42 | 1 | |||||||||||||||
Terra | 22.1 | 9.7 | 12.4 | 11 | 3 | |||||||||||||||
Lum | 21.6 | 17.7 | 3.9 | 3 | 3 | |||||||||||||||
Sen | 21.1 | 14.5 | 6.6 | 11 | 1 | |||||||||||||||
Valeriana | 20.9 | 0.0 | 20.9 | — | 1 | |||||||||||||||
Madrefil | 20.8 | 16.7 | 4.1 | 6 | 1 | |||||||||||||||
Etkal | 20.2 | 3.7 | 16.5 | 1 | 2 | |||||||||||||||
Cuervito | 19.9 | 7.6 | 12.2 | 84 | 52 | |||||||||||||||
Eltreinta | 19.6 | 12.2 | 7.5 | 11 | 8 | |||||||||||||||
Jaatsul | 19.1 | 0.0 | 19.1 | — | 3 | |||||||||||||||
Mora | 17.9 | 9.4 | 8.5 | 4 | 4 | |||||||||||||||
Ixtoc | 17.9 | 17.9 | 0.0 | 10 | 0 | |||||||||||||||
Bolontikú | 17.8 | 17.8 | 0.0 | 5 | 0 | |||||||||||||||
Edén-Jolote | 17.3 | 12.4 | 4.9 | 7 | 2 | |||||||||||||||
Tupilco | 17.1 | 15.2 | 1.8 | 25 | 1 | |||||||||||||||
Sunuapa | 16.1 | 13.4 | 2.7 | 4 | 2 | |||||||||||||||
Caparroso-Pijije-Escuintle | 15.5 | 11.8 | 3.8 | 16 | 1 | |||||||||||||||
Cinco Presidentes | 15.5 | 13.9 | 1.6 | 31 | 1 | |||||||||||||||
Los Soldados | 15.4 | 14.1 | 1.3 | 21 | 3 | |||||||||||||||
Paredón | 15.1 | 15.1 | 0.0 | 3 | 0 | |||||||||||||||
Cuitláhuac | 15.1 | 11.2 | 3.9 | 185 | 10 | |||||||||||||||
Cacalilao | 14.0 | 6.6 | 7.4 | 88 | 99 |
Reserves | Reserves | Number of Producing Wells | Number of Undeveloped Locations(2) | |||||||||||||||||||||||||||||||||||||
Field | Proved(1) | Developed(1) | Undeveloped(1) | Number of Producing Wells | Number of Undeveloped Locations(2) | Proved(1) | Developed(1) | Undeveloped(1) | ||||||||||||||||||||||||||||||||
(in millions of barrels of oil equivalent) | (in millions of barrels of oil equivalent) | |||||||||||||||||||||||||||||||||||||||
Costero | 20.0 | 20.0 | 0.0 | 10 | 0 | |||||||||||||||||||||||||||||||||||
Valeriana | 19.9 | 9.7 | 10.2 | 1 | 1 | |||||||||||||||||||||||||||||||||||
Tsimín | 19.1 | 19.1 | 0.0 | 8 | 0 | |||||||||||||||||||||||||||||||||||
Ogarrio | 18.9 | 4.5 | 14.4 | 87 | 10 | |||||||||||||||||||||||||||||||||||
Jaatsul | 18.8 | 0.0 | 18.8 | 0 | 3 | |||||||||||||||||||||||||||||||||||
Esah | 12.5 | — | 12.5 | — | 1 | 18.1 | 0.0 | 18.1 | 0 | 2 | ||||||||||||||||||||||||||||||
Lum | 18.0 | 14.3 | 3.7 | 3 | 3 | |||||||||||||||||||||||||||||||||||
Cibix | 17.7 | 3.8 | 13.9 | 1 | 5 | |||||||||||||||||||||||||||||||||||
Koban | 17.6 | 0.0 | 17.6 | 0 | 2 | |||||||||||||||||||||||||||||||||||
Sini | 12.3 | 8.3 | 4.0 | 7 | 1 | 17.6 | 14.1 | 3.6 | 7 | 0 | ||||||||||||||||||||||||||||||
Takín | 17.3 | 17.3 | 0.0 | 4 | 0 | |||||||||||||||||||||||||||||||||||
Terra | 17.2 | 17.2 | 0.0 | 13 | 0 | |||||||||||||||||||||||||||||||||||
Sen | 16.3 | 16.3 | 0.0 | 12 | 0 | |||||||||||||||||||||||||||||||||||
Kax | 15.8 | 15.8 | 0.0 | 3 | 0 | |||||||||||||||||||||||||||||||||||
Chinchorro | 15.4 | 12.7 | 2.7 | 4 | 1 | |||||||||||||||||||||||||||||||||||
Madrefil | 15.3 | 15.3 | 0.0 | 6 | 0 | |||||||||||||||||||||||||||||||||||
Caparroso-Pijije-Escuintle | 14.7 | 9.4 | 5.3 | 16 | 1 | |||||||||||||||||||||||||||||||||||
Paredón | 14.6 | 14.6 | 0.0 | 3 | 0 | |||||||||||||||||||||||||||||||||||
Ébano Chapacao | 14.2 | 10.2 | 3.9 | 150 | ND | |||||||||||||||||||||||||||||||||||
Edén-Jolote | 14.1 | 12.3 | 1.8 | 5 | 1 | |||||||||||||||||||||||||||||||||||
Bedel | 13.4 | 12.3 | 1.1 | 13 | 1 | |||||||||||||||||||||||||||||||||||
Kuil | 13.2 | 7.7 | 5.4 | 3 | 1 | |||||||||||||||||||||||||||||||||||
Sunuapa | 13.0 | 10.2 | 2.8 | 10 | 2 | |||||||||||||||||||||||||||||||||||
Mulach | 12.7 | 0.0 | 12.7 | 0 | 1 | |||||||||||||||||||||||||||||||||||
Tupilco | 12.6 | 12.6 | 0.0 | 19 | 0 | |||||||||||||||||||||||||||||||||||
Cinco Presidentes | 12.6 | 11.4 | 1.1 | 36 | 3 | |||||||||||||||||||||||||||||||||||
Ixtoc | 11.9 | 11.9 | 0.0 | 8 | 0 | |||||||||||||||||||||||||||||||||||
May | 11.6 | 11.6 | 0.0 | 10 | 0 | |||||||||||||||||||||||||||||||||||
Cacalilao | 11.5 | 4.1 | 7.4 | 87 | 99 | |||||||||||||||||||||||||||||||||||
Cuervito | 11.0 | 4.2 | 6.8 | 90 | 16 | |||||||||||||||||||||||||||||||||||
Teca | 11.0 | 0.0 | 11.0 | 0 | 2 | |||||||||||||||||||||||||||||||||||
Bolontikú | 10.8 | 10.8 | 0.0 | 3 | 0 | |||||||||||||||||||||||||||||||||||
Och | 12.3 | 12.3 | — | 5 | — | 10.2 | 10.2 | 0.0 | 5 | 0 | ||||||||||||||||||||||||||||||
Tintal | 12.3 | 8.9 | 3.4 | 7 | 7 | |||||||||||||||||||||||||||||||||||
Pánuco | 9.9 | 2.6 | 7.3 | 60 | 121 | |||||||||||||||||||||||||||||||||||
Tetl | 9.3 | 0.0 | 9.3 | 0 | 3 | |||||||||||||||||||||||||||||||||||
Blasillo | 9.3 | 5.4 | 3.8 | 14 | 6 | |||||||||||||||||||||||||||||||||||
Taratunich | 8.8 | 8.8 | 0.0 | 3 | 0 | |||||||||||||||||||||||||||||||||||
Uech | 8.7 | 8.7 | 0.0 | 2 | 0 | |||||||||||||||||||||||||||||||||||
Manik | 12.0 | 12.0 | — | 3 | — | 8.2 | 8.2 | 0.0 | 3 | 0 | ||||||||||||||||||||||||||||||
Bedel | 11.5 | 5.1 | 6.4 | 6 | 7 | |||||||||||||||||||||||||||||||||||
Nohoch | 11.4 | 11.4 | — | 7 | — | |||||||||||||||||||||||||||||||||||
Santa Anita | 11.2 | 7.4 | 3.8 | 60 | 7 | |||||||||||||||||||||||||||||||||||
Takín | 10.9 | 10.9 | — | 4 | — | |||||||||||||||||||||||||||||||||||
Pánuco | 10.8 | 3.5 | 7.3 | 51 | 121 | |||||||||||||||||||||||||||||||||||
Cauchy | 10.7 | 10.7 | — | 18 | — | |||||||||||||||||||||||||||||||||||
Rodador | 8.1 | 8.1 | 0.0 | 25 | 0 | |||||||||||||||||||||||||||||||||||
San Ramón | 10.5 | 9.1 | 1.4 | 39 | 3 | 7.7 | 6.4 | 1.3 | 29 | 4 | ||||||||||||||||||||||||||||||
Sinán | 10.4 | 10.4 | — | 6 | — | |||||||||||||||||||||||||||||||||||
Ayocote | 10.2 | 7.9 | 2.4 | 13 | 1 | |||||||||||||||||||||||||||||||||||
Taratunich | 10.1 | 10.1 | — | 7 | — | |||||||||||||||||||||||||||||||||||
Guaricho | 10.1 | 9.6 | 0.5 | 15 | 1 | |||||||||||||||||||||||||||||||||||
Blasillo | 9.1 | 6.9 | 2.2 | 22 | 6 | |||||||||||||||||||||||||||||||||||
Cheek | 7.4 | 0.0 | 7.4 | 0 | 2 | |||||||||||||||||||||||||||||||||||
Chuc | 7.3 | 7.3 | 0.0 | 9 | 0 | |||||||||||||||||||||||||||||||||||
Batsil | 7.3 | 0.0 | 7.3 | 0 | 0 | |||||||||||||||||||||||||||||||||||
Cactus | 7.2 | 7.2 | 0.0 | 15 | 0 | |||||||||||||||||||||||||||||||||||
Jacinto | 7.1 | 7.1 | 0.0 | 4 | 0 | |||||||||||||||||||||||||||||||||||
Bacab | 9.1 | 9.1 | — | 6 | — | 7.0 | 7.0 | 0.0 | 6 | 0 | ||||||||||||||||||||||||||||||
Uech | 9.1 | 9.1 | — | 2 | — | |||||||||||||||||||||||||||||||||||
Vinik | 7.0 | 0.0 | 7.0 | 0 | 1 | |||||||||||||||||||||||||||||||||||
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Total | 7,317.8 | 4,648.1 | 2,670.0 | 4,493 | 4,048 | 6,853.2 | 3,996.3 | 2,856.8 | 5,809 | 4,146 | ||||||||||||||||||||||||||||||
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Our proved reserves | 7,694.7 | 4,940.3 | 2,754.4 | 7,181.9 | 4,278.9 | 2,902.9 | ||||||||||||||||||||||||||||||||||
Percentage | 95.1 | % | 94.1 | % | 96.9 | % | 95.4 | % | 93.4 | % | 98.4 | % |
Note: |
|
(1) | Proved reserves, developed reserves and undeveloped reserves are expressed in millions of barrels of oil equivalent. To convert dry gas to barrels of oil equivalent, a factor of 5.201 thousand cubic feet of dry gas per barrel of oil equivalent is used. |
(2) | Undeveloped Locations refers to the number of geographic sites or locations where a well will be drilled to produce undeveloped proved reserves. |
(3) | Includes extraction assignments and temporary assignments. |
(4) | Includes the Cunduacán, Iride, Oxiacaque, Platanal and Samaria fields. |
ND: | No data available as undeveloped reserves are located in areas shared with third parties. |
Source: Pemex Exploration and Production.
Ourreserve-replacement ratio, or RRR, for a given period is calculated by dividing the sum of proved reserves additions due to discoveries, developments, delineations and revisions by that period’s total production. During 2017,2019, we obtained 174.21,026.5 million barrels of oil equivalent of proved reserves, which represents an RRR of 17.5%120.1%, as compared to our RRR of 4.0%34.7% in 2016.2018. We expect continued improvements in our RRR in subsequent years.
Our reserves production ratio, which is presented in terms of years, is calculated by dividing the estimated remaining reserves at the end of the relevant year by the total production of hydrocarbons for that year. As of December 31, 2017,2019, this ratio stayed constant with 2016 levels and was equal to 7.78.4 years for proved reserves. For more information, see Note 2931 to our consolidated financial statements included herein.
Sales Prices and Production Costs
The following table sets forth our average sales price per unit of oil and gas produced and our average production cost per unit of production, in the aggregate and for each field containing 10% or more of our proved reserves.
Unit Sales Prices and Production Costs(1)
Ku-Maloob- Zaap | Akal | Other Fields | All Fields | Ku-Maloob-Zaap | Akal | Other Fields | All Fields | |||||||||||||||||||||||||
(in U.S. dollars) | ||||||||||||||||||||||||||||||||
Year ended December 31, 2019 | ||||||||||||||||||||||||||||||||
Average sales prices | ||||||||||||||||||||||||||||||||
Crude oil, per barrel | U.S. $ | 53.34 | U.S. $ | 59.68 | U.S. $ | 61.73 | U.S. $ | 57.13 | ||||||||||||||||||||||||
Natural gas, per thousand cubic feet | 3.63 | 1.57 | 3.54 | 3.55 | ||||||||||||||||||||||||||||
Average production costs, per barrel of oil equivalent | 10.37 | 17.27 | 16.32 | 14.06 | ||||||||||||||||||||||||||||
Year ended December 31, 2018 | ||||||||||||||||||||||||||||||||
Average sales prices | ||||||||||||||||||||||||||||||||
Crude oil, per barrel | 58.71 | 61.41 | 66.34 | 66.13 | ||||||||||||||||||||||||||||
Natural gas, per thousand cubic feet | 4.37 | 1.62 | 4.21 | 4.21 | ||||||||||||||||||||||||||||
Average production costs, per barrel of oil equivalent | 10.03 | 38.94 | 14.78 | 13.73 | ||||||||||||||||||||||||||||
Year ended December 31, 2017 | (in U.S. dollars) | |||||||||||||||||||||||||||||||
Average sales prices | ||||||||||||||||||||||||||||||||
Crude oil, per barrel | U.S. $ | 41.70 | U.S. $ | 48.75 | U.S. $ | 52.90 | U.S. $ | 48.71 | 41.70 | 48.75 | 52.90 | 48.71 | ||||||||||||||||||||
Natural gas, per thousand cubic feet | U.S. $ | 5.07 | U.S. $ | 4.25 | U.S. $ | 4.12 | U.S. $ | 4.32 | 5.07 | 4.25 | 4.12 | 4.32 | ||||||||||||||||||||
Average production costs, per barrel of oil equivalent | U.S. $ | 7.53 | U.S. $ | 23.25 | U.S. $ | 11.53 | U.S. $ | 10.90 | 7.53 | 23.25 | 11.53 | 10.90 | ||||||||||||||||||||
Year ended December 31, 2016 | ||||||||||||||||||||||||||||||||
Average sales prices | ||||||||||||||||||||||||||||||||
Crude oil, per barrel | U.S. $ | 30.11 | U.S. $ | 36.67 | U.S. $ | 40.21 | U.S. $ | 36.55 | ||||||||||||||||||||||||
Natural gas, per thousand cubic feet | U.S. $ | 3.40 | U.S. $ | 2.86 | U.S. $ | 3.16 | U.S. $ | 3.01 | ||||||||||||||||||||||||
Average production costs, per barrel of oil equivalent | U.S. $ | 5.34 | U.S. $ | 16.53 | U.S. $ | 8.08 | U.S. $ | 7.78 | ||||||||||||||||||||||||
Year ended December 31, 2015 | ||||||||||||||||||||||||||||||||
Average sales prices | ||||||||||||||||||||||||||||||||
Crude oil, per barrel | U.S. $ | 41.21 | U.S. $ | 47.79 | U.S. $ | 51.51 | U.S. $ | 48.22 | ||||||||||||||||||||||||
Natural gas, per thousand cubic feet | U.S. $ | 4.59 | U.S. $ | 3.59 | U.S. $ | 3.79 | U.S. $ | 3.78 | ||||||||||||||||||||||||
Average production costs, per barrel of oil equivalent | U.S. $ | 6.93 | U.S. $ | 15.97 | U.S. $ | 9.69 | U.S. $ | 9.40 |
(1) | Average of sales prices as of the last day of each month of the year. |
Source: Pemex Exploration and Production.
In 2017,2019, our average production cost was U.S. $10.90$14.06 per barrel of oil equivalent, andwhich represented an increase of 40.1%2.4%, as compared to our average production cost of U.S. $7.78$13.73 per barrel of oil equivalent in 2016.2018. This increase resulted primarily from an increase in expenses for the maintenance of wells, equipmentpurchases between PEMEX entities and production facilitiesassociated expenses and payments ofnon-income related taxesunder Integrated Exploration and duties.Production Contracts.
We calculate and disclose our production costs pursuant to international practices, which are based on U.S. GAAP under ASC Topic 932. In accordance with ASC Topic 932, the production cost per barrel of oil equivalent is calculated by dividing total production expenses (in U.S. dollars) by total production of oil and gas (in barrels of oil equivalent) for the relevant period.
Our total production cost consists of all direct and indirect costs incurred to produce crude oil and gas, including costs associated with the operation and maintenance of wells and related equipment and facilities. In addition, it includes costs of labor to operate the wells and facilities, the costs of materials, supplies and fuel consumed, including gas used for gas lifting, nitrogen and other chemicals, repair andnon-capitalized maintenance costs, and other costs, such as fees for general services, a labor fund for active personnel, corporate services, indirect overhead and applicable taxes and duties. However, it excludesnon-cash expenses such as amortization of capitalized well expenses, the depreciation of fixed assets, expenses associated with the distribution and handling of oil and gas and other expenses that are related to exploration, development and drilling activities.
Crude Oil and Natural Gas Production
In 2017,2019, we produced an average of 1,948.31,683.8 thousand barrels per day of crude oil, 9.5% less thana decrease of 7.6% as compared to our average production in 2016 of 2,153.51,822.5 thousand barrels per day of crude oil.oil in 2018. The decrease in 20172019 resulted primarily from the decrease of production in the Cantarell,Yaxché-Xanab, Crudo Ligero Marino, ElGolpe-Puerto Ceiba,Bellota-Chinchorro, Complejo Antonio J. Bermúdez, Cactus SitioCactus-Sitio Grande,Ixtal-Manik, Chuc, Costero Terrestre andTsimín-Xux projects. Accordingly,Notwithstanding this overall decrease, our average production of heavy crude oil decreasedincreased by 53.63.3 thousand barrels per day, or 4.9% less0.3% more than the average daily production in 2016,2018, primarily due to a decreasean increase in our drilling activities and a deceleration in the natural decline in field production, an increaseprimarily in fractional flow water production and an increase in the gas production cap of reservoirs, particularly for reservoirs past the saturation stage.Ayatsil-Tekel project. In 2017,2019, the average production of light crude oil decreased by 96.3142.1 thousand barrels per day, or 12.3%18.9%, as compared to 2016.2018. This decrease occurred mainly due to a natural decline in production in the Chuhuk, Caan, and Ixtal fields of theAbkatún-Pol-Chuc business unit; the Xanab, Tsimín, Sinán, Bolontikú, and Yaxché fields of the Litoral de Tabasco business unit; the Costero and Sitio Grande Teotleco fields of theMacuspana-Muspac business unitunit; and the Samaria, Íride Cunduacán and Sini fields of theSamaria-Luna business unit.
Crude oil can be classified by its sulfur content. “Sour” or heavy crude oil contains 3.4% or greater sulfur content by weight and “sweet” or light crude oil contains less than 1.0% sulfur content by weight. Most of our production is classified as sour or heavy crude oil.
Our exploration and production segment primarily produces four types of crude oil:
Altamira, a heavy crude oil;
Maya, a heavy crude oil;
Isthmus, a light crude oil; and
Olmeca, anextra-light crude oil.
Most of our production consists of Isthmus and Maya crude oil. In 2017, 53.8%2019, 63.8% of our total production of crude oil consisted of heavy crude oil and 46.2%36.2% consisted of light andextra-light crude oil. The Marine regions yield mostly heavy crude oil (61.7%(71.0% of these regions’ production in 2017)2019), although significant volumes of light crude oil are also produced there (38.2%(29.0% of these regions’ production in 2017)2019). The Southern region yields mainly light andextra-light crude oil (together, 93.7%82.6% of this region’s production in 2017)2019), and the Northern region yields both light andextra-light crude oil (44.7%(38.5% of this region’s production in 2017)2019) and heavy crude oil (55.3%(61.5% of this region’s production in 2017)2019).
The most productive crude oil and natural gas fields in the Gulf of Mexico are located in theKu-Maloob-Zaap, Litoral de Tabasco,Abkatún-Pol-Chuc and Cantarell business units in the Marine regions and the SarmariaSamaria Luna andBellota-Jujo business units in the Southern region. In particular, theKu-Maloob-Zaap business unit was theour most important crude oil producer in 2017,2019, producing an average of 858.0842.7 thousand barrels per day of crude oil per day in 2017,2019, or 44.0%50.0% of our total crude oil production for the year, and 552.3785.8 million cubic feet per day of natural gas, or 10.9%16.3% of our total natural gas production for the year. Our second most important crude oil producer was Litoral de Tabasco which produced an average of 345.8198.8 thousand barrels per day of crude oil per day in 2017,2019, or 17.7%11.8% of our total crude oil production for the year, and an average of 882.3713.1 million cubic feet per day of natural gas, or 17.4 %14.8% of our total natural gas production for the year.
The following table sets forth our annual crude oil production rates by type of oil for the five years ended December 31, 2017.2019.
Crude Oil Production
| 2017 vs. 2016 | Year ended December 31, | 2019 vs. 2018 | |||||||||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||||||||||||||||||||||||||
(in thousands of barrels per day) | (%) | (in thousands of barrels per day) | (%) | |||||||||||||||||||||||||||||||||||||||||||||
Marine regions | ||||||||||||||||||||||||||||||||||||||||||||||||
Heavy crude oil | 1,258.3 | 1,160.1 | 1,054.9 | 1,018.3 | 978.0 | (4.0 | ) | 1,054.9 | 1,018.3 | 978.0 | 996.1 | 982.7 | (1.3 | ) | ||||||||||||||||||||||||||||||||||
Light crude oil(1) | 638.1 | 691.3 | 705.4 | 682.7 | 605.6 | (11.3 | ) | 705.4 | 682.7 | 605.6 | 514.8 | 402.2 | (21.9 | ) | ||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||||||||
Total | 1,896.4 | 1,851.4 | 1,760.3 | 1,700.9 | 1,583.6 | (6.9 | ) | 1,760.3 | 1,700.9 | 1,583.6 | 1,510.9 | 1,384.8 | (8.3 | ) | ||||||||||||||||||||||||||||||||||
Southern region | ||||||||||||||||||||||||||||||||||||||||||||||||
Heavy crude oil | 26.5 | 35.0 | 31.7 | 22.3 | 16.9 | (24.2 | ) | 31.7 | 22.3 | 16.9 | 25.8 | 36.2 | 40.2 | |||||||||||||||||||||||||||||||||||
Light crude oil(1) | 454.3 | 417.4 | 362.1 | 321.8 | 249.8 | (22.4 | ) | 362.1 | 321.8 | 249.8 | 193.6 | 172.2 | (11.0 | ) | ||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||
Total | 480.8 | 452.4 | 393.8 | 344.1 | 266.7 | (22.5 | ) | 393.8 | 344.1 | 266.7 | 219.4 | 208.4 | (5.0 | ) | ||||||||||||||||||||||||||||||||||
Northern region | ||||||||||||||||||||||||||||||||||||||||||||||||
Heavy crude oil | 80.2 | 70.4 | 65.7 | 62.0 | 54.2 | (12.7 | ) | 65.7 | 62.0 | 54.2 | 49.3 | 55.6 | 12.9 | |||||||||||||||||||||||||||||||||||
Light crude oil(1) | 64.7 | 54.6 | 47.0 | 46.5 | 43.8 | (5.8 | ) | 47.0 | 46.5 | 43.8 | 43.0 | 34.9 | (18.8 | ) | ||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||
Total | 144.9 | 125.0 | 112.7 | 108.5 | 97.9 | (9.8 | ) | 112.7 | 108.5 | 97.9 | 92.3 | 90.6 | (1.9 | ) | ||||||||||||||||||||||||||||||||||
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Total heavy crude oil | 1,365.1 | 1,265.5 | 1,152.3 | 1,102.6 | 1,049.0 | (4.9 | ) | 1,152.3 | 1,102.6 | 1,049.1 | 1,071.2 | 1,074.5 | 0.3 | |||||||||||||||||||||||||||||||||||
Total light crude oil(1) | 1,157.1 | 1,163.3 | 1,114.5 | 1,050.9 | 899.2 | (14.4 | ) | 1,114.5 | 1,051.0 | 899.2 | 751.4 | 609.3 | (18.9 | ) | ||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||
Total crude oil | 2,522.1 | 2,428.8 | 2,266.8 | 2,153.5 | 1,948.3 | (9.5 | ) | 2,266.8 | 2,153.6 | 1,948.3 | 1,822.5 | 1,683.8 | (7.6 | ) | ||||||||||||||||||||||||||||||||||
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Note: |
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(1) | Includesextra-light crude oil. |
Source: Pemex Exploration and Production.
The following table sets forth our annual crude oil production by region and business unit for the five years ended December 31, 2017.2019.
Crude Oil Production
| 2017 vs. 2016 | Year ended December 31, | 2019 vs. 2018 | |||||||||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||||||||||||||||||||||||||
(in thousands of barrels per day) | (%) | (in thousands of barrels per day) | (%) | |||||||||||||||||||||||||||||||||||||||||||||
Marine regions | ||||||||||||||||||||||||||||||||||||||||||||||||
Ku-Maloob-Zaap | 863.8 | 856.7 | 853.1 | 866.6 | 858.0 | (1.0 | ) | 853.1 | 866.6 | 858.0 | 874.7 | 842.7 | (3.7 | ) | ||||||||||||||||||||||||||||||||||
Cantarell | 439.8 | 374.9 | 273.4 | 215.8 | 176.0 | (18.1 | ) | |||||||||||||||||||||||||||||||||||||||||
Litoral de Tabasco | 299.2 | 320.4 | 347.2 | 359.9 | 345.8 | (3.9 | ) | 347.2 | 359.9 | 345.8 | 291.1 | 198.8 | (31.7 | ) | ||||||||||||||||||||||||||||||||||
Abkatún-Pol-Chuc | 293.6 | 299.3 | 286.7 | 258.7 | 203.2 | (21.4 | ) | 286.7 | 258.7 | 203.2 | 183.8 | 184.0 | 0.1 | |||||||||||||||||||||||||||||||||||
Cantarell | 273.4 | 215.8 | 176.0 | 161.2 | 159.3 | (1.1 | ) | |||||||||||||||||||||||||||||||||||||||||
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Total | 1,896.4 | 1,851.4 | 1,760.3 | 1,700.9 | 1,583.6 | (6.9 | ) | 1,760.4 | 1,700.9 | 1,583.6 | 1,510.9 | 1,384.8 | (8.3 | ) | ||||||||||||||||||||||||||||||||||
Southern region | ||||||||||||||||||||||||||||||||||||||||||||||||
Samaria-Luna | 172.5 | 161.4 | 145.4 | 127.0 | 99.9 | (21.4 | ) | 145.4 | 127.0 | 99.9 | 86.5 | 82.1 | (5.1 | ) | ||||||||||||||||||||||||||||||||||
Bellota-Jujo | 134.3 | 124.8 | 101.7 | 90.3 | 72.4 | (19.8 | ) | 101.7 | 90.3 | 72.4 | 58.6 | 58.2 | (0.7 | ) | ||||||||||||||||||||||||||||||||||
Cinco Presidentes | 93.1 | 89.1 | 87.6 | 80.0 | 63.1 | (21.0 | ) | 87.6 | 80.0 | 63.1 | 50.7 | 41.5 | (18.1 | ) | ||||||||||||||||||||||||||||||||||
Macuspana-Muspac | 80.9 | 77.0 | 59.0 | 46.8 | 31.3 | (33.1 | ) | 59.0 | 46.8 | 31.3 | 23.6 | 26.4 | 11.9 | |||||||||||||||||||||||||||||||||||
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Total | 480.8 | 452.4 | 393.8 | 344.1 | 266.7 | (22.5 | ) | 393.7 | 344.1 | 266.7 | 219.4 | 208.3 | (5.1 | ) | ||||||||||||||||||||||||||||||||||
Northern region | ||||||||||||||||||||||||||||||||||||||||||||||||
PozaRica-Altamira | 58.7 | 53.9 | 48.2 | 43.7 | 41.0 | (6.1 | ) | |||||||||||||||||||||||||||||||||||||||||
Aceite Terciario del Golfo | 66.2 | 48.8 | 42.0 | 39.8 | 34.4 | (13.5 | ) | 42.0 | 39.8 | 34.4 | 28.4 | 24.3 | (14.5 | ) | ||||||||||||||||||||||||||||||||||
Poza Rica-Altamira | 61.5 | 59.8 | 58.7 | 53.9 | 48.2 | (10.6 | ) | |||||||||||||||||||||||||||||||||||||||||
Veracruz | 12.1 | 14.8 | 15.3 | 17.6 | 22.3 | 26.7 | ||||||||||||||||||||||||||||||||||||||||||
Burgos | 8.0 | 5.0 | — | — | — | — | — | — | — | 2.6 | 3.0 | 15.4 | ||||||||||||||||||||||||||||||||||||
Veracruz | 9.3 | 11.4 | 12.1 | 14.8 | 15.3 | 3.5 | ||||||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||
Total | 144.9 | 125.0 | 112.7 | 108.5 | 97.9 | (9.7 | ) | 112.7 | 108.5 | 97.9 | 92.3 | 90.6 | (1.8 | ) | ||||||||||||||||||||||||||||||||||
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Total crude oil | 2,522.1 | 2,428.8 | 2,266.8 | 2,153.5 | 1,948.3 | (9.5 | ) | 2,266.9 | 2,153.6 | 1,948.3 | 1,822.5 | 1,683.8 | (7.6 | ) | ||||||||||||||||||||||||||||||||||
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Note: |
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Source: Pemex Exploration and Production.
The Marine regions, which are comprised of the Northeastern Marine region and the Southwestern Marine region, are located on the continental shelf and its slope in the Gulf of Mexico. They cover a surface area of approximately 550,000 square kilometers, located entirely within Mexican territorial waters, along the coast of the states of Tabasco, Campeche, Yucatán, Quintana Roo and the southern coast of the state of Veracruz. In 2017,2019, the average crude oil production from the 43 fields located in these regions was 1,583.61,384.8 thousand barrels per day.
The Southern region covers an area of approximately 392,000 square kilometers, including the states of Guerrero, Oaxaca, Chiapas, Tabasco, Yucatán, Quintana Roo, Campeche and Veracruz. In 2017,2019, the average crude oil production from the 8676 fields located in this region was 266.7208.3 thousand barrels per day.
The Northern region, including its offshore area, is located on the continental shelf in the Gulf of Mexico along the coast of the state of Tamaulipas and the northern coast of the state of Veracruz. It covers an area of approximately 1.8 million square kilometers. Our production area in the onshore portion of this region is located in, among others, the states of Veracruz, Tamaulipas, Nuevo León, Coahuila, San Luis Potosí and Puebla; we also produce offshore on the continental shelf in the Gulf of Mexico. In 2017,2019, the average crude oil and natural gas production in the Northern region totaled 98.090.6 thousand barrels per day of crude oil per day and 1,169.4927.6 million cubic feet per day of natural gas, per day, respectively, from the 263200 oil and gas fields in this region.
The following table sets forth our annual natural gas production by region and business unit for the five years ended December 31, 2017.2019.
Natural Gas Production
| 2017 vs. 2016 | Year ended December 31, | 2019 | |||||||||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | ||||||||||||||||||||||||||||||||||||||
(in millions of cubic feet per day) | (%) | (in millions of cubic feet per day) | (%) | |||||||||||||||||||||||||||||||||||||||||||||
Marine regions | ||||||||||||||||||||||||||||||||||||||||||||||||
Cantarell | 1,007.1 | 1,120.9 | 1,277.1 | 1,184.9 | 1,133.4 | (4.3 | ) | 1,277.1 | 1,184.9 | 1,133.4 | 1,151.1 | 1,245.7 | 8.2 | |||||||||||||||||||||||||||||||||||
Ku-Maloob-Zaap | 556.5 | 589.3 | 552.3 | 693.5 | 785.8 | 13.3 | ||||||||||||||||||||||||||||||||||||||||||
Litoral de Tabasco | 747.6 | 842.6 | 993.5 | 950.0 | 882.3 | (7.1 | ) | 993.5 | 950.0 | 882.3 | 798.0 | 713.1 | (10.6 | ) | ||||||||||||||||||||||||||||||||||
Abkatún-Pol-Chuc | 579.4 | 553.4 | 455.9 | 390.5 | 319.5 | (18.2 | ) | 455.9 | 390.5 | 319.5 | 288.2 | 300.5 | 4.3 | |||||||||||||||||||||||||||||||||||
Ku-Maloob-Zaap | 405.1 | 571.0 | 556.5 | 589.3 | 552.3 | (6.3 | ) | |||||||||||||||||||||||||||||||||||||||||
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Total | 2,739.2 | 3,087.9 | 3,283.0 | 3,114.6 | 2,887.6 | (7.3 | ) | 3,283.0 | 3,114.6 | 2,887.6 | 2,930.8 | 3,045.2 | 3.9 | |||||||||||||||||||||||||||||||||||
Southern region | ||||||||||||||||||||||||||||||||||||||||||||||||
Samaria-Luna | 606.3 | 583.1 | 500.3 | 498.7 | 426.9 | (14.4 | ) | 500.3 | 498.7 | 426.9 | 381.0 | 371.7 | (2.4 | ) | ||||||||||||||||||||||||||||||||||
Macuspana-Muspac | 515.1 | 490.5 | 455.3 | 382.2 | 291.6 | (23.7 | ) | 455.3 | 382.2 | 291.6 | 249.2 | 269.3 | 8.1 | |||||||||||||||||||||||||||||||||||
Bellota-Jujo | 319.7 | 288.9 | 264.5 | 231.5 | 183.3 | (20.8 | ) | 264.5 | 231.5 | 183.3 | 147.4 | 128.1 | (13.0 | ) | ||||||||||||||||||||||||||||||||||
Cinco Presidentes | 129.4 | 152.8 | 160.1 | 137.7 | 109.1 | (20.8 | ) | 160.1 | 137.7 | 109.1 | 90.9 | 74.3 | (18.2 | ) | ||||||||||||||||||||||||||||||||||
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Total | 1,570.5 | 1,515.4 | 1,380.1 | 1,250.0 | 1,011.0 | (19.1 | ) | 1,380.1 | 1,250.0 | 1,011.0 | 868.5 | 843.4 | (2.9 | ) | ||||||||||||||||||||||||||||||||||
Northern region | ||||||||||||||||||||||||||||||||||||||||||||||||
Burgos | 1,286.6 | 1,221.0 | 1,099.0 | 864.6 | 699.2 | (19.1 | ) | 1,099.0 | 864.6 | 699.2 | 603.9 | 567.6 | (5.9 | ) | ||||||||||||||||||||||||||||||||||
Veracruz | 494.5 | 455.3 | 392.2 | 322.8 | 263.5 | (18.4 | ) | 392.2 | 322.8 | 263.5 | 217.3 | 208.1 | (4.2 | ) | ||||||||||||||||||||||||||||||||||
Aceite Terciario del | ||||||||||||||||||||||||||||||||||||||||||||||||
Golfo | 167.0 | 149.5 | 145.2 | 142.5 | 118.5 | (16.8 | ) | |||||||||||||||||||||||||||||||||||||||||
Aceite Terciario del Golfo | 145.2 | 142.5 | 118.5 | 92.2 | 69.4 | (24.8 | ) | |||||||||||||||||||||||||||||||||||||||||
Poza Rica-Altamira | 112.4 | �� | 102.8 | 101.5 | 97.9 | 88.2 | (9.9 | ) | 101.5 | 97.9 | 88.2 | 90.3 | 82.5 | (8.7 | ) | |||||||||||||||||||||||||||||||||
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Total | 2,060.6 | 1,928.6 | 1,737.9 | 1,427.8 | 1,169.4 | (18.1 | ) | 1,737.9 | 1,427.8 | 1,169.4 | 1,003.7 | 927.6 | (7.6 | ) | ||||||||||||||||||||||||||||||||||
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Total natural gas | 6,370.3 | 6,531.9 | 6,401.0 | 5,792.5 | 5,068.0 | (12.5 | ) | 6,401.1 | 5,792.5 | 5,068.0 | 4,803.0 | 4,816.2 | 0.3 | |||||||||||||||||||||||||||||||||||
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Note: |
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Source: Pemex Exploration and Production.
In 2017,2019, the Marine regions produced 2,887.63,045.2 million cubic feet per day of natural gas, or 57.0%63.2% of our total natural gas production, an increase of 3.9% as compared to the regions’ 2018 production of 2,930.8 million cubic feet per day. In 2019, the Southern region produced 843.4 million cubic feet per day of natural gas, or 17.5% of our total natural gas production, a decrease of 7.3%2.9% as compared to the regions’ 2016region’s 2018 production of 3,114.6868.5 million cubic feet per day. In 2017,2019, the SouthernNorthern region produced 1,011.0927.6 million cubic feet per day of natural gas, or 19.9%19.3% of our total natural gas production, a decrease of 19.1%7.6% as compared to the region’s 20162018 production of 1,250.0 million cubic feet per day. In 2017, the Northern region produced 1,169.4 million cubic feet per day of natural gas, or 23.1% of our total natural gas production, a decrease of 18.1% as compared to the region’s 2016 production of 1,427.81,003.7 million cubic feet per day.
Our average natural gas production decreasedincrease by 12.5%0.3% in 2017,2019, from 5,792.54,803.0 million cubic feet per day in 20162018 to 5,068.04,816.2 million cubic feet per day in 2017.2019. Natural gas production associated with crude oil production accounted for 80.0%83.2% of total natural gas production in 2017,2019, with the remainder of natural gas production consisting of extraction from fields holding natural gas reserves. As of December 31, 2017, 1702019, 124 of our 394319 gas producing fields, or 43%38.9%, producednon-associated gas. Thesenon-associated gas fields accounted for 20.0%16.8% of all of our natural gas production in 2017.2019.
Investments in Exploration and Production
In nominal peso terms, our capital expenditures for exploration and production were Ps. 85,49198,763 million in 2017,2019, as compared to Ps. 137,24271,107 million in 2016,2018, representing a decreasean increase of 37.7%38.9% in nominal terms. Of our
total capital expenditures, Ps. 20,45417,560 million was directed to theKu-Maloob-Zaap fields, Ps. 4,961803 million was directed to theTsimin-Xux project, Ps. 8,76110,711 million was directed to the Chuc project, Ps. 3,1192,342 million was directed to the Cantarell fields, Ps. 1,0263,715 million was directed to the Crudo Ligero Marino project, Ps. 1,0631,092 million was directed to theOgarrio-Sánchez Magallanes project, Ps. 1,705958 million was directed to the Delta del Gijalva fields, Ps. 1,3063,166 million was directed to the Antonio J. Bermúdez fields, Ps. 606243 million was used for development of the Burgos natural gas fields and Ps. 604758 million was directed to the ATGAceite Terciario del Golfo (ATG) project. During 2017,2019, expenditures for these ten projects amounted to 28.3%41.9% of all our capital expenditures for exploration and production. The remaining 71.7%58.1% amounted to Ps. 61,28257,415 million in nominal terms, which was directed to the 1628 remaining projects, as well as to other exploratory projects, other development projects and administrative and technical support.
20182020 Exploration and Production Capital Expenditures Budget
For 2018,2020, our total capital expenditures budget is Ps. 81,765175,743 million, as compared to Ps. 85,49198,763 million of capital expenditures made in 2017,2019, representing a decreasean increase of 4.4%77.9%, largely due towith a view of reaching our strategic focus onobjectives of stopping and reversing the decline in our most profitable projects.reserves and production, and accelerating the development of discovered fields. The 20182020 budget includes all of the 2426 ongoing strategic exploration and production projects, an additional Ps. 18,26641,249 million into be allocated to other exploratory projects and Ps. 545,458 million in administrative and technical support. Approximatelyto be allocated to other development projects. Ps. 57,092131,307 million, or 69.8%74.7% of our 20182020 capital expenditures budget is to be allocated to projects relating to field development and pipelines. Approximately Ps. 24,67444,436 million, or 30.2%25.3% of the total budget, will be allocated to exploration activities.
The 20182020 exploration and production budget includes Ps. 17,07121,590 million for investments in theKu-Maloob-Zaap project, Ps. 5,0866,556 million for the Integral Yaxché project, Ps. 13,3115,178 million for the Chuc project, Ps. 1,077331 million for theTsimin-XuxTsimín-Xux project, Ps. 1,8817,737 million for the Cantarell project, Ps. 6751,228 million for the Delta del Grijalva project, Ps. 3,72210,723 million for the Crudo Ligero Marino project, Ps. 1,5225,346 million for the Antonio J. Bermúdez project, Ps. 1,3754,767 million for theOgarrio-Sá Ogarrio Sánchez Magallanes project, Ps. 1751,500 million for the Burgos project, Ps. 448908 million for the Bellota ChinchorroBellota-Chinchorro project, and Ps. 35,423109,879 million for the remaining projects, as well as for other exploratory and development projects and administrative and technical support.
Given the recent and ongoing impact of theCOVID-19 pandemic on our business and the global economy, we anticipate adjustments to Pemex Exploration and Production’s investment budget for 2020, which may include reductions to our capital expenditures andnon-capitalizable maintenance expenses. For more information regarding the impact of theCOVID-19 pandemic to our investment budget, See “Item 5—Overview”.
Exploration and Production Investment Trends
In 2017,2019, we invested Ps. 28,75321,992 million in nominal terms, or 34%22.3% of the total capital expenditures of our exploration and production segment, in exploration activities, which representsrepresented an 11.3%8.0% decrease from the Ps. 32,44123,892 million invested in exploration activities in 2016.2018. In 2017,2019, we invested Ps. 56,74176,771 million in nominal terms, or 66.4%77.7% of our total capital expenditures in development activities, which represents a 45.8% decrease62.6% increase from the Ps. 104,80147,214 million invested in development activities in 2016.2018.
In 2018,2020, we have budgeted Ps. 24,67444,436 million, or 30.2%25.3% of total capital expenditures, for exploration activities of our exploration and production segment, which represents an 18.9% decreasea 102.1% increase in nominal terms from the amount invested in exploration activities in 2017.2019. For development activities in 2018,2020, we have budgeted Ps. 57,092131,307 million, or 70%74.7% of total capital expenditures, which represents a 0.6%71.0% increase in nominal terms from the amount that we invested in development activities in 2017.2019.
Our projected exploration and development capital expenditures correspond to the areas assigned to us through Round Zero,bidding rounds, which represent the areas in which we are exploring, operating or have an interest in developing based on our operational capabilities. The Ministry of EnergySENER granted us the right to explore and develop these areas with the aim of maintaining our production levels in the short term, while providing us with sufficient exploration opportunities to increase our production in the future. Given that a significant number of exploration areas wereare reserved by the Mexican Government for potential future competitive bidding rounds, we intend to carry out our strategy of increasing production and improving our RRR over time by entering into strategic joint
ventures with other oil and gas companies. Through these joint ventures, we hope to gain access to new technology and international best practices, while sharing the costs associated with security, occupational health and environmental protection and minimizing our operational risks. Over time, the allocation of our capital expenditures budget may change accordingdue to a number of factors, including the results of potential subsequent bidding rounds in which we participate. See “—Exploration and Production—New Exploration and Production Contracts and Farm-Outs” below in this Item 4.
The capital expenditures of our exploration and production segment have constituted 75.0%73.5% or more of our total capital expenditures in each of the last three years. In 2018,2020, the budgeted capital expenditures of our exploration and production segment constitute 72.2%89.1% of our total.total capital expenditures.
The following tabletables sets forth our capital expenditures, excludingnon-capitalizable maintenance, related to exploration and development duringfor each of the three years ended December 31, 20172019, and our estimated capital expendituresthe budget for exploration and development 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.
Exploration and Development Capital Expenditures
Year ended December 31,(1) | Budget 2018(2) | Year ended December 31,(1) | Budget | |||||||||||||||||||||||||||||
2015 | 2016 | 2017 | 2017 | 2018 | 2019(2) | 2020(2)(3) | ||||||||||||||||||||||||||
(in millions of nominal pesos) | (in millions of pesos) (4) | |||||||||||||||||||||||||||||||
Exploration | Ps. 31,146 | Ps. 32,441 | Ps. 28,753 | Ps. 24,674 | Ps. | 28,753 | Ps. | 23,892 | Ps. | 21,992 | Ps. | 44,436 | ||||||||||||||||||||
Development | 120,398 | 104,801 | 56,738 | 57,092 | 56,738 | 47,214 | 76,771 | 131,307 | ||||||||||||||||||||||||
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Total | Ps. 151,544 | Ps. 137,242 | Ps. 85,491 | Ps. 81,765 | Ps. | 85,491 | Ps. | 71,107 | Ps. | 98,763 | Ps. | 175,743 | ||||||||||||||||||||
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(1) | Amounts based on cash basis method of accounting. |
(2) | Figures include our drilling and services line of business beginning July 1, 2019. Prior to July 1, 2019, Pemex Drilling and Services operated as an additional productive state-owned subsidiary. As of July 1, 2019, Pemex Drilling and Services was merged into Pemex Exploration and Production. |
(3) | Original budget published in the |
(4) | Figures are stated in nominal pesos. |
Source: Pemex Exploration and Production
Investments and Production by Project
We conduct exploration, production and development activities in fields throughout Mexico. Our main projects areKu-Maloob-Zaap,Tsimin-Xux,Tsimín-Xux, ATG, Cantarell, Crudo Ligero Marino, Burgos, Chuc, Antonio J. Bermúdez,Ogarrio-Sánchez Magallanes and Delta del Grijalva. These projects are described below.
Exploration and Production’s Capital Expenditures
Year ended December 31,(1) | Budget 2018(2) | Year ended December 31,(1) | Budget | |||||||||||||||||||||||||||||
2015 | 2016 | 2017 | 2017 | 2018 | 2019 | 2020(2) | ||||||||||||||||||||||||||
(in millions of pesos)(3) | (in millions of pesos)(3) | |||||||||||||||||||||||||||||||
Exploration and Production | ||||||||||||||||||||||||||||||||
Ku-Maloob-Zaap | Ps. | 23,507 | Ps. | 25,468 | Ps. | 20,454 | Ps. | 17,071 | Ps. | 20,454 | Ps. | 10,879 | Ps. | 17,560 | Ps. | 21,590 | ||||||||||||||||
Tsimin-Xux | 13,950 | 13,802 | 4,961 | 1,077 | ||||||||||||||||||||||||||||
Chuc | 8,761 | 13,178 | 10,711 | 5,178 | ||||||||||||||||||||||||||||
Ek-Balam | 737 | 2,918 | 8,888 | 8,237 | ||||||||||||||||||||||||||||
Integral Yaxché | 6,649 | 10,116 | 7,984 | 5,086 | 7,984 | 3,686 | 5,592 | 6,556 | ||||||||||||||||||||||||
Chuc | 10,037 | 10,024 | 8,761 | 13,311 | ||||||||||||||||||||||||||||
Crudo Ligero Marino | 1,026 | 3,535 | 3,715 | 10,723 | ||||||||||||||||||||||||||||
Antonio J. Bermúdez | 1,306 | 1,148 | 3,166 | 5,346 | ||||||||||||||||||||||||||||
Cantarell | 11,217 | 8,179 | 3,119 | 1,881 | 3,119 | 2,228 | 2,342 | 7,737 | ||||||||||||||||||||||||
Lakach | 3,079 | 5,683 | 1,058 | 751 | ||||||||||||||||||||||||||||
Crudo Ligero Marino | 9,275 | 4,931 | 1,026 | 3,722 | ||||||||||||||||||||||||||||
Cuenca de Veracruz | 671 | 2,018 | 2,110 | 4,935 | ||||||||||||||||||||||||||||
Ixtal-Manik | 368 | 807 | 1,922 | 201 | ||||||||||||||||||||||||||||
Bellota-Chinchorro | 400 | 1,187 | 1,646 | 908 | ||||||||||||||||||||||||||||
Cactus-Sitio Grande | 463 | 412 | 1,377 | 687 | ||||||||||||||||||||||||||||
Tamaulipas-Constituciones | 101 | 339 | 1,232 | 2,220 | ||||||||||||||||||||||||||||
Ogarrio-Sánchez Magallanes | 4,626 | 3,543 | 1,063 | 1,375 | 1,063 | 1,227 | 1,092 | 4,767 | ||||||||||||||||||||||||
Delta del Grijalva | 4,687 | 2,859 | 1,705 | 675 | 1,705 | 879 | 958 | 1,228 | ||||||||||||||||||||||||
Ek-Balam | 2,722 | 2,687 | 737 | 6,080 | ||||||||||||||||||||||||||||
Antonio J. Bermúdez | 5,352 | 2,562 | 1,306 | 1,522 | ||||||||||||||||||||||||||||
El Golpe-Puerto Ceiba | 286 | 365 | 902 | 945 | ||||||||||||||||||||||||||||
Tsimín-Xux | 4,961 | 1,065 | 803 | 331 | ||||||||||||||||||||||||||||
Aceite Terciario del Golfo | 604 | 511 | 758 | 2,311 | ||||||||||||||||||||||||||||
Integral Poza Rica | 173 | 324 | 491 | 1,354 | ||||||||||||||||||||||||||||
Jujo-Tecominoacán | 565 | 492 | 405 | 1,460 | ||||||||||||||||||||||||||||
Burgos | 5,855 | 2,032 | 606 | 175 | 606 | 162 | 243 | 1,500 | ||||||||||||||||||||||||
Bellota-Chinchorro | 4,070 | 1,978 | 400 | 448 | ||||||||||||||||||||||||||||
Ixtal-Manik | 1,439 | 1,740 | 368 | 989 | ||||||||||||||||||||||||||||
Cactus-Sitio Grande | 2,671 | 1,555 | 463 | 559 | ||||||||||||||||||||||||||||
Aceite Terciario del Golfo | 2,817 | 1,487 | 604 | 478 | ||||||||||||||||||||||||||||
El Golpe-Puerto Ceiba | 2,605 | 1,375 | 286 | 189 | ||||||||||||||||||||||||||||
Jujo-Tecominoacán | 847 | 997 | 565 | 776 | ||||||||||||||||||||||||||||
Veracruz Basin | 1,538 | 884 | 671 | 1,941 | ||||||||||||||||||||||||||||
Integral Poza Rica | 438 | 521 | 173 | 160 | ||||||||||||||||||||||||||||
Tamaulipas-Constituciones | 459 | 501 | 101 | 79 | ||||||||||||||||||||||||||||
Cuenca de Macuspana | 117 | 96 | 125 | 212 | ||||||||||||||||||||||||||||
Costero Terrestre | 120 | 114 | 83 | 78 | ||||||||||||||||||||||||||||
Lakach | 1,058 | 1,083 | 56 | — | ||||||||||||||||||||||||||||
Arenque | 6 | 61 | 40 | 38 | ||||||||||||||||||||||||||||
Ayín-Alux | 1,161 | 443 | 1 | — | 1 | — | — | — | ||||||||||||||||||||||||
Costero Terrestre | 321 | 380 | 120 | 92 | ||||||||||||||||||||||||||||
Cuenca de Macuspana | 476 | 368 | 117 | 73 | ||||||||||||||||||||||||||||
Lankahuasa | — | 22 | 11 | — | 11 | — | — | — | ||||||||||||||||||||||||
Arenque | 26 | 16 | 6 | 11 | ||||||||||||||||||||||||||||
Other Exploratory Projects | 31,146 | 32,410 | 26,235 | 18,266 | 26,235 | 22,388 | 20,550 | 41,249 | ||||||||||||||||||||||||
Other Development Projects | 17 | 172 | 2,341 | 4,974 | 2,341 | — | 11,324 | 45,458 | ||||||||||||||||||||||||
Xikin | — | — | 6,210 | 5,898 | ||||||||||||||||||||||||||||
Esah | — | — | 1,675 | 1,795 | ||||||||||||||||||||||||||||
Tetl | — | — | 728 | 1,367 | ||||||||||||||||||||||||||||
Suuk | — | — | 637 | 2,603 | ||||||||||||||||||||||||||||
Teekit Profundo | — | — | 566 | 1,675 | ||||||||||||||||||||||||||||
Octli | — | — | 505 | 1,769 | ||||||||||||||||||||||||||||
Ixachi | — | — | 436 | 20,079 | ||||||||||||||||||||||||||||
Koban | — | — | 174 | 2,639 | ||||||||||||||||||||||||||||
Manik NW | — | — | 149 | 729 | ||||||||||||||||||||||||||||
Cahua | — | — | 66 | 478 | ||||||||||||||||||||||||||||
Mulach | — | — | 64 | 2,473 | ||||||||||||||||||||||||||||
Cheek | — | — | 44 | 366 | ||||||||||||||||||||||||||||
Hok | — | — | 40 | 1,609 | ||||||||||||||||||||||||||||
Tlacame | — | — | 30 | 1,304 | ||||||||||||||||||||||||||||
Cibix | — | — | — | 339 | ||||||||||||||||||||||||||||
Chocol | — | — | — | 335 | ||||||||||||||||||||||||||||
Others | 2,341 | — | — | — | ||||||||||||||||||||||||||||
Administrative and Technical Support | 557 | 507 | 249 | 5 | 249 | 5 | — | — | ||||||||||||||||||||||||
Drilling and Services(4) | — | — | 672 | 494 | ||||||||||||||||||||||||||||
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Total | Ps. | 151,546 | Ps. | 137,242 | Ps. | 85,491 | Ps. | 81,765 | Ps. | 85,491 | Ps. | 71,107 | Ps. | 98,763 | Ps. | 175,743 | ||||||||||||||||
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Notes: Numbers may not total due to rounding.
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the |
(3) | Figures are stated in nominal pesos. |
(4) | Figures include our drilling and services line of business beginning July 1, 2019. Prior to July 1, 2019, Pemex Drilling and Services operated as an additional productive state-owned subsidiary. As of July 1, 2019, Pemex Drilling and Services was merged into Pemex Exploration and Production. |
Source: Petróleos Mexicanos.
KuKu-Maloob-Zaap-Maloob-Zaap Project.Project. TheKu-Maloob-Zaap project was our most important producer of heavy crude oil and plays an important part in the production of the Maya crude oil mix. It is the most important project in Mexico in terms of total proved hydrocarbon reserves and crude oil production. It is composed of the Ayatsil, Bacab, Lum, Ku Maloob, Tekel, Utsil and Zaap fields, and extends over an area of 305.7 square kilometers. As of December 31, 2017,2019, there waswere a total of 265294 wells completed, 186208 of which were producing. The project produced an average of 858.0842.7 thousand barrels per day of crude oil, per day, 44.0%50.0% of our total production, and 552.3785.8 million cubic feet per day of natural gas per day in 2017.2019. As of December 31, 2017,2019, cumulative production was 5.46.0 billion barrels of crude oil and 2.73.2 trillion cubic feet of natural gas. As of December 31, 2017,2019, proved hydrocarbon reserves totaled 2.7 billion barrels of crude oil and 1.30.953 trillion cubic feet of natural gas. Total proved
reserves were 3.02.9 billion barrels of oil equivalent, of which 2.11.7 billion barrels of oil equivalent were proved developed reserves.
In nominal peso terms, our exploration and production segment’s capital expenditures for this project were Ps. 23,50710,879 million in 2015,2018 and Ps. 25,46817,560 million in 2016 and Ps. 20,454 million in 2017.2019. For 2018,2020, we anticipate that our capital expenditures will be Ps. 17,07121,590 million and that total accumulated capital expenditures for this project will reach approximately U.S. $360,884 million.$26.7 billion. In 2017,2019, we paid approximately U.S. $38.3$39.3 million to acquire approximately 101.5106.6 billion cubic feet of nitrogen for the pressure maintenance project in the fifth module of the Cantarell nitrogen cryogenic plant, which began operations in November 2006.plant. In 2018,2020, we expect to spend approximately U.S. $38.8$38.5 million to acquire approximately 109.5105.4 billion cubic feet of nitrogen for injection into theKu-Maloob-Zaap fields.
TsimínTsimin-Xux-Xux Project. This project consists of the TsiminTsimín and Xux fields, which include volatile oil and gas condensate reservoirs in the shallow waters of the Gulf of Mexico. The TsiminTsimín field is located 62 kilometers from the Dos Bocas Marine Terminal in Paraíso, Tabasco, while the Xux field is located on the continental shelf of the Gulf of Mexico, approximately ten kilometers off the coast of Tabasco. During 2017, one2019, no new well waswells were completed at the Xux field.or Tsimín fields. During 2017,2019, average daily production at theTsimin-XuxTsimín-Xux project totaled 88.769.5 thousand barrels of crude oil and 497.3435.4 million cubic feet of natural gas. During 2017,2019, the sales prices of the light andextra-light crude oil produced at this fieldthese fields averaged approximately U.S. $59.25$65.40 per barrel, making this one of our most important projects in terms of revenue generation.
As of December 31, 2017,2019, cumulative production totaled 0.1 billion barrels of crude oil and 0.81.1 trillion cubic feet of natural gas. Proved oil and gas reserves totaled 67.4 million barrels of crude oil and 368.0 billion cubic feet of natural gas. Total proved reserves were 148.663.3 million barrels of oil equivalent, of which 126.8 million barrels of oil equivalentall were proved developed reserves.
In nominal peso terms, our exploration and production segment’s capital expenditures for theTsimin-XuxTsimín-Xux project were Ps. 4,9611,065 million in 2017.2018 and Ps. 803 million in 2019. In 2018,2020, we expect capital expenditures for this project to total Ps. 1,077331 million and that, by the end of 20182020, our total accumulated capital expenditures for this project will reach approximately U.S. $130.0$226.7 million.
Chuc Project.Project. The Chuc project is the second largest producer of light crude oil in the Southwestern Marine region, and includes the operation and maintenance of thePol-A facility and water injection complexes. In 2013, the Ministry of Finance and Public Credit approved the integration of the Caan project into the Chuc project.ThisThis project covers an area of 213 square kilometers and has been exploited by our exploration and production segment since 1981.kilometers. The fields of this project are located on the continental shelf of the Gulf of Mexico, off the coast of the states of Tabasco and Campeche, at a depth of between the20- and100-meter isobaths, approximately 132 kilometers from the Dos Bocas Marine Terminal in Paraíso, Tabasco, and 79 kilometers northeast of Ciudad del Carmen, Campeche. The fields in the project include Abkatún, Batab, Caan, Ché, Chuc, Chuhuk, Etkal, Homol, Kanaab, Kuil, Onel, Pol, Taratunich and Tumut. In January 2007, the Pol and Batab projects were merged into the Chuc project. As of December 31, 2017, 1172019, 125 wells had been completed, of which 7972 were producing. During 2017,2019, average production totaled 176.3159.8 thousand barrels per day of crude oil and 276.6256.2 million cubic feet per day of natural gas. As of December 31, 2017,2019, cumulative production totaled 5.86.0 billion barrels of crude oil and 6.76.9 trillion cubic feet of natural gas. As of December 31, 2017,2019, proved hydrocarbon reserves totaled 297.1135.3 million barrels of oil and 518.7389.5 billion cubic feet of natural gas, or 377.8214.4 million barrels of oil equivalent. As of December 31, 2017,2019, total proved developed reserves were 240.2159.8 million barrels of oil equivalent.
In nominal peso terms, our exploration and production segment’s capital expenditures for the Chuc project were Ps. 10,03713,178 million in 2015,2018 and Ps. 10,02410,711 million in 2016 and Ps. 8,761 million in 2017.2019. In 2018,2020, we expect
our capital expenditures to be Ps. 13,3115,178 million and anticipate that our total accumulated capital expenditures for this project will reach approximately U.S. $143,581 million.$7.8 billion.
Cantarell Project. The Cantarell project is located on the continental shelf of the Gulf of Mexico. It consists of the Akal, Chac, Ixtoc, Kambesah, Kutz, Nohoch, Sihil and Takin fields, which extend over an area of 294.4 square kilometers. As of December 31, 2017,2019, there was a total of 561568 wells drilled in the Cantarell project, 125127 of which were producing. During 2017,2019, the Cantarell business unit, of which the Cantarell project is part, was the fourth most important producer of crude oil in Mexico, averaging 176.6159.3 thousand barrels per day of crude oil. This was 18.1%1.1% less than 20162018 production, which was 215.8161.2 thousand barrels per day, as a result of the decline of crude oil reserves remaining in these fields. Natural gas production from the Cantarell business unit during 20172019 averaged 1,133.41,245.7 million cubic feet per day. This was 4.3% less8.2% more than the 20162018 average natural gas production, which was 1,184.91,151.1 million cubic feet per day, due to the natural decline of field production and an increase in the fractional water flow of wells in highly fractured deposits.day.
As of December 31, 2017,2019, cumulative production of the Cantarell project was 14.3 billion barrels of crude oil and 9.510.6 trillion cubic feet of natural gas. As of December 31, 2017,2019, proved oil and gas reserves of the Cantarell project totaled 850.4607.4 million barrels of crude oil and 941.8749.4 billion cubic feet of natural gas. As of December 31, 2017,2019, total proved reserves were 1,025.4738.2 million barrels of oil equivalent, of which 910.7721.8 million barrels were proved developed reserves.
The Akal field, which is the most important field in the Cantarell project, averaged 55.242.8 thousand barrels per day of crude oil production during 2017.2019. This was 20.7%14.1% less than the average production in 2016,2018, which was 69.549.8 thousand barrels per day.
In nominal peso terms, our exploration and production segment’s capital expenditures for the Cantarell project totaled Ps. 11,2172,228 million in 2015,2018 and Ps. 8,1792,342 million in 2016 and Ps. 3,119 million in 2017.2019. For 2018,2020, we budgeted Ps. 1,8817,737 million for capital expenditures for the Cantarell project. By the end of 2018,2020, we expect our total accumulated capital expenditures to be approximately U.S. $43,296 million$41.6 billion for this project.
On October 10, 1997, we awarded abuild-own-operate contract for a nitrogen cryogenic plant at the Cantarell project to a consortium formed by BOC Holdings, Linde, Marubeni, West Coast Energy and ICA Fluor Daniel. Under this contract, the consortium is responsible for the financing, design, construction and operation of the plant. The plant began operations in 2000 and cost approximately Ps. 10,131 million. Pursuant to the terms of the agreement, Pemex Exploration and Production has the right to acquire the nitrogen plant in the case of a default by the consortium. Pemex Exploration and Production has the obligation to acquire the nitrogen plant if it defaults under the contract. Under the terms of the contract, Pemex Exploration and Production committed to purchasing 1.2 billion cubic feet per day of nitrogen from the consortium and to continue to supply service through June 2027.
During 2017,2019, we paid approximately U.S. $190.8$203.5 million under this contract for an approximate total volume of 398.6418.5 billion cubic feet of nitrogen, which was injected into the Cantarell fields. In 2018,2020, our exploration and production segment expects to pay approximately U.S. $205.7$197.4 million under this contract for an approximate total volume of 438.0414.3 billion cubic feet of nitrogen to be injected into the fields.
Crudo Ligero Marino Project. In 2013, the Ministry of Finance and Public Credit approved the designation of theThe Crudo Ligero Marino project as a stand-alone project, thereby separating itProject is located on the continental shelf in the Gulf of Mexico, across the coasts of the states of Tabasco and Campeche, about 75 kilometers from the Strategic Gas Program of which it formed partDos Bocas Marine Terminal in Paraíso and 89 kilometers northwest from 2001 through 2012. In 2013, theOch-Uech-Kax project was integrated into this project.Ciudad del Carmen, Campeche. The main objectives for the Crudo Ligero Marino project during the years 20182019 to 2035 are to continue constructing one marine structure, in addition to the marine structure completed during 2014, drill additional wells, implement secondary recovery, as well as intervention, optimization and maintenance techniques to its
facilities, particularly in the Sinan, Kab and Kax fields. As of December 31, 2017,2019, a total of 99102 wells had been completed at this project, of which 3834 were producing. During 2017,2019, average daily production totaled 80.970.2 thousand barrels of crude oil and 252.2231.3 million cubic feet of natural gas. As of December 31, 2017,2019, cumulative production was 874.2923.7 million barrels of crude oil and 2,477.82,662.2 billion cubic feet of natural gas. Proved oil and gas reserves totaled 98.539.2 million barrels of crude oil and 278.7130.6 billion cubic feet of natural gas. Total proved reserves were 156.565.6 million barrels of oil equivalent, of which 122.465.6 million barrels were proved developed reserves.
In nominal peso terms, our exploration and production segment’s capital expenditures for the Crudo Ligero Marino project totaled Ps. 1,0263,535 million in 2017.2018 and Ps. 3,715 million in 2019. For 2018,2020, we anticipate our capital expenditures to total Ps. 3,72210,723 million and that total accumulated capital expenditures for this project will reach approximately U.S. $207.4$656.0 million.
OgarrioOgarrio-Sá-Sánchez Magallanes ProjectProject.. TheOgarrio-Sánchez Magallanes project is composed of 2118 crude oil and natural gas producing fields and forms part of the Cinco Presidentes business unit. This project is located between the state borders of Veracruz and Tabasco and covers an area of 10,820 square kilometers. From a geological standpoint, this project pertains to the Isthmus Saline basin, specifically the southeastern basins at the Tertiary level. TheOgarrio-Sánchez Magallanes project is geographically bounded by the Gulf of Mexico to the north, the geological folds of the Sierra Madre of Chiapas to the south, the Tertiary basin of Veracruz to the west and the Comalcalco Tertiary basin to the east. The primary objective of this project is to increase production levels through the drilling of development wells and infill wells, which are drilled between producing wells to more efficiently recover oil and gas reserves, the execution of workovers of wells and the implementation of secondary and enhanced oil recovery processes. In addition, we aim to optimize the infrastructure of this project in order to counteract the decreases in production levels that result from the natural depletion of its reservoirs.
As of December 31, 2017,2019, theOgarrio-Sánchez Magallanes project had 524539 producing wells. NoSix new wells were completed during 2017.2019. Average daily production totaled 63.141.5 thousand barrels of crude oil and 109.174.3 million cubic feet of natural gas during 2017.2019. As of December 31, 2017,2019, cumulative production was 1.3 billion barrels of crude oil and 1.9 trillion cubic feet of natural gas. Proved hydrocarbon reserves totaled 115.692.6 million barrels of crude oil and 212.7198.1 billion cubic feet of natural gas. Total proved reserves were 154.8119.2 million barrels of oil equivalent, of which 137.180.0 million barrels were proved developed reserves.
In nominal peso terms, our capital expenditures for theOgarrio-Sánchez Magallanes project were Ps. 1,0631,227 million in 2017.2018 and Ps. 1,092 million in 2019. For 2018,2020, we anticipate that our capital expenditures will total Ps. 1,3754,767 million and that by the end of 20182020 total accumulated capital expenditures for this project will reach approximately U.S. $82.0$201.5 million.
Delta del Grijalva Project. The Delta del Grijalva project is the most important project in the Southern region in terms of both oil and gas production. The project covers an area of 1,343 square kilometers and has been exploited by our exploration and production segment since 1982.kilometers. As of December 31, 2017,2019, there was a total of 199200 wells drilled, of which 4662 were producing. During 2017,2019, the project produced an average of 63.048.3 thousand barrels per day of crude oil and 266.0217.6 million cubic feet per day of natural gas. The most important fields are Terra, Tizón, Sen and Caparroso-Pijije-Escuintle.
As of December 31, 2017,2019, cumulative production in the Delta del Grijalva project was 0.8 billion barrels of crude oil and 3.03.2 trillion cubic feet of natural gas. Proved oil and gas reserves as of December 31, 20172019 totaled 66.056.4 million barrels of crude oil and 299.2259.5 billion cubic feet of natural gas. As of December 31, 2017,2019, total proved reserves were 137.0117.0 million barrels of oil equivalent, 88.394.2 million of which were proved developed reserves.
In nominal peso terms, our exploration and production segment’s capital expenditures for the Delta del Grijalva project were Ps. 4,687879 million in 2015,2018 and Ps. 2,859958 million in 2016 and Ps. 1,705 million in 2017.2019. In 2018,2020, we expect our capital expenditures to be Ps. 6751,228 million, bringing our total capital expenditures for the project to approximately U.S.$ 42,390 $4.0 billion.
Antonio J. Bermúdez Project. In 2002, we began investing in theThe Antonio J. Bermúdez project, the main investment project in the Southern region and the fifth largest in Mexico. This project is designed to accelerate reserves recovery, as well as increase the recovery factor, by drilling additional wells and implementing a system of pressure maintenance through nitrogen injection. It consists of the Samaria, Cunduacán, Oxiacaque, Iride and Platanal fields, and covers an area of 163 square kilometers. As of December 31, 2017,2019, a total of 845882 wells had been completed, of which 230222 were producing. During 2017,2019, the project produced an average of 36.933.8 thousand barrels per day of crude oil and 160.1154.1 million cubic feet per day of natural gas. As of December 31, 2017,2019, cumulative production was 3.0 billion barrels of crude oil and 4.74.9 trillion cubic feet of natural gas. As of December 31, 2017,2019, proved hydrocarbon reserves in this fieldthese fields totaled 125.8107.7 million barrels of crude oil and 238.8152.4 billion cubic feet of natural gas. As of December 31, 2017,2019, total proved reserves were 184.1144.1 million barrels of oil equivalent, of which 118.594.9 million were proved developed reserves.
In nominal peso terms, our exploration and production segment’s capital expenditures for the Antonio J. Bermúdez project were Ps. 5,3521,148 million in 2015,2018 and Ps. 2,5623,166 million in 2016 and Ps. 1,306 million in 2017.2019. For 2018,2020, we anticipate that our capital expenditures for this project will be Ps. 1,5225,346 million and that our total accumulated investments in the project will reach approximately U.S. $30,849$9.5 billion.
In March 2005, we entered into a contract with Praxair México, S. de R.L. de C.V. to build, own and operate a nitrogen cryogenic plant, which was completed in June 2008. After completing testing in July 2008, we began injecting 190 million cubic feet per day of nitrogen into the project. In 2017, we paid approximately Ps. 491.5 million to acquire nitrogen from this plant, which we used to inject approximately 25,097 million cubic feet per day until July 9, 2017, when the injection of nitrogen was suspended.
Burgos Project. The Burgos project is the largest producer ofnon-associated gas in Mexico. In 1997, our exploration and production segment, through Pemex-Exploration and Production, initiated a development program for the Burgos natural gas fields. The purpose of the Burgos project is to enable us to meet increasing domestic demand for natural gas. The fields in Burgos accounted for 13.8%11.8% of our total natural gas production in 2017.2019. The project is located in northeastern Mexico.
During 2017,2019, the Burgos project produced an average of 699.2 billion567.6 million cubic feet per day of natural gas. As of December 31, 2017,In 2019, we drilled 16 additional wells at the drilling of 7,977Burgos project, bringing our total completed wells had been completed, 2,982drilled to 8,004, 2,626 of which were producing. The most important fields are the Nejo,Arcabuz-Culebra, Cuitláhuac, Cuervito, Velero and Santa Anita fields, which together produced 50.5%56.8% of the total production of the Burgos project in 2017.2019.
Main Fields of the Burgos Project
(as of December 31, 2017)2019)
Nejo | Arcabuz- Culebra | Cuitláhuac | Velero | Cuervito | Santa Anita | Nejo | Arcabuz- Culebra | Cuitláhuac | Velero | Cuervito | Santa Anita | |||||||||||||||||||||||||||||||||||||
Wells completed | 407 | 968 | 443 | 219 | 135 | 79 | 436 | 974 | 448 | 221 | 138 | 81 | ||||||||||||||||||||||||||||||||||||
Producing wells | 198 | 516 | 185 | 137 | 84 | 60 | 209 | 472 | 189 | 136 | 90 | 56 | ||||||||||||||||||||||||||||||||||||
2017 production of natural gas | 134 | 87 | 53 | 32 | 23 | 26 | ||||||||||||||||||||||||||||||||||||||||||
2019 production of natural gas (million cubic feet per day) | 120.4 | 81.1 | 43.3 | 28.5 | 15.6 | 33.7 | ||||||||||||||||||||||||||||||||||||||||||
Cumulative production of natural gas | 538.3 | 2,074.7 | 807.4 | 349.1 | 206.7 | 263.9 | 621.4 | 2,133.5 | 841.7 | 371.4 | 219.2 | 286.0 | ||||||||||||||||||||||||||||||||||||
Proved reserves of natural gas | 112.0 | 72.7 | 85.0 | 34.3 | 95.6 | 55.5 | 248.4 | 34.6 | 121.0 | 37.7 | 58.6 | 19.5 | ||||||||||||||||||||||||||||||||||||
Proved developed reserves | 100.2 | 69.0 | 63.1 | 30.5 | 36.7 | 36.7 | 164.1 | 33.2 | 101.9 | 37.7 | 22.2 | 9.9 | ||||||||||||||||||||||||||||||||||||
Proved undeveloped reserves | 11.7 | 3.7 | 21.9 | 3.9 | 58.9 | 18.9 | 84.3 | 1.4 | 19.2 | 0.0 | 36.3 | 9.6 |
Source: Pemex Exploration and Production.
During 2017,2019, proved reserves increased by 3.85.9 million barrels of oil equivalent, from 178.8169.7 million barrels of oil equivalent in 20162018 to 182.6175.6 million barrels of oil equivalent in 2017,2019, primarily due to a decelerationthe maintenance of production of certain fields in the decline of the gas production rate in 2017.Burgos project.
In nominal peso terms, our exploration and production segment’s capital expenditures (including capital expenditures made pursuant to Financed Public Works Contracts, or FPWCs) for the Burgos project were Ps. 5,855162 million in 2015,2018 and Ps. 2,032243 million in 2016 and Ps. 606 million in 2017.2019. For 2018,2020, we anticipate that our capital expenditures for this project will amount to Ps. 1751,500 million and that our total accumulated capital expenditures will reach approximately U.S. $19,243$20.5 billion.
Aceite Terciario del Golfo Project (formerly Paleocanal de Chicontepec). The ATG project, is located in the Northern region and covers an area of 4,243 square kilometers. This project comprises 29 fields, which are divided among eight sectors. As of December 31, 2017,2019, there was a total of 4,5694,659 wells completed, of which 1,9841,912 were producing. The project produced an average of 34.424.3 thousand barrels per day of crude oil per day in 20172019 as compared to 39.828.4 thousand barrels per day of crude oil per day in 2016,2018, which represents a 13.6%14.4% decrease, and
118.5 69.4 million cubic feet per day of natural gas in 2019 as compared to 92.2 million cubic feet of natural gas per day in 2017 as compared to 142.5 million cubic feet of natural gas per day in 2016,2018, which represents a 16.8%24.7% decrease. The decrease in crude oil and natural gas production was primarily due to the decline in pressure in certain reservoirs. As of December 31, 2017,2019, cumulative production was 314.4333.7 million barrels of crude oil and 688.2727.2 billion cubic feet of natural gas. As of December 31, 2017,2019, proved reserves totaled 441.8434.9 million barrels of crude oil and 893.1854.6 billion cubic feet of natural gas. Total proved hydrocarbon reserves were 620.1565.6 million barrels of oil equivalent, of which 125.185.6 million barrels of oil equivalent were proved developed reserves.
During 2017,2019, field development activities at the project included the drilling of 3211 new wells and the completion of 2413 wells, all 13 of which were classified as producing, reflecting a 100% success rate. As of December 31, 2017, 80%2019, 83.0% of the total producing wells were operating with artificial systems such as mechanical, pneumatic, hydraulic and electric pumping, while the remaining 20.0%17.0% were “flowing wells” that are classified accordingly because they did not require any means of artificial lift.
In nominal peso terms, our exploration and production segment’s capital expenditures for the ATG project were Ps. 2,817511 million in 2015,2018 and Ps. 1,487758 million in 2016 and Ps. 604 million in 2017.2019. For 2018,2020, we anticipate that our capital expenditures for this project will be Ps. 4782,311 million and that total accumulated investments in this project will be approximately U.S. $51.9$13.2 billion.
Crude Oil Sales
During 2017,2019, domestic consumption of crude oil amounted to approximately 769.0576.8 thousand barrels per day, which represented 39.7%34.2% of our total crude oil production. Through PMI’s activities, we sold the remainder of our crude oil production abroad. Maya crude oil accounted for 89.7%89.2% of exported crude oil volume sold by PMI in 2017.2019. See “—Business Overview—International Trading” in this Item 4.
The following table sets forth crude oil distribution for the past five years.
Crude Oil Distribution
At December 31, | 2017 vs. 2016 | At December 31, | 2019 | |||||||||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | ||||||||||||||||||||||||||||||||||||||
(in thousands of barrels per day) | (%) | (in thousands of barrels per day) | (%) | |||||||||||||||||||||||||||||||||||||||||||||
Production | 2,522.1 | 2,428.8 | 2,266.8 | 2,153.5 | 1,948.3 | (9.5 | ) | 2,266.8 | 2,153.5 | 1,948.3 | 1,822.5 | 1,683.8 | (7.6 | ) | ||||||||||||||||||||||||||||||||||
Distribution | ||||||||||||||||||||||||||||||||||||||||||||||||
Refineries | 1,229.1 | 1,161.1 | 1,064.0 | 935.0 | 769.0 | (17.8 | ) | 1,064.0 | 935.0 | 769.0 | 606.4 | 576.8 | (4.9 | ) | ||||||||||||||||||||||||||||||||||
Export terminals | 1,190.4 | 1,148.6 | 1,177.7 | 1,198.7 | 1,167.8 | (2.6 | ) | 1,177.7 | 1,198.7 | 1,167.8 | 1,186.9 | 1,102.5 | (7.1 | ) | ||||||||||||||||||||||||||||||||||
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Total | 2,419.5 | 2,309.7 | 2,241.7 | 2,133.7 | 1,936.7 | (9.2 | ) | 2,241.7 | 2,133.7 | 1,936.7 | 1,793.3 | 1,679.3 | (6.4 | ) | ||||||||||||||||||||||||||||||||||
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Statistical differences in stock | 102.6 | 119.1 | 25.2 | 19.8 | 7.8 | 46.6 | 25.2 | 19.8 | 11.6 | 29.2 | 20.0 | (31.5 | ) |
Note: Numbers may not total due to rounding.
(1) | Includes measurement inconsistencies, shrinkage and leakage, naphthas and condensates added to crude oil. |
Source: |
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Differences between the volume of crude oil measured at the wellhead and the volume distributed reflect customary adjustments due to, among other things, shifting inventories, evaporation, shrinkage and product segregation. In August 2014,the past, we identified increases in the difference between the volumes of crude oil production and distribution. Based on an analysis conducted in coordination with the CNH, we implemented various corrective measures to improve our measurement methodology and management system, including continuously monitoring our wells, calibrating our measurement equipment and installing additional crude oil
dehydration systems. To this end, sediment tanks have also been installed at marine terminals in order to accelerate water evaporation and crude oil stabilization in accordance with industry standards. In addition, crude oil barrels undergo a stabilization process in preparation for export, which involves certification by us, the buyer and a third party to verify that the contents meet international standards and contain no more than 0.5% water.
Gas Flaring
The flaring of produced gas, which consists of the burning off of surplus combustible vapors from a well, usually occurs as a result of operational adjustments to carry out maintenance at production facilities, and in some cases is due to limitations in the ability to handle, process or transport natural gas. In addition, the flaring of produced gas is also used as a safety measure to relieve well pressure. Gas flaring is considered to be one of the most significant sources of air emissions from offshore oil and gas installations. In 2017,2019, gas flaring represented 4.3%4.8% of total natural gas production, as compared to 8.8%3.7% of total natural gas production in 2016.2018. The increased gas flaring in 20162019 was primarily due to an explosion that occurredthe maintenance carried out in a gas sweetening plant at theAbkatún-A platform Akal field and in February 2016, management of oils with highgas-oil ratiothe floating production storage and offloading production system, as well as failures in gas compression equipment on offshore platforms. For more information on the explosion at theAbkatún-A platform, see “—Health, Safety and Environmental Performance” in this Item 4. We continue to implement programs to reduce gas flaring and improve gas extraction efficiency, including strategies to optimize the exploitation of wells with high associated gas contentprocessing plants at the Cantarell project. In addition,Ciudad Pemex facility. As a result, we are carrying out maintenance of our compression modules in March 2017, we agreedorder to certain programs withincrease the CNH, including five projects for U.S. $3.0 billion, which may allow us to improve our gas utilization rate to up to 98.0% at ourKu-Maloob-Zaap business unit by 2020. We began to take action steps under this program in 2017 and are continuing to work towards increasing our gas utilization rate.use of produced gas.
Pipelines
The crude oil and natural gas pipeline network owned by our exploration and production segment connects crude oil and natural gas producing centers with refineries and petrochemical plants. At the end of 2017,2019, this pipeline network consisted of approximately 38,75437,469 kilometers of pipelines, of which 2,0582,060 kilometers were located in the Northeast Marine region, 1,1731,421 kilometers were located in the Southeast Marine region, 9,3319,540 kilometers were located in the Southern region, 25,07624,448 kilometers were located in the Northern region and 1,116 kilometers are distribution and commercial pipelines.region. For a description of products transported by the pipeline network, see “—Business Overview—Logistics” in this Item 4.
Integrated Exploration and Production Contracts, and Financed Public Works Contracts and CSIEEs
Our FPWC program, previously known as the Multiple Services Contracts program, was first announced in December 2001. The objective of the program was to provide a contractual framework that promotes efficient execution of public works in order to increase Mexico’s oil and gas production. The FPWC were public works contracts based on unit prices that aggregate a number of different services into a single contract. Under the FPWC framework, Pemex-ExplorationPemex Exploration and Production retainedretains the rights and title to all oil and gas produced and works performed under each FPWC.
Our Integrated E&P Contracts program was established as part of reforms to the Mexican energy sector enacted in 2008. The objective of these Integrated E&P Contracts was to increase our execution and production capabilities. The oil and gas reserves located in and extracted from the areas to which we have a legal right, continue to be owned exclusively by the Mexican Government. Under this program, payments to the contractors were made on aper-barrel basis, plus recovery costs, provided that the payments did not exceed our cash flow from the particular block.
We may amend our Integrated E&P Contracts and FPWCs in order to align these contracts with the new contractual framework established under the Hydrocarbons Law. According to the Energy Reform Decree and the new contractual framework established under the Hydrocarbons Law anand existing Integrated E&P ContractContracts or FPWCFPWCs may be migrated into a contract for exploration and production upon agreement by the contract parties to
the technical guidelines established by the Ministry of EnergySENER (after seeking our favorable opinion) and the financial terms determined by the Ministry of Finance and Public Credit. Upon approval by the contract parties, the existing Integrated E&P Contract or FPWC will terminate and be replaced by the new contract for exploration and production without the need for a bidding process. If the contract parties do not agree to the proposed technical guidelines and contractual and financial terms, the original Integrated E&P Contract or FPWC will remain in effect.
On December 19, 2014, we and the relevant counterparties requested that the Ministry of Energy migrate the Integrated E&P Contracts governing the Santuario, Magallanes, Altamira, Arenque, Ébano, Miquetla and Pánuco blocks, and the FPWC governing the Misión and Olmos blocks, into new contracts for exploration and production. Parties to the FPWC governing the Nejo block and parties to the Integrated E&P Contract governing the San Andrés block made similar requests on November 24, 2015 and December 1, 2015. As part of the migration process, the Ministry of Energy, Ministry of Finance and Public Credit and the CNH requested further information on the proposed fiscal and technical terms of the new contracts, which Pemex Exploration and Production provided. On December 7, 2015, January 29, 2016 and May 11, 2016, the parties to the Altamira, San Andrés and Nejo blocks, respectively, withdrew their request for migration. We continue to evaluate the business case for the Altamira and San Andrés blocks and in the future mayre-submit our request for migration of the Integrated E&P Contracts for those blocks.
The migration of Integrated E&P Contracts and FPWCs into contracts for exploration and production has taken longer than expected. As of the date of this annual report, we have migrated three Integrated E&P Contracts to contracts for exploration and production:
On December 18, 2017, the Integrated E&P contract forContract governing the Santuario and El Golpe blocks was migrated;
On August 3, 2018, the Integrated E&P Contract governing the Ebano block inwas migrated; and
On November 21, 2018, the Southern region of MexicoIntegrated E&P Contract governing the Miquetla Block was migrated.
In addition, we migrated on December 18, 2017 and we expect the FPWC forFPWCs governing the Misión block and the Olmos block on March 2, 2018 and February 22, 2018, respectively, to different contractual frameworks permitted under the Petróleos Mexicanos Law. For more information on the migration of these Integrated E&P Contracts and FPWCs, see “—Other Exploration and Production Contracts” below.
As of the date of this annual report, we are pursuing integration of the technical and economic components of our Integrated E&P Contracts and FPWCs in order to execute extraction activities under the Burgos basin willlong-term service contracts for oil production (contratos de servicios de largo plazo para la producción del petróleoor CSIEEs) business model. The implementation of CSIEEs is part of our 2019-2023 Business Plan, see “Item 5—Operating and Financial Review and Prospects—2019-2023 Business Plan and Recent Initiatives.” The bidding process began in late 2019 and is expected to continue through to 2021. All of these contracts relate to relatively low risk proven and probable reserves, and some also have an exploration component.
Additionally, we are negotiating with third-party contractors the potential migration from our current contracts to contracts conforming to CSIEE-type terms, or otherwise preferable for us and for the third-party contractors. These negotiations include the FPWCs that govern the Pánuco, Altamira, Pitepec, Miahuapan and Magallanes blocks, all of which were previously evaluated in 2018 to be migrated intoto contracts for exploration and production inunder the first six monthsHydrocarbons Law.
The goal of 2018.these contract migration strategies is to increase our hydrocarbon production and to meet our reserve replacement goals at competitive costs. As of the date of this annual report, we have not migrated any existing FPWCs or Integrated E&P Contracts to CSIEEs or similar contracts.
Among the FPWC works during 2017,2019, maintenance and development activities were carried out in the Burgos project under the FPWC program.The work carried out in 20172019 represented an investment of approximately U.S. $99.0$197.1 million. In 2017,2019, natural gas production in the existing FPWC blocks reached 238.0120.8 million cubic feet per day and condensate production reached 3.0 thousand barrels per day.
During 2017,2019, contractors expended approximately U.S $251.4U.S. $196.4 million in connection with Integrated E&P Contracts. In 2017,2019, production in the existing Integrated E&P blocks reached 34.116.2 thousand barrels per day of crude oil and 58.149.2 million cubic feet per day of natural gas, for a total of 45.726.0 thousand barrels of oil equivalent per day.
New ExplorationFarm-Outs and Production Contracts and Farm-OutsCSIEEs
As a result ofOver the opportunities made available to us by the energy reform,last several years, we have pursuedfarm-outs and other partnerships in order to diversify and strengthen our exploration and production portfolio and to focus on the most profitable projects. Throughfarm-outs, we sell a partial interest in fields that have been granted to us and enter into agreements for the joint operation of such fields. This requires third parties to make financial contributions to the partnership and to provide field services, allowing us to recoup some of our previous investments in the fields and to share some of the risk associated with the further development of the fields, while maintaining an interest in the future profits.
On December 11, 2018, the Mexican Government announced the suspension of bidding rounds for exploration and extraction of hydrocarbons contracts in order to evaluate the results and progress of the existing contracts. On June 13, 2019, the Mexican Government announced the suspension of bidding rounds for newfarm-outs to provide an opportunity to evaluate the performance of existingfarm-outs. The existing farm-outs will continue to operate in accordance with the terms and conditions of their respective contracts. We understand the Mexican Government will use the results of such evaluation to determine whether to pursuefarm-outs in the future.
During 2019, in accordance with our 2019-2023 Business Plan, we evaluated the use of CSIEEs as a replacement for farm-outs to encourage the participation of the private sector in our operations. The CSIEE model seeks to increase production by guaranteeing incentive-based remuneration based on production received and the risk involved in the field in question pursuant to the terms of each contract. Each CSIEE contract is to have a term between 15 and 25 years. CSIEE contracts are expected to replace farm-outs as a vehicle for private sector involvement, although existingfarm-out arrangements will be maintained for the duration of their respective terms. However, as of December 31, 2019, no CSIEE was in effect.
TriónFarm-Out
On July 28, 2016, the CNH published the tender offer and bidding package to select a partner for Pemex Exploration and Production to carry out exploration and production activities in the Trión block field
assignments located in the Perdido Fold Belt in the Gulf of Mexico. Since the Trión block has a depth greater than 2,500 meters, it requires a high level of technical expertise and financial investment to develop.
On December 5, 2016, the CNH announced that BHP Billiton Petróleo Operaciones de México, S. de R.L. de C.V., or BHP Billiton Mexico, an affiliate of BHP BillitonGroup Limited and BHP BillitonGroup Plc, had been selected as the partner for Pemex Exploration and Production in the Trión blockfarm-out. Pursuant to the terms of its bid, BHP Billiton Mexico will makemade a U.S. $789.6 million contribution to the partnership in exchange for a 60% participating interest in the Trión Block. BHP Billiton Mexico will be the operator of the Trión block, and must invest U.S. $1.9 billion in the Triónfarm-out before we are required to invest in the project, which depending on the timeline set by the consortium, will likely be in four to five years.not occur until 2022. The corresponding exploration and production contract, joint operating agreement and other relevant agreements were executed on March 3, 2017, and we are currently working on the development stagesCNH approved the exploration plan in February 2018. As of December 31, 2019, this project.
Nobilis-MaximinoFarm-Out
On April 27, 2017, our Board of Directors authorized thefarm-out of the Nobilis-Maximino Block, which is located in ultra-deep waters in the area of the Perdido Fold Belt in the Gulf of Mexicoexploration and on September 18, 2017, the CNH published the announcement for the international public bidding process corresponding to that block. On December 8, 2017, however, we announced that, due to the high geological complexity of this ultra-deep-water field, as well as prevailing market conditions affecting the oil industry, we are delaying thefarm-out of the Nobilis-Maximino block. We continue to seek partners and evaluate opportunities for the Nobilis-Maximinofarm-out, including through potential future bidding rounds.evaluation stages.
Ogarrio,Cárdenas-Mora and Ayin-Batsil Farm-OutsAyin-BatsilFarm-Outs
In addition to the Trión and Nobilis-Maximino farm-outs,farm-out, on October 4, 2017, the CNH held a bidding round forfarm-outs of the Ogarrio,Cárdenas-Mora andAyin-Batsil blocks. No bids were received for theAyin-Batsil block, which is located in the shallow waters of the Gulf of Mexico. However, multiple bids were received for the Ogarrio block, which currently produces approximately 6,000 barrels of crude oil per day and 21 million cubic feet of natural gas per day, and the Cárdenas-Mora block, which currently produces approximately 5,000 barrels of crude oil per day and 18 million cubic feet of natural gas per day.block. The Ogarrio andCárdenas-Mora blocks, both onshore fields located in the state of Tabasco, were ultimately awarded to the German company Deutsche Erdoel AG (DEA) and the Egyptian company Cheiron Holdings Limited (Cheiron), respectively. DEA’s bid consisted of an initial cash payment of U.S. $190.0 million, a royalty rate of 13% and an additional cash payment of U.S. $213.9 million, which is the highestsign-up bonus submitted in a CNH bidding round as of the date of this annual report. Cheiron’s bid consisted of an initial cash payment of U.S. $ 125.0$125.0 million, a royalty rate of 13% and an additional cash payment of U.S. $41.5 million. The corresponding contracts were signed on March 6, 2018 and have a term of 25 years. We retain a 50% interest in both blocks. The Ogarrio and Cárdenas-Mora fields are currently in the development stage following the approval of the development plan by the CNH in March of 2019. In 2019, the Ogarrio field produced approximately 5.8 thousand barrels of crude oil per day and 16.7 million cubic feet per day of natural gas. In 2019, theCárdenas-Mora block produced approximately 5.4 thousand barrels per day of crude oil and 14.5 million cubic feet per day of natural gas.
Other Exploration and Production Contracts
In addition to thefarm-outs described above, we have also pursued other types of partnerships for the exploration and production of fields that were not already granted to us.
On December 5, 2016, we participated in the bidding process referred to as Round 1.4, through which we, as part of a consortium consisting of Pemex Exploration and Production, Chevron Energía de Mexico, S. de R.L. de C.V., or Chevron Energía, a subsidiary of Chevron Corporation, and INPEX Corporation, were awarded an exploration contract for a field located in the Perdido Fold Belt in the Gulf of Mexico. The field covers an area of approximately 1,686.9 square kilometers and is located approximately 117 kilometers off the coast of Mexico in water depths ranging between 500 meters and 1,700 meters. Chevron Energía will be the operator and holds a 33.3334% interest in the consortium, while Pemex Exploration and Production and INPEX Corporation each hold a 33.3333% interest. The corresponding exploration and production contract, joint operating agreement and other relevant agreements were executed on February 28, 2017. This project is currently in the exploration phase following approval of the exploration plan by the CNH in February of 2018.
On May 2, 2017, Pemex Exploration and Production entered into a contract for crude oil extraction with the CNH to upgrade the assignments under the shared shallow water production schemestructure for the Ek and Balam project area located in Campeche Sound. This project is in line with our stragegy as contemplated by the 2017-2021 Business Plan to accelerate the development of fields, making it possible to reach the maximum recovery factor and significantly increase production. Under the contract, which has a term of twenty-two22 years with two possiblefive-year extensions, Pemex Exploration and Producion will pay the Mexican Government will retain 70.5% of the operating profits and will pay Pemex Exploration and Production the remaining 29.5%. Pemex Exploration and Production has provided a guarantee of U.S. $5.0 billion.
On May 30, 2017, During 2019, we obtained approval from the CNH for the assignmentproduced an average of a new area that includes Chachiquin, located in the Cinturón Plegado Perdido region in the deep waters46.3 thousand barrels per day of the Gulfcrude oil and 10.7 million cubic feet per day of Mexico south of the maritime border with the U.S., and an area southwest of the Nobilis field.natural gas pursuant to this contract.
On June 19, 2017, we participated in another bidding round conducted by the CNH, referred to as Round 2.1. As a result of this bidding process, we won two blocks. We were awarded Block 2, which covers an area of 549 square kilometers and is located on the continental shelf of theTampico-Misantla basin, to the west of the Gulf of Mexico, in partnership with DEA. We are the operating partner in this block and own a 70% interest. Additionally, we were awarded Block 8, which is located in the Southeastern Basins and covers an area of 586 square kilometers, in partnership with Colombia’s Ecopetrol. In Block 8, we are also the operating partner and own a 50% interest. The corresponding contracts for the exploration and extraction of hydrocarbons with DEA and Ecopetrol were signed on September 25, 2017. Both blocks are in the exploration phase following approval of the exploration plans by the CNH in November and October of 2018, respectively.
On December 18, 2017, we executed contracts for an association with Petrofac México, S.A. de C.V., or Petrofac, under which we assigned to Petrofac the rights to certain fields that were part of the ElGolpe-Puerto Ceiba project, including the onshore fields of Santuario, El Golpe and Caracolillo located in the state of Tabasco. AsWe have a 64% share in this project. During 2019 we had an average production of December 31, 2017, we still own 64%10.8 thousand barrels per day of crude oil and 8.1 million cubic feet per day of gas. These fields are currently in the development stage following approval of the proved reservesdevelopment plan by the CNH in this project.December of 2018.
On January 31,March 2, 2018, we successfully participated in bidding Round 2.4,completed the first migration of an FPWC. The FPWC governing the Misión block was migrated to a shared production contract with Servicios Múltiples de Burgos, S.A. de C.V. and were awarded the assignment of four blocks, all of which are located in deep watersCNH. The Misión block is in the Gulfstates of Mexico. Pemex ExplorationNuevo León and Production and Royal Dutch Shell PLC were awarded Block 2 of the Perdido area. The consortium formed by Pemex Exploration and Production, Chevron and INPEX was awarded area 22 of the Cuenca Salina province. Finally, we were assigned Block 5Tamaulipas. We have a 51% interest in the Perdidocontractual area and area 18the average production under this contract in 2019 amounted to 101.6 million cubic feet per day of natural gas. The FPWC governing the Mexican Range province.Misión block allows exploration and extraction activities. The CNH approved the development plan in December 2018 and the exploration plan in January 2019. The Misión block is currently in both the exploration and extraction phases.
On March 27, 2018, we successfully participated in the first call of bidding Round 3 of the NCH,CNH, and were awarded seven contractual areas in shallow waters, six of them as part of a consortium and one on an individual basis. Pemex Exploration and Production won four blocks in the Southeast Basins: two in consortium with Total S.A., one with Shell Oil Company and one individually, as well as three blocks corresponding to the province of Tampico-Misantla-Veracruz: two in partnership with Compañía Española de Petróleos and one in partnership with DEA.
On May 7, 2018, we signed four exploration and extraction contracts covering severaldeep-water blocks in the Gulf of Mexico, the rights to which were auctioned off pursuant to the bidding round referred to as Round 2.4:
Block 2 with Shell Exploración y Extracción de México, S.A. de C.V., as operator. We have a 50% interest in the contractual area, which spans 2,146 square kilometers and is in the Plegado Perdido Belt.
Block 22 with Chevron Energía de Mexico, S. de R.L. de C.V., as operator, and Inpex E&P México, S.A. de C.V. We have a 27.5% interest in the contractual area, which spans 2,879 square kilometers and is in the Cuenca Salina region.
Block 5. We are the operator of and have a 100% interest in the contractual area, which spans 2,733 square kilometers and is in the Plegado Perdido Belt.
Block 18. We are the operator of and have a 100% interest in the contractual area, which spans 2,917 square kilometers and is in the Cordilleras Mexicanas region.
The CNH approved the exploration plans for Blocks 5 and 22 in May 2019, Block 2 in June 2019 and Block 18 in July 2019. These blocks are currently in the exploration phase.
On June 27, 2018, we signed seven exploration and extraction contracts covering shallow water blocks in the Gulf of Mexico, the rights to which were auctioned off pursuant to the bidding round referred to as Round 3.1:
Block 16 and Block 17 with DEM, S. de R. de C.V, as operator, and Cepsa E.P. Mexico, S. de R.L. de C.V. We have a 40% interest in the contractual area, which spans 785 square kilometers and is in the Tampico-Misantla-Veracruz area.
Block 18 with Cepsa E.P. Mexico, S. de R.L. de C.V. We operate the block with an 80% interest in the contractual area, which spans 813 square kilometers and is in the Tampico-Misantla-Veracruz area.
Block 29. We are the operator of and have a 100% interest in the contractual area, which spans 471 square kilometers and is in the Cuencas del Sureste area.
Block 32 with Total E&P México, S. A. de C.V. We operate the block with a 50% interest in the contractual area, which spans 1,027 square kilometers and is in the Cuencas del Sureste area.
Block 33 with Total E.P. Mexico, S. de R.L. de C. as operator. We have a 50% interest in the contractual area, which spans 581 square kilometers and is in the Cuencas del Sureste area.
Block 35 with Shell Exploración y Extracción de México, S.A. de C.V. as operator. We have a 50% interest in the contractual area, which spans 798 square kilometers and is in the Cuencas del Sureste area.
The CNH approved the exploration plans for Block 18 in July 2019 and for the other six blocks in September 2019. These blocks are currently in the exploration phase.
On August 3, 2018, we migrated the Integrated E&P Contract for the Ébano block to a shared production contract with DS Servicios Petroleros, S.A. de C.V. (DIAVAZ), as operator, and D&S Petroleum, S.A. de C.V. The Ébano block spans an area of 1,569.1 square kilometers and is located in the states of Veracruz, San Luis Potosí and Tamaulipas. In 2019, average production under this contract was 6.1 thousand barrels per day of crude oil and 1.7 million cubic feet per day of gas. We and DIAVAZ contributed to a corporate guarantee delivered to the Mexican Government in accordance with our respective interests in the partnership. The corporate guarantee totaled U.S. $500 million, 55% of which was contributed by us and 45% of which was contributed by DIAVAZ.
Our shared production contract for the Ébano block allows for exploration and extraction activities. The CNH approved the development plan in May 2019 and the exploration plan in October 2019. This block is currently in both the exploration and extraction phases.
On September 18, 2018, we signed apre-unitization agreement related to certain tracts of the Yaxché fields and the shared production contract for Block 7 with a consortium of Talos Energy Inc., as operator, Sierra Oil & Gas and Premier Oil plc. Both areas are located in the offshore regions of Mexico’s Southeast basin. Thispre-unitization agreement is atwo-year contract that enables information sharing relating to the Zama discovery, which spans Block 7 and a neighboring block assigned to us.
On December 9, 2019, theTalos-led consortium submitted to SENER a shared reservoir notice for the Zama field. On March 5, 2020, SENER resolved to continue with the unitization process.
On November 21, 2018, we migrated the Integrated E&P Contract for the Miquetla block to a license contract with Operadora de Campos DWF, S.A. de C.V., as operator. The Miquetla block spans 139.7 square kilometers and is located in the states of Puebla and Veracruz. In 2019, average production under this contract was 1.3 thousand barrels per day of crude oil and 4.2 million cubic feet per day of natural gas. We have a 49% interest in the contractual area and the contract has a term of 30 years. Our license contract for the Miquetla block allows for exploration and extraction activities. The CNH approved the development and exploration plans in November 2019. This block is currently in both the exploration and extraction phases.
Expediting the development of newly discovered fields
In 2019, we began the development of 22 new fields discovered in the last four years, 18 in shallow water and four onshore. We designed a strategy for these developments, considering both the manner of contracting and in the formation of integrated services.
In order to improve the contracting process, we established the following four strategies:
regulatory, contractual and constructive simplification;
establishment of reference detail type engineering;
homologation of technical bases for design, and
encouragement of the formation of consortiums of companies to develop more efficiently the infrastructure necessary for the production and transportation of hydrocarbons, such as platforms, pipelines and interconnections, among others.
In 2019, we contracted three infrastructure development packages, which together entailed the development of 15 platforms and 17 pipelines. During 2019, the construction of marine infrastructure progressed 79.6% and the construction of land infrastructure (land platforms, pipelines, process) progressed 45.1%.
In 2019, we also contracted five integrated drilling packages, including the drilling of 128 wells in 22 fields. As of December 31, 2019, we had begun production in five fields 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 natural gas in 2019.
Collaboration and Other Agreements
Pemex Exploration and Production, or its predecessorPemex-Exploration and Production, have entered intonon-commercial scientific and technology agreements with the following parties, which, except as noted, remain in effect as of the date of this annual report:
Pan American Oil, Plc (PAO), during 2012;2015;
Hokchi Energy, S.A. de C.V., ExxonMobil Ventures Mexico Ltd., Japan Oil, Gas and Metals National Corporation, Chevron Deepwater Mexico Inc., BG North Americaduring 2016;
Kinder Morgan Texas LLC, during 2013; and2016;
ENI México, S. de R.L. de C.V., during 2013.2016 (expired in May 2019);
Pemex Exploration
Ministerio de Energía y Minas de Nicaragua, Pan American Oil PLC and Production did not enter into any collaboration agreements in 2017.the Empresa Nicaragüense del Petróleo (Petronic), during 2017;
Sun God Energía de México, S.A. de C.V., during 2018.
Through these agreements, we seekhave sought to increase our technical and scientific knowledge in areas including deepwater subsalt exploration and drilling; enhanced oil recovery processes, such as air injection; and reservoir characterization of complex structures. These broad agreements of technological and scientific collaboration are strictlynon-commercial,i.e., there is no transfer of resources and they do not establish a binding relationship among the parties.
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 Pemex Exploration and 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. Beginning July 1, 2019, such services were provided through Pemex Exploration and Production.
During 2019, we carried out the following activities: drilling of 74 wells, 54 of which were onshore and 20 offshore, completion of 48 wells, 25 of which were onshore and 23 offshore and 328 workovers, 263 of which were onshore and 65 offshore. These services were performed with an average of 99 rigs, 61 of which were onshore and 38 offshore, including both owned and leased rigs.
In addition, during 2019 we carried out 10,460 well services for our own infrastructure, 48% of which were wirelines, 32% cementings, 17% registrations and perforations and 3% coiled tubing operations. We also provided well services to our external client Marinsa.
Drilling and Services Capital Expenditures
Our drilling and services segment invested Ps. 738 million on capital expenditures in 2019. The 2020 budget for drilling and services capital expenditures is included in the budget for Pemex Exploration and Production capital expenditures.
The following table sets forth our drilling and services segment’s capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2019. 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.
Drilling and Services’ Capital Expenditures
Year ended December 31,(1) | Budget | |||||||||||||||
2017 | 2018 | 2019(2) | 2020(3)(4) | |||||||||||||
(in millions of pesos)(5) | ||||||||||||||||
Drilling and Services | ||||||||||||||||
Acquisition of TwoJack-Up Platforms | Ps. | 794 | Ps. | 804 | Ps. | 403 | n.a. | |||||||||
Acquisition of NineLand-Based Drilling Rigs | 352 | 353 | 178 | n.a. | ||||||||||||
Drilling Rig Equipment and Well Service Equipment Maintenance Program | 96 | 83 | 60 | n.a. | ||||||||||||
Acquisition of Two Modular Drilling Rigs | 3 | 2 | 7 | n.a. | ||||||||||||
Others | 307 | 146 | 90 | n.a. | ||||||||||||
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|
|
|
|
|
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| |||||||||
Total | Ps. | 1,550 | Ps. | 1,388 | Ps. | 738 | n.a |
Note: Numbers may not total due to rounding.
(1) | Amounts based on cash basis method of accounting. |
(2) | Figures include our drilling and services segment’s capital expenditures for thesix-month period ended June 30, 2019. Prior to July 1, 2019, Pemex Drilling and Services operated as an additional productive state-owned subsidiary. As of July 1, 2019, Pemex Drilling and Services was merged into Pemex Exploration and Production. |
(3) | As a result the merger of Pemex Drilling and Services into Pemex Exploration and Production on July 1, 2019, our drilling and services segment ceased to operate as a separate segment, but rather was consolidated as a line of business within our exploration and development segment. 2020 budget figures for our drilling and services line of business are included within our capital expenditures for our exploration and development segment. See “Item 4—Business Overview—Exploration and Development Capital Expenditures.”. |
(4) | Original budget published in the Official Gazette of the Federation on December 11, 2019. |
(5) | Figures are stated in nominal pesos. |
Source: Petróleos Mexicanos.
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
Refining Processes and Capacity
Our refining production processes include the following:
• | Atmospheric distillation. This process heats crude oil in a tube furnace at atmospheric pressure to distill refined products. The primary products produced are gasoline, jet fuel, diesel, atmospheric gas oil and atmospheric residual crude oil. |
• | Vacuum distillation. This process heats crude oil or other feedstock in a vacuum distillation column, which is operated at low pressures. The objective of this process is to maximize production of heavy vacuum gas oil, which is produced by boiling crude oil. |
• | Cracking. This process uses either heat and pressure or a catalytic agent to increase gasoline yields from crude oil. |
• | Visbreaking. This is a thermal cracking process, which uses ahorizontal-tube heater fired to a high temperature. Visbreaking reduces flasher bottom viscosity and produces some heavy gas oil. |
• | Reforming processes. These processes use heat and catalysts to transform smaller or unstable hydrocarbon molecules into larger, more useful refining or blending products. For example, we use reforming processes to convert low octane gasoline into higher octane stocks that are suitable for blending into finished gasoline and to convert naphthas into more volatile, higher octane products. |
• | Hydrotreatment or residual hydrocracking. This process uses a catalyst and hydrogen at high temperature and pressure to remove sulfur, nitrogen and some aromatic compounds. Hydrotreatment also processes some lighter liquid productoff-take. |
• | Alkylation and isomerization. This polymerization process unites olefins and isoparaffins. Butylenes and isobutanes are combined with sulfuric acid or hydrofluoric acid to rearrangestraight-chain hydrocarbon molecules intobranched-chain products. Pentanes and hexanes, which are difficult to reform, are isomerized through the use of aluminum chloride and otherprecious-metal catalysts. Normal butane may be isomerized to provide a portion of the |
• | Coking. This process is a severe method of thermal cracking used to upgrade heavy residuals into lighter products or distillates. Coking producesstraight-run gasoline (coker naphtha) and variousmiddle-distillate fractions used as catalytic feedstock, thus generating a concentrated solid material. |
These production processes together constitute our production capacity as set forth in the table below.
Refining Capacity by Production Process
At December 31, | At December 31, | |||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||||||||||||||||||
(in thousands of barrels per day) | (in thousands of barrels per day) | |||||||||||||||||||||||||||||||||||||||
Production Process | ||||||||||||||||||||||||||||||||||||||||
Atmospheric distillation | 1,690.0 | 1,602.0 | 1,640.0 | 1,602.0 | 1,627.0 | 1,640.0 | 1,602.0 | 1,627.0 | 1,640.0 | 1,640.0 | ||||||||||||||||||||||||||||||
Vacuum distillation | 832.0 | 767.5 | 772.4 | 767.5 | 772.2 | 772.4 | 767.5 | 772.2 | 772.2 | 772.2 | ||||||||||||||||||||||||||||||
Cracking | 422.5 | 422.5 | 422.5 | 422.5 | 422.5 | 422.5 | 422.5 | 422.5 | 422.5 | 422.5 | ||||||||||||||||||||||||||||||
Visbreaking | 91.0 | 91.0 | 91.0 | 91.0 | 91.0 | 91.0 | 91.0 | 91.0 | 91.0 | 91.0 | ||||||||||||||||||||||||||||||
Reforming | 279.3 | 279.3 | 279.3 | 279.3 | 279.3 | 279.3 | 279.3 | 279.3 | 279.3 | 279.3 | ||||||||||||||||||||||||||||||
Hydrotreatment | 1,067.5 | 1,067.5 | 1,099.9 | 1,230.0 | 1,230.0 | 1,099.9 | 1,230.0 | 1,230.0 | 1,230.0 | 1,230.0 | ||||||||||||||||||||||||||||||
Alkylation and isomerization | 155.3 | 154.3 | 154.8 | 154.3 | 154.3 | 154.8 | 154.3 | 154.3 | 154.3 | 154.3 | ||||||||||||||||||||||||||||||
Coking | 155.8 | 155.8 | 155.8 | 155.8 | 155.8 | 155.8 | 155.8 | 155.8 | 155.8 | 155.8 |
Source: Base de Datos Institucional (Pemex Institutional Database, or Pemex BDI).
As of December 31, 2017,2019, we owned and operated six refineries: Cadereyta, Madero, Minatitlán, Salamanca, Salina Cruz and Tula. Our refineries consist of atmospheric and vacuum distillation units, where the bulk of crude oil input is processed. Secondary processing facilities include desulfurization units and facilities for catalytic cracking, reforming and hydrotreating.
During 2017,2019, our refineries processed 767.0592.0 thousand barrels per day of crude oil (127.2(103.2 thousand barrels per day at Cadereyta, 44.658.0 thousand barrels per day at Madero, 86.491.6 thousand barrels per day at Minatitlán, 156.892.9 thousand barrels per day at Salamanca, 137.0125.1 thousand barrels per day at Salina Cruz and 215.1121.2 thousand barrels per day at Tula), which in total consisted of 456.4299.9 thousand barrels per day of Olmeca and Isthmus crude oil and 310.4292.1 thousand barrels per day of Maya crude oil.
In recent years,the first nine months of 2019, we have been affected by operational difficulties at our auxiliary services facilities. In order to increase the processingprocessed 151.7 thousand barrels per day of crude oil above the 504.9 thousand barrels per day we processed during the fourth quarter of 2018. This recovery was mainly due to improved levels of processing and production that resulted from the maintenance carried out in our refineries since March 2019. Such maintenance was financed with operating cash flow. Specific factors that contributed to this recovery include: the stabilization of process levels at our refineriesMinatitlan refinery, the restart of operations of the Mayan distilling unit at our Madero refinery in June 2019, the stabilization of operations at our Cadereyta refinery during the first nine months of 2019, with an average production level of 107.9 thousand barrels per day, and the productionstabilization of petroleum products,operations at our Salamanca refinery through August 2019 due to the restart of two distilling units.
In the last quarter of 2019, we are implementingprocessed 557.1 thousand barrels per day of crude oil. This decrease, which began at the end of the third quarter, was due to increased refinery maintenance programs for critical equipmentactivities that temporarily reduced our refining capacity since September 2019. During 2019, we processed 592.0 thousand barrels per day of crude oil, a decrease of 3.2% compared to improve the safety and reliability2018.
We began maintenance of our operating processes andrefineries pursuant to improve the performance levelsour refinery rehabilitation program in 2019, which emphasizes addressing critical risks of our refineries.facilities, improving efficiency and stabilizing our crude oil processing. We anticipate that this rehabilitation program will conclude in 2020. Among others, our refinery rehabilitation program has included maintenance of the following equipment: a crude distilling unit, a distilling unit, a visbreaker, a delayed coking unit, a fluid catalytic unit, a solvent desalphalting unit, a catalytic reformer unit, a methyl tert-butyl ether (MTBE) unit, an alkylation unit, an isomerization unit, hydrotreaters and sulfur recovery units.
Since 1993, through our subsidiary company, P.M.I. Norteamérica, S.A. de C.V. (PMI-NASA),PMI-NASA, we have participated in a limited partnership with Shell Oil Company in a refinery located in Deer Park, Texas, which has the capacity to process 340 thousand barrels per day of crude oil. Under the Deer Park Limited Partnership agreement,PMI-NASA and Shell Oil Company each provide 50% of the refinery’s crude oil input and own 50% of the refinery’s output. This agreement is limited to the specific purpose of operating the Deer Park refinery.
Production
We produce a wide range of products derived from crude oil and natural gas, including LPG, gasoline, jet fuel, diesel, fuel oil, asphalts, lubricants and other refined products. In 2017,2019, we produced 786.2625.6 thousand barrels per day of refined products (including dry gasby-products of the refining process), as compared to 977.2628.5 thousand barrels per day in 2016,2018, representing a decrease of 19.5%0.5%. ThisDespite the overall decrease in refined products, the production wasof distillates (gasoline, diesel and jet fuel) increased during the fourth quarter of 2019, mainly due to a decrease in crude oil productionincreased performance as a result of the implementation of major maintenance programs at the Madero and Minatitlán refineriescarried out in the second half of the year. In addition, our Salina Cruz refinery was affected by natural disasters: In June of 2017, the refinery was forced into an emergency shutdown as a result of flooding caused by tropical storm “Calvin”, and on September 7, 2017, an earthquake caused the refinery to go into an automatic safety shutdown. These natural disasters did not result in structural damage to our Salina Cruz refinery, although our electrical power generators were affected, and operations resumed during November of 2017.refineries.
The following table sets forth, by category, our production of petroleum products from 2013 through 2017.for the five years ended December 31, 2019.
Refining Production
Year ended December 31, | 2017 vs. 2016 | Year ended December31, | 2019 | |||||||||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | ||||||||||||||||||||||||||||||||||||||
(in thousands of barrels per day) | (%) | (in thousands of barrels per day) | (%) | |||||||||||||||||||||||||||||||||||||||||||||
Refinery Crude Oil Runs | 1,224.1 | 1,155.1 | 1,064.5 | 933.1 | 767.0 | (17.8 | ) | 1,064.5 | 933.1 | 767.0 | 611.9 | 592.0 | (3.2 | ) | ||||||||||||||||||||||||||||||||||
Refined Products | ||||||||||||||||||||||||||||||||||||||||||||||||
Liquefied petroleum gas | 25.2 | 26.4 | 21.4 | 17.2 | 15.8 | (8.1 | ) | 21.4 | 17.2 | 15.8 | 10.1 | 7.2 | (28.7 | ) | ||||||||||||||||||||||||||||||||||
Gasoline | ||||||||||||||||||||||||||||||||||||||||||||||||
Pemex Magna | 360.5 | 290.9 | 272.5 | 150.6 | 11.0 | (92.7 | ) | 272.5 | 150.6 | 11.0 | 8.8 | 13.9 | 57.6 | |||||||||||||||||||||||||||||||||||
Ultra-Low Sulfur Magna | 56.7 | 99.1 | 88.4 | 165.5 | 238.7 | 44.2 | 88.4 | 165.5 | 238.7 | 196.4 | 187.1 | (4.7 | ) | |||||||||||||||||||||||||||||||||||
Pemex Premium(1) | 19.8 | 30.8 | 16.8 | 7.7 | 5.6 | (27.3 | ) | 16.8 | 7.7 | 5.6 | 1.9 | 1.7 | (9.4 | ) | ||||||||||||||||||||||||||||||||||
Base | 0.2 | 0.8 | 3.6 | 1.6 | 1.8 | 12.5 | 3.6 | 1.6 | 1.8 | — | 0.8 | — | ||||||||||||||||||||||||||||||||||||
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Total | 437.3 | 421.6 | 381.4 | 325.3 | 257.0 | (21.0 | ) | 381.4 | 325.3 | 257.0 | 207.1 | 203.5 | (1.7 | ) | ||||||||||||||||||||||||||||||||||
Kerosene (Jet fuel) | 60.8 | 53.4 | 47.8 | 42.8 | 40.5 | (5.4 | ) | 47.8 | 42.8 | 40.5 | 34.7 | 29.0 | (16.3 | ) | ||||||||||||||||||||||||||||||||||
Diesel | ||||||||||||||||||||||||||||||||||||||||||||||||
Pemex Diesel(2) | 217.7 | 186.9 | 191.5 | 130.1 | 87.4 | (32.8 | ) | |||||||||||||||||||||||||||||||||||||||||
Pemex Diesel(2) | 191.5 | 130.1 | 87.4 | 67.8 | 54.8 | (19.1 | ) | |||||||||||||||||||||||||||||||||||||||||
Ultra-Low Sulfur Diesel | 92.1 | 97.8 | 83.0 | 85.1 | 63.8 | (25.0 | ) | 83.0 | 85.1 | 63.8 | 48.9 | 74.1 | 51.7 | |||||||||||||||||||||||||||||||||||
Others | 3.7 | 1.9 | 0.2 | 1.0 | 2.4 | 140.0 | 0.2 | 1.0 | 2.4 | 0.1 | 1.3 | 871.1 | ||||||||||||||||||||||||||||||||||||
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Total | 313.4 | 286.6 | 274.7 | 216.2 | 153.6 | (29.0 | ) | 274.7 | 216.2 | 153.6 | 116.8 | 130.3 | 11.5 | |||||||||||||||||||||||||||||||||||
Fuel oil(3) | 268.8 | 259.2 | 237.4 | 228.1 | 217.3 | (4.7 | ) | 237.4 | 228.1 | 217.3 | 185.1 | 149.8 | (19.1 | ) | ||||||||||||||||||||||||||||||||||
Other refined products | ||||||||||||||||||||||||||||||||||||||||||||||||
Asphalts | 18.7 | 23.9 | 17.7 | 16.9 | 16.5 | (2.4 | ) | 17.7 | 16.9 | 16.5 | 13.8 | 10.0 | (27.3 | ) | ||||||||||||||||||||||||||||||||||
Lubricants | 4.4 | 3.7 | 2.3 | 3.0 | 1.9 | (36.7 | ) | 2.3 | 3.0 | 1.9 | 1.9 | 0.9 | (52.0 | ) | ||||||||||||||||||||||||||||||||||
Paraffins | 0.7 | 0.6 | 0.5 | 0.6 | 0.4 | (33.3 | ) | 0.5 | 0.6 | 0.4 | 0.5 | 0.2 | (57.2 | ) | ||||||||||||||||||||||||||||||||||
Still gas | 70.7 | 63.9 | 62.2 | 61.9 | 47.9 | (22.6 | ) | 62.2 | 61.9 | 47.9 | 34.8 | 45.4 | 30.4 | |||||||||||||||||||||||||||||||||||
Other refined products(4) | 75.7 | 66.7 | 68.9 | 65.3 | 35.5 | (45.6 | ) | 68.9 | 65.3 | 35.5 | 23.7 | 49.3 | 107.6 | |||||||||||||||||||||||||||||||||||
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Total | 170.2 | 158.8 | 151.6 | 147.6 | 102.1 | (30.8 | ) | 151.6 | 147.6 | 102.1 | 74.7 | 105.8 | 41.6 | |||||||||||||||||||||||||||||||||||
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Total refined products | 1,275.8 | 1,206.1 | 1,114.3 | 977.2 | 786.2 | (19.5 | ) | 1,114.3 | 977.2 | 786.2 | 628.5 | 625.6 | (0.5 | ) | ||||||||||||||||||||||||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Pemex Premium is anultra-low sulfur gasoline with 0.003% sulfur content. |
(2) | Pemex Diesel is sold in the northern border market with 0.003% sulfur content. |
(3) | Includes heavy fuel oil and intermediate 15. |
(4) | Includes mainly coke, along with other products such as aeroflex, furfural extract, and light cyclic |
Source: Pemex BDI.
Fuel oil, automotiveOur refining production mostly consist of gasoline, diesel and diesels represent the bulk of our production.fuel oil. In 2017,2019, gasoline represented 32.7%32.5%, fuel oil represented 27.6% and23.9%, diesel fuel represented 19.5%20.8%, jet fuel represented 4.6% and LPG represented 1.2% of total petroleum products production. Jet fuel represented 5.2% and LPG represented 2.0% of total production of petroleum products in 2017. The remainder, 13.0%,16.9% of our production, consisted of a variety of other refined products.
As a result of our strategy of investing in technology to improve the quality of our fuels, we have introduced new environmentally sound products such asultra-low sulfur gasoline (or ULSG) andultra-low sulfur diesel (or ULSD).
In recent years, our production has been affected by operational problems in our auxiliary services facilities. In order to improve production, our 2017-2021 Business Plan includes measures to ensure the supply of auxiliary services through partnerships with third parties. On September 1, 2017, we entered into long-term agreements
with Air Liquide for the supply of hydrogen to our Tula refinery. Air Liquide will operate the existing hydrogen plant and will invest in the construction of a second plant at our Tula refinery. Air Liquide intends to provide the total supply of hydrogen required for both the existing and new plant.
Additionally, in October 2017, we began the process of selecting partners that will supply the hydrogen for our Madero and Cadereyta refineries, and in April of 2018, we entered into a long-term agreement with the German company Linde AG for the supply of hydrogen to our Madero refinery. We expect that by carefully selecting partners we will be able to reduce the cost and improve the reliability of the supply of hydrogen, which, in turn, we believe will improve the reliability of our crude oil refining and decrease unscheduled stoppages. We also expect that these projects will strengthen the operational performance of our Tula, Madero and Cadereyta refineries and increase the production of gasoline and diesel.
Variable Refining Margin
During 2017,2019, the National Refining System recorded a variable refining margin of U.S. $5.43$0.80 per barrel, an increasea decrease of U.S. $0.95$0.16 per barrel as compared to U.S. $4.48$0.96 in 2016.2018. This is broadly thedecrease was primarily a result of a decline in prices and weak refining margins in the recoverynorth coast of the Gulf of Mexico, which were caused by decreased demand for gasoline and heightened levels of refinery production. The decrease was partially offset by increased operational performance of the National Refining System due to an increase in international prices for refined products in 2017.the yield of distillates.
The following table sets forth the variable refining margin for the five years ended December 31, 2017.2019.
Variable Refining Margin
Year ended December 31, | 2017 vs. 2016 | |||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | ||||||||||||||||||||
(U.S dollars per barrel) | (%) | |||||||||||||||||||||||
Variable margin | (1.84 | ) | 1.76 | 3.35 | 4.48 | 5.43 | 21.2 |
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(U.S. dollars per barrel) | (%) | |||||||||||||||||||||||
Variable margin | 3.35 | 4.48 | 5.43 | 0.96 | 0.80 | (16.6 | ) |
Domestic Sales
We market a full range of refined products, including gasoline, jet fuel, diesel, fuel oil and petrochemicals. We are one of a few major producers of crude oil worldwide that experiences significant domestic demand for our refined products.
For the five years ended December 31, 2017,2019, the value of our domestic sales of refined products and petrochemicals was as follows:follows.
Value of Refining’s Domestic Sales(1)
Year ended December 31, | 2017 vs. 2016 | Year ended December 31, | 2019 | |||||||||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | ||||||||||||||||||||||||||||||||||||||
(in millions of pesos)(2) | (%) | (in millions of pesos)(2) | (%) | |||||||||||||||||||||||||||||||||||||||||||||
Refined Products | ||||||||||||||||||||||||||||||||||||||||||||||||
Gasoline | ||||||||||||||||||||||||||||||||||||||||||||||||
Pemex Magna | Ps. | 340,750.7 | Ps. | 347,952.4 | Ps. | 274,006.9 | Ps. | 248,595.2 | Ps. | 361,021.7 | 45.2 | Ps. | 274,006.9 | Ps. | 248,595.2 | Ps. | 361,021.7 | Ps. | 428,838.0 | Ps. | 374,020.2 | (12.8 | ) | |||||||||||||||||||||||||
Pemex Premium | 63,723.1 | 80,058.9 | 81,813.5 | 87,422.8 | 82,028.7 | (6.2 | ) | 81,813.5 | 87,422.8 | 82,028.7 | 83,837.1 | 75,538.0 | (9.9 | ) | ||||||||||||||||||||||||||||||||||
Aviation fuels (Others) | 414.1 | 387.5 | 339.8 | 342.4 | 371.1 | 8.4 | 339.8 | 342.4 | 371.1 | 433.1 | 404.7 | (6.6 | ) | |||||||||||||||||||||||||||||||||||
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Total | 404,887.9 | 428,398.8 | 356,160.2 | 336,360.4 | 443,421.5 | 31.8 | Ps. | 356,160.2 | Ps. | 336,360.4 | Ps. | 443,421.5 | Ps. | 513,108.2 | Ps. | 449,962.9 | (12.3 | ) | ||||||||||||||||||||||||||||||
Kerosene (Jet fuel) | 35,417.9 | 36,449.3 | 27,077.2 | 28,945.2 | 39,024.5 | 34.8 | 27,077.2 | 28,945.2 | 39,024.5 | 56,793.9 | 55,716.4 | (1.9 | ) | |||||||||||||||||||||||||||||||||||
Diesel | ||||||||||||||||||||||||||||||||||||||||||||||||
Pemex Diesel | 178,929.4 | 194,545.6 | 139,796.2 | 117,556.3 | 181,854.4 | 54.7 | 139,796.2 | 117,556.3 | 181,854.4 | 207,499.4 | 171,405.9 | (17.4 | ) | |||||||||||||||||||||||||||||||||||
Others | 32,542.0 | 31,156.7 | 22,930.4 | 19,236.4 | 28,195.1 | 46.6 | 22,930.4 | 19,236.4 | 28,195.1 | 26,669.3 | 23,659.7 | (11.3 | ) | |||||||||||||||||||||||||||||||||||
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Total | 211,471.4 | 225,702.4 | 162,726.7 | 136,792.7 | 210,049.5 | 53.6 | Ps. | 162,726.7 | Ps. | 136,792.7 | Ps. | 210,049.5 | Ps. | 234,168.6 | Ps. | 195,065.6 | (16.7 | ) | ||||||||||||||||||||||||||||||
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Fuel oil | ||||||||||||||||||||||||||||||||||||||||||||||||
Total | 78,001.8 | 46,838.3 | 25,906.0 | 16,436.3 | 35,622.9 | 116.7 | 25,906.0 | 16,436.3 | 35,622.9 | 43,779.1 | 28,789.8 | (34.2 | ) | |||||||||||||||||||||||||||||||||||
Other refined products | ||||||||||||||||||||||||||||||||||||||||||||||||
Asphalts | 7,865.4 | 10,788.0 | 7,575.5 | 5,468.7 | $ | 5,895.8 | 7.8 | 7,575.5 | 5,468.7 | 5,895.8 | 7,062.0 | 6,058.3 | (14.2 | ) | ||||||||||||||||||||||||||||||||||
Lubricants | 2,991.2 | 2,618.9 | 1,297.5 | 1,473.0 | 1,061.4 | (27.9 | ) | 1,297.5 | 1,473.0 | 1,061.4 | 1,277.4 | 673.3 | (47.3 | ) | ||||||||||||||||||||||||||||||||||
Paraffins | 339.4 | 319.2 | 257.9 | 267.0 | 230.9 | (13.5 | ) | 257.9 | 267.0 | 230.9 | 291.4 | 135.8 | (53.4 | ) | ||||||||||||||||||||||||||||||||||
Coke | 473.4 | 763.3 | 669.5 | 501.9 | 421.1 | (16.1 | ) | 669.5 | 501.9 | 421.1 | 200.5 | 666.0 | 232.3 | |||||||||||||||||||||||||||||||||||
Citroline | 2.3 | 0.4 | 0.9 | 4.6 | 3.6 | (21.7 | ) | 0.9 | 4.6 | 3.6 | — | — | — | |||||||||||||||||||||||||||||||||||
Gas oil for domestic use | 273.1 | 432.2 | 587.4 | 424.2 | 0.0 | (100.0 | ) | 587.4 | 424.2 | — | — | — | — | |||||||||||||||||||||||||||||||||||
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Total | Ps. | 11,944.8 | Ps. | 14,921.9 | Ps. | 10,388.8 | Ps. | 8,139.4 | Ps. | 7,612.8 | (6.5 | ) | Ps. | 10,388.8 | Ps. | 8,139.4 | Ps. | 7,612.8 | Ps. | 8,831.2 | Ps. | 7,533.5 | (14.7 | ) | ||||||||||||||||||||||||
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Total Refined Products | Ps. | 741,723.8 | Ps. | 752,310.8 | Ps. | 582,258.9 | Ps. | 526,673.9 | Ps. | 735,731.2 | 39.7 | Ps. | 582,258.9 | Ps. | 526,673.9 | Ps. | 735,731.2 | Ps. | 856,681.0 | Ps. | 737,068.2 | (14.0 | ) | |||||||||||||||||||||||||
Petrochemicals(3) | Ps. | 3,930.9 | Ps. | 3,118.0 | Ps. | 3,905.6 | Ps. | 3,795.9 | Ps. | 2,422.4 | (36.2 | ) | ||||||||||||||||||||||||||||||||||||
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Petrochemicals(3) | Ps. | 6,882.8 | Ps. | 7,582.2 | Ps. | 3,930.9 | Ps. | 3,118.0 | Ps. | 3,905.6 | 25.3 |
Note: Numbers may not total due to rounding.
(1) | Excludes IEPS tax and value added tax. See “—Taxes, Duties and Other Payments to the Mexican Government” in this Item 4. |
(2) | Figures are stated in nominal pesos. See “Item 3—Key Information—Selected Financial Data.” |
(3) | Petrochemical products produced at refineries operated by our industrial transformation segment (carbon black feedstocks and propylene). |
Source: Pemex BDI.
In 2017,2019, our domestic sales of refined products increaseddecreased by Ps. 209,057119,612.8 million, or 39.7%14.0% in value as compared to 20162018 levels (excluding IEPS tax and value added tax). This was primarily due to a 31.8% increase12.3% decrease in the value of our gasolines sales, an increasea decrease of 53.6%16.7% in the value of our diesel sales and a 116.7% increase34.2% decrease in the value of our fuel oil sales, in each case primarily as a result of higherdecreased average prices.
The volume of our domestic sales of refined products for thefive-year period ended December 31, 20172019 was distributed as follows:follows.
Volume of Refining’s Domestic Sales
Year ended December 31, | 2017 vs. 2016 | Year ended December 31, | 2019 vs. 2018 | |||||||||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||||||||||||||||||||||||||
(in thousands of barrels per day, except where otherwise indicated) | (%) | (in thousands of barrels per day, except where otherwise indicated) | (%) | |||||||||||||||||||||||||||||||||||||||||||||
Refined Products | ||||||||||||||||||||||||||||||||||||||||||||||||
Gasoline | ||||||||||||||||||||||||||||||||||||||||||||||||
Pemex Magna | 667.6 | 639.1 | 638.0 | 637.5 | 660.5 | 3.6 | 638.0 | 637.5 | 660.5 | 646.2 | 607.5 | (6.0 | ) | |||||||||||||||||||||||||||||||||||
Pemex Premium | 119.2 | 137.1 | 154.8 | 185.1 | 136.6 | (26.2 | ) | 154.8 | 185.1 | 136.6 | 117.5 | 112.7 | (4.1 | ) | ||||||||||||||||||||||||||||||||||
Aviation fuels (Others) | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 | — | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 | (1.5 | ) | |||||||||||||||||||||||||||||||||||
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Total | 787.3 | 776.7 | 793.3 | 823.1 | 797.5 | (3.1 | ) | 793.3 | 823.1 | 797.5 | 764.2 | 720.6 | (5.7 | ) | ||||||||||||||||||||||||||||||||||
Kerosenes (jet fuel) | 62.2 | 66.5 | 70.8 | 76.2 | 81.7 | 7.2 | 70.8 | 76.2 | 81.7 | 85.6 | 83.3 | (2.7 | ) | |||||||||||||||||||||||||||||||||||
Diesel | ||||||||||||||||||||||||||||||||||||||||||||||||
Pemex Diesel | 333.2 | 336.4 | 330.6 | 335.5 | 317.6 | (5.3 | ) | 330.6 | 335.5 | 317.6 | 292.8 | 256.9 | (12.3 | ) | ||||||||||||||||||||||||||||||||||
Others | 58.5 | 53.0 | 54.2 | 51.8 | 47.9 | (7.5 | ) | 54.2 | 51.8 | 47.9 | 38.5 | 36.1 | (6.0 | ) | ||||||||||||||||||||||||||||||||||
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Total | 391.7 | 389.4 | 384.7 | 387.2 | 365.5 | (5.6 | ) | 384.7 | 387.2 | 365.5 | 331.3 | 293.0 | (11.6 | ) | ||||||||||||||||||||||||||||||||||
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Fuel oil | ||||||||||||||||||||||||||||||||||||||||||||||||
Total | 189.3 | 121.7 | 111.7 | 102.6 | 124.7 | 21.5 | 111.7 | 102.6 | 124.7 | 105.1 | 76.5 | (27.2 | ) | |||||||||||||||||||||||||||||||||||
Other refined products | ||||||||||||||||||||||||||||||||||||||||||||||||
Asphalts | 17.3 | 21.7 | 15.9 | 15.9 | 15.4 | (3.1 | ) | 15.9 | 15.9 | 15.4 | 12.9 | 9.5 | (26.3 | ) | ||||||||||||||||||||||||||||||||||
Lubricants | 4.7 | 4.0 | 2.6 | 3.1 | 2.0 | (35.5 | ) | 2.6 | 3.1 | 2.0 | 2.0 | 1.0 | (51.6 | ) | ||||||||||||||||||||||||||||||||||
Paraffins | 0.7 | 0.6 | 0.6 | 0.6 | 0.4 | (33.3 | ) | 0.6 | 0.6 | 0.4 | 0.5 | 0.2 | (57.2 | ) | ||||||||||||||||||||||||||||||||||
Coke | 47.8 | 46.0 | 45.9 | 36.3 | 21.3 | (41.3 | ) | 45.9 | 36.3 | 21.3 | 13.2 | 27.4 | 107.8 | |||||||||||||||||||||||||||||||||||
Citroline | — | — | — | 0.01 | 0.01 | — | — | 0.01 | 0.01 | — | — | — | ||||||||||||||||||||||||||||||||||||
Gas oil for domestic use | 0.7 | 0.9 | 1.2 | 0.9 | — | (100.0 | ) | 1.2 | 0.9 | — | — | — | — | |||||||||||||||||||||||||||||||||||
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Total | 71.2 | 73.3 | 66.2 | 56.9 | 39.1 | (31.3 | ) | 66.2 | 56.9 | 39.1 | 28.5 | 38.1 | 33.3 | |||||||||||||||||||||||||||||||||||
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Total refined products | 1,501.8 | 1,427.6 | 1,426.7 | 1,446.0 | 1,408.4 | (2.6 | ) | 1,426.7 | 1,446.0 | 1,408.4 | 1,314.8 | 1,211.5 | (7.9 | ) | ||||||||||||||||||||||||||||||||||
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Petrochemicals(1)(2) | 738.8 | 703.8 | 620.9 | 543.5 | 464.5 | (14.5 | ) | |||||||||||||||||||||||||||||||||||||||||
Petrochemicals(1) | 620.9 | 543.5 | 464.5 | 411.1 | 362.8 | (11.8 | ) |
Note: Numbers may not total due to rounding.
(1) | In thousands of metric tons. |
Source: Pemex BDI.
The volume of our domestic gasoline sales decreased by 3.1%5.7% in 2017,2019, from 823.1764.2 thousand barrels per day in 20162018 to 797.5720.6 thousand barrels per day in 2017.2019. The volume of our diesel sales decreased by 5.6%11.6%, from 387.2331.3 thousand barrels per day in 20162018 to 365.5293.0 thousand barrels per day in 2017.2019. The decrease in the volume of our domestic gasoline and diesel sales iswas mainly due to lower demandincreased competition in the first quartersupply of 2017, whichproducts in turn was primarily the result of an increase in average gasoline and diesel prices.open market. The volume of our domestic sales of fuel oil increaseddecreased by 21.5%,27.2 %, from 102.6105.1 thousand barrels per day in 20162018 to 124.776.5 thousand barrels per day in 2017,2019, primarily due to an increasea decrease in CFE’s demand for fuel oil.
SalesIn 2019, sales of Pemex Premium gasoline decreased 26.2% in 2017,4.1% as compared to 2018, to 112.7 thousand barrels per day, while those of Pemex Magna increased 3.6% from the previous year. This change in consumption patterns is the result of an increase in the price differential between the two kinds of gasolines.decreased 6.0% as compared to 2018, to 607.5 thousand barrels per day.
We have also made concerted efforts to build and enhance our brands. As a result of energy reform, beginning in April 2016, the Mexican government has allowed private companies, including third-party franchises, to participate as retailers in the Mexican gasoline market and purchase gasoline products from us or import these same products from abroad. Pursuant to this regulatory change,these efforts, on June 5, 2016, wePemex Industrial Transformation announced thatthe establishment of a joint branding program had been established withbetween us and various entities that own and operate retail service stations in Mexico. The joint branding program allowed our franchisees to rename their retail service stations while continuing to sell our products under our brand. In addition, we continued to provide technical and operational assistance to such franchisees. We believe that this program has strengthened our relationship with entities that own and operate retail service stations in Mexico, asand we continue to adapt to the new competitive pressures in the Mexican fuel market. The joint branding program ended on February 28, 2018, but a large number of franchisees optedplan to continue theour commercial practices developed as part of the program.branding strategy.
On November 15, 2017, we relaunched the “Pemex Franchise” image program with a new business model that includes new products and a variety of new association schemes.structures. The goal of this program, which consists of nearly 10,000 service stations throughout Mexico, is to provide better service to end users and to strengthen the PEMEX brand, particularly in response tobrand.
On October 11, 2018, we launched the current competitive environment in the Mexican fuel market. We have improved the qualityseventh generation of our fuel types by blendinghigh-end performance additive that blends with our Pemex Magna and Pemex Premium gasoline withhigh-end additives.gasolines. This formula was developed exclusively for usadditive is promoted as Pemex Aditec. Pemex Aditec is a multifunctional additive and is made with components that maximize the fuel’sformulated to help obtain optimum performance, cleanliness and quality. protection of the engine. We believe that Pemex Aditec technology may provide a competitive advantage for the Pemex Franchise scheme.
At the end of 2018 and during the first quarter of 2019, we implemented an advertising campaign in digital media to publicize the benefits and characteristics of gasoline with Pemex Aditec technology.
During the last quarter of 2019, we began the development of the eighth generation of the performance additive for Pemex gasolines in conjunction with theInstituto Mexicano del Petróleo (Mexican Petroleum Institute or IMP). The development of this additive includes innovations such a molecular tracer, new high-spectrum detergent molecules and corrosion and oxidation inhibition.
As part of the Pemex Franchise program, we also introducedoperate three association schemes:structures: (i) PEMEX Franchise, (ii) sublicensing of branded products and (iii) the sale of generic, unbranded products. We also have two options for wholesale distribution: (i) independent retailers of unbranded products and (ii) associate distributors ofPEMEX-branded gasoline and diesel. In order to strengthen and protect the PEMEX brand, in 2018 we have established various controls to ensure that allintroduced an optional redesign for service stations. As of December 31, 2019, 345 service stations comply with our demand for high qualityhave been redesigned and honest service. Furthermore, we plan to launch a new generationmore than 665 are in the process of performance additive for our gasoline towards the endbeing redesigned.
As of 2018, which will be supported by significant promotional and advertising efforts.
At the end of 2017,December 31, 2019, there were 11,5868,593 retail service stations in Mexico, of which 11,5408,548 were privately owned and operated as franchises, while the remaining 4645 were owned by Pemex Industrial Transformation. This total number of retail service stations represents a decrease of 2.4%13.5% from the 11,8769,930 service stations as of December 31, 2016. Additionally,2018. This decrease was mainly due to increased competition in the open market. As of December 31, 2019, we had 6,432 marketing contracts, a decrease of 3,501 marketing contracts as compared to 9,933 marketing contracts as of December 31, 2017, we served2018. The decrease in the number of marketing contracts is mainly due to the higher concentration of customer volume in each contract as a result of new commercial contract models. These 6,432 contracts include 20 of the supplier for 454 retaillargest volume trading and distribution customers nationwide. In addition, Pemex Industrial Transformation supplies oil products to 2,992 service stations that operatedoutside the Pemex Franchise program. Of these service stations, 568 operate under a sublicense of PEMEX brands and 2,424 usethird-party brands.
In order to gain market presence, competitors often transfer well-established Pemex gas stations to third-party brands. As a result, we are working to counteract this by opening new gas stations under our franchise model and strengthening the Pemex brand other thanamong our existing gas stations. During December 2019, 593 Pemex gas stations were undergoing transformation to our Pemex franchise model. Additionally, we received 126 requests for gas stations to register under the PEMEX brand.Pemex franchise model.
Despite the aggressive competitive environment and our relatively limited marketing investment, we maintained approximately 77% of market share with our franchised andsub-licensed Pemex gas stations by the end of December 2019.
Pricing Decrees
The energy reform provides forAs of December 31, 2017, fuel price liberalization, which beganprices in early 2017 and was completed by the end of that year. Even though prices have beenMexico are fully liberalized,liberalized. However, the CRE reserves the right to intervene. Therefore, our sales prices continue to be subject to potential future regulations by the CRE, until theComisión Federal de Competencia Económica (Federal Economic Competition Commission) determines that there is effective competition in the wholesale market.
Gasoline and Diesel
Historically, the Mexican Government has established periodic increases on the price of gasoline and diesel.
On January 1, 2014, pursuant to theImpuesto a los Combustibles Fósiles(IEPS Tax on Fossil Fuels) approved under theLey del Impuesto Especial sobre Producción y Servicios(Special Tax on Production and Services Law, or the IEPS Law), unleaded gasoline and diesel became subject toone-time price increases of ten and thirteen Mexican cents per liter, respectively. See “—Information on the Company—Taxes, Duties and Other Payments to the Mexican Government” in this Item 4.
During 2015, the Mexican Government imposed furtherone-time increases of approximately 26 Mexican cents per liter on Magna gasoline and diesel and 27 Mexican cents per liter on premium gasoline. As of
January 1, 2016 the Mexican Government established a new mechanism to determine the prices of gasoline and diesel, which took into account international market prices. This mechanism allowed gasoline and diesel prices to float within a fixed range determined by the Mexican Government, adding a flat IEPS tax. At the end of 2016, prices of gasoline were approximately 43 Mexican cents per liter higher, as compared to 2015, and prices of diesel were approximately 43 Mexican cents per liter higher in 2016, as compared to 2015.
In January 2017, as part of the energy reform, the Mexican Government began to liberalize the price of gasoline and diesel. As a result, on January 1, 2017, magna gasoline prices increased sharply by between Ps. 1.35 and Ps. 2.61 per liter, as compared to December 31, 2016. Similarly, diesel prices increased by between Ps. 1.78 and Ps. 3.05 per liter on January 1, 2017, as compared to December 31, 2016.
The liberalization of prices continued in 2017 and, as of December 31, 2017, sale prices of gasoline and diesel have been fully liberalized and are determined by the free market. For more information, see “Item 5—Operating and Financial Review and Prospects—IEPS Tax, Hydrocarbon Duties and Other Taxes.”
Discount
Since the early 1980s, the Mexican Government has also established a discount of 30% on the price at which we sell gas oil intended for domestic use to the state of Chihuahua during the months of January, February and December of each year. On January 1, 2014, pursuant to2019, in accordance with reports issued by the IEPS Tax on Fossil Fuels, such gas oil became subject to aone-time price increase of 10.857 Mexican cents per liter. Gas oil became subject to aone-time price increase of 11.307 Mexican cents per liter in 2015, 11.558 Mexican centsCRE, average national regular retail gasoline prices decreased by Ps. 0.29 per liter, as ofcompared to December 31, 2018. Similarly, average national retail diesel prices decreased by Ps. 0.08 per liter on January 1, 2016, 11.94 Mexican cents per liter2019, as of January 1, 2017compared to December 31, 2018.
On December 16, 2019, the CRE issued agreement A/043/2019, which terminated agreement A/057/2018 and 12.73 Mexican cents per liter as of January 1, 2018. Notably,allowed Pemex to set the discount on the price of gas oil in the state of Chihuahua was suspended in December 2016. As of the date of this annual report, this discount remains suspended.prices for its gasoline and diesel.
Fuel Oil
Since December 2008,We determine the price at which we sell fuel oil to CFE has been linked to international market prices in accordance with a pricingprice methodology established by the Mexican Government. This methodology is based on the price of fuel oil in the U.S. Gulf of Mexico coastal region, and is then adjusted for quality as well as expenses related to distribution.
On January 1, 2015, the IEPS Tax on Fossil Fuels of 14.00 Mexican cents per liter of fuel oil became effective through the fiscal year ended December 31, 2015. As of January 1, 2016, fuel oil became subject to a premium of 14.31 Mexican cents per liter and as of January 1, 2017, the IEPS Tax on Fossil Fuels is 14.78 Mexican cents per liter. As of January 1, 2018, the IEPS Tax on Fossil Fuels is 15.76 Mexican cents per liters.
As of November 3, 2017,guidelines issued by the CRE authorized new formulas to determine the price for fuel oil. As of December 31, 2017, there are first-hand sale prices for sales at refineries and market prices for sales at storage and distribution terminals. These pricesin resolution RES/047/2016. Prices using this methodology are calculated weekly and apply to all customers, including the CFE.
The Mexican Government could modify these price controls or impose additional price controls in the future. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government has historically imposed price controls in the domestic market on our products.”
We withhold IEPS Tax.tax. While it is included in the price to our customers, we pay this tax to the authorities upon collection of the sale of our products and it is not included in our revenues. For more information, see “Item 4—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime for PEMEX.”
As of January 1, 2018, the IEPSa los Combustibles Fósiles(IEPS Tax on Fossil Fuels) was 15.76 Mexican cents per liter, as of January 1, 2019, the IEPS Tax on Fossil Fuels was 16.50 Mexican cents per liter and as of January 1, 2020, the IEPS Tax on Fossil Fuels was 16.99 Mexican cents per liter.
Refining’s Capital Expenditures
Investments
Over the past several years, we have focused our investment program on enhancing the quality of the gasoline and diesel we produce to meet Mexico’s new environmental standards. In 2019, we shifted our focus to the maintenance of our existing refineries and the expansion of our refinery system in order to increase our hydrocarbon production. Our aimcontinued objective is to stabilize and improve our ability to process heavy crude oil in order to optimize the crude oil blend in our refineriesrefinery production and to increase our production of unleaded gasoline and dieselother hydrocarbons in order to supply the growing demand at a lower cost.national demand.
Our refining business invested Ps. 15,9888,409 million in capital expenditures in 20172019 and has budgeted Ps. 14,37612,500 million in capital expenditures for 2018. We hope to complement2020.
This increase in our capital expenditures budget for 2020 as compared to 2019 is because in 2018 through strategic alliances.2020, our entire capital expenditures budget is to be used for the rehabilitation of our six refineries that form the National Refining System. Pursuant to this rehabilitation program, we have evaluated each of our six existing refineries and have identified specific maintenance requirements for each plant. Our rehabilitation program focuses on addressing critical risks of the facilities such as mechanical integrity and safety, and improving the efficiency and the stabilization of our crude oil processing.
The following table sets forth our refining business’ capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2017,2019, and the budget 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.
Refining’s Capital Expenditures
Year ended December 31,(1) | Budget 2018(2) | Year ended December 31,(1) | Budget | |||||||||||||||||||||||||||||
2015 | 2016 | 2017 | 2017 | 2018 | 2019 | 2020(2) | ||||||||||||||||||||||||||
(in millions of pesos)(3) | (in millions of pesos)(3) | |||||||||||||||||||||||||||||||
Refining | ||||||||||||||||||||||||||||||||
Maintenance of the Production Capacity at the Madero Refinery | Ps. | 766 | Ps. | 1,933 | Ps. | 1,717 | Ps. | — | ||||||||||||||||||||||||
Fuel Quality Investments(4) | Ps. | 9,045 | Ps. | 10,702 | Ps. | 5,196 | Ps. | 2,483 | 5,196 | 2,639 | 1,374 | — | ||||||||||||||||||||
Reconfiguration of Miguel Hidalgo Refinery in Tula | 4,674 | 8,610 | 1,912 | 303 | ||||||||||||||||||||||||||||
New Refinery in Tula(5) | 561 | 1,849 | — | — | ||||||||||||||||||||||||||||
Minatitlán Refinery Energy Train | — | 1,100 | — | — | ||||||||||||||||||||||||||||
National Refining System Rehabilitation Program | — | — | 1,196 | 12,500 | ||||||||||||||||||||||||||||
Maintaining the Production Capacity at the Cadereyta Refinery | 733 | 1,139 | 1,140 | — | ||||||||||||||||||||||||||||
Residual Use at the Miguel Hidalgo Refinery in Tula (Formerly Reconfiguration of Miguel Hidalgo Refinery in Tula) | 1,912 | 306 | 948 | — | ||||||||||||||||||||||||||||
Rehabilitation of Electrical Substations Miguel Hidalgo Refinery | 391 | 1,281 | 843 | — | ||||||||||||||||||||||||||||
Maintenance of the Production Capacity at the Minatitlán Refinery | 3,673 | 1,884 | 519 | — | ||||||||||||||||||||||||||||
Maintenance of the Production Capacity at the Salina Cruz Refinery | 1,338 | 2,429 | 296 | — | ||||||||||||||||||||||||||||
Installation of a 250 T/hr. Steam Boiler at the Minatitlan Refinery | 19 | — | 115 | — | ||||||||||||||||||||||||||||
Adequacy of the Burner System and Installation of an Elevated Burner at the Francisco I. Madero Refinery | — | 163 | 62 | — | ||||||||||||||||||||||||||||
Maintenance of the Production Capacity at the Salamanca Refinery | 762 | 406 | 33 | — | ||||||||||||||||||||||||||||
Integral Maintenance Program and Process Compressor Technology Update at the Miguel Hidalgo Refinery | — | 1 | 25 | — | ||||||||||||||||||||||||||||
Residual Conversion from Salamanca Refinery | 773 | 101 | 17 | — | ||||||||||||||||||||||||||||
Cadereyta Refinery Energy Train | — | 872 | — | — | — | — | 15 | — | ||||||||||||||||||||||||
Residual Conversion from Salamanca Refinery | 913 | 749 | 773 | 68 | ||||||||||||||||||||||||||||
Acquisition of Capitalizable Catalysts for the Hydrotreatment Process in the Tula Refinery | 5 | 112 | 12 | — | ||||||||||||||||||||||||||||
Supervision and Administration Work for the Use of Waste at the Salina Cruz Refinery | 22 | 16 | 8 | — | ||||||||||||||||||||||||||||
Tuxpan Pipeline and Storage and Distribution Terminals | 100 | 15 | 67 | 71 | 67 | 342 | 3 | — | ||||||||||||||||||||||||
Project Refinery in Tula(5) | — | 18 | — | — | ||||||||||||||||||||||||||||
Others | 14,353 | 6,604 | 8,039 | 11,452 | 330 | 1,351 | 87 | — | ||||||||||||||||||||||||
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Total | Ps. | 29,646 | Ps. | 30,501 | Ps. | 15,988 | Ps. | 14,376 | Ps. | 15,988 | Ps. | 14,119 | Ps. | 8,409 | Ps. | 12,500 | ||||||||||||||||
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Notes: Numbers may not total due to rounding.
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the |
(3) | Figures are stated in nominal pesos. |
(4) | Includes clean fuels investments for gasoline and diesel in our six refineries. |
(5) | Includespre-investments studies,on-site preparation and other expenses related to this project. This project concluded in 2018. |
(6) | 2019 figures reflect the decrease caused by budget adjustment authorized by the Board of Directors of Petróleos Mexicanos in accordance with resolutionCA-050/2019 in special meeting 942. This budget adjustment reclassified the capital expenditures of the new Dos Bocas refinery from investment in property, plant and equipment to financial investment. |
Source: Petróleos Mexicanos.
During 2017,
In 2019, we imported approximately 570.2544.3 thousand barrels per day of gasoline, which represented approximately 71.5%75.5% of total domestic demand for gasoline in that year. Our priority in 2020 is to increase our production of oil products by focusing on the maintenance of our existing refineries and the development of the new Dos Bocas refinery in order to increase our production capacity.
Our projects, which will involve some private sector investments, aim to reduce greenhouse gas emissions by promoting cleaner fuels. Certain of theseAdditionally, we are exploring alternative investment projects, including the Fuels Quality Project (formerly known as the Clean Fuels Project),our fuel quality project, the reconfiguration of the Miguel Hidalgo Refineryrefinery in Tula and the residual conversion ofat the Salamanca Refinery, are already part of ongoing projects developed by our industrial transformation segment. refinery.
Our projects are described in further detail below.
Fuel Quality Project, Gasolines Phase (ULSG)
Our Fuel Quality Project is being developedThis project consisted of the installation of ULSGpost-treatment units in our six refineries with a first phase involvingin order to improve the installationquality of eight ULSG post-treatment units, the capacities of which are set forth below by refinery. The first phase of this
project was divided into thee groups of refineries: Group 1: Tula and Salamanca (which are both 100% completed, and which began operations in June 2016); Group 2, Cadereyta and Madero (which are both 100% completed and which began operations in February 2014 and July 2015, respectively); and Group 3, Minatitlán and Salina Cruz (which are both 100% completed and which began operations in December 2015 and August 2016, respectively).our gasoline. As a result of these projects, and as of the date of this annual report, all gasoline produced in Mexico meets international environmental standards. The consumptionstandards and the plants are operating, pending the completion of cleaner fuels will allow usvarious complementary projects suspended due to reduce emissions of greenhouse compounds.
Plant Capacity
Cadereyta | Madero | Minatitlán | Salamanca | Salina Cruz | Tula | |||||||||||||||||||
ULSG units (tbpd) | 1 | (42) | 2 | (20) | 1 | (25) | 1 | (25) | 2 | (25) | 1 | (30) |
Note: tbpd = thousand barrels per day.
ULSG: Ultra Low Sulfur Gasoline.budgetary restrictions.
Source: Pemex Industrial Transformation.
In addition to the ULSG post-treatment units, we entered into 15 additional contracts during phase 1 of our Fuel Quality Project, of which two are in progress, eight have been completed, four have been temporarily suspended and one was terminated early. The status of these contracts is as follows, by refinery:Diesel Phase (ULSD)
The second phaseThis project consists of the Fuel Quality Project involves the construction of five ULSD facilities, five hydrogen plants, four sulfur recovery units, five sour water treatment plants and the reconfiguration of 17 existing units to produce ULSD. The strategy for phase II consistsHowever, as of the following three stages: (i) early production, (ii) Cadareyta dieselDecember 31, 2019, this project has been suspended and (iii) a diesel stageour capital expenditures budget is focused on other areas of priority. We continue to evaluate funding alternatives for the five remaining refineries, as described below.
Early production. We executed projects to increase efficiency at certain of our existing processing plants and to produce ULSD through eight construction and services contracts totaling Ps. 130 billion. All of these projects have been completed and the respective plants are in operation.
Cadereyta diesel phase. Construction began in March 2013 and, as of the datecompletion of this annual report, is approximately 68% complete. Due to budgetary constraints, however, two ofproject, which would aid our compliance with environmental regulations. However, the four relevant contracts have been suspended since April 2016. We are currently evaluating funding alternatives through alliances and/or strategic partnerships in order to resume work under these two contracts and we anticipate that work may resume duringCRE has approved extending the second quarter of 2018.The two other contracts have been completed.
Diesel phasedeadline for outstanding refineries.The Open Book Cost Estimation (OBCE) methodology is used in connectionour compliance with the implementation of the diesel phaserelevant regulation,NOM-016-2016, which governs sulfur content in commercial diesel.
Residual Use at the refineries other than Cadereyta and is divided into two stages:
Phase I: the development of detailed engineering plans and the placement of purchase orders for equipment requiring significant delivery time to determine a cost estimate for Phase II. Phase I was completed with the execution of the Final Works Agreement on December 17, 2015.
Phase II: the execution of detailed engineering, procurement and construction, which commencedMiguel Hidalgo Refinery in January 2016. Due to budgetary constraints, however, the project was suspended in October 2016 with only a small portion completed.We are currently evaluating funding alternatives through alliances and/or strategic partnerships in order to resume work under the contracts.
As of the date of this annual report, we also have 15 contracts for complementary facilities, which comprise the total scope of the Fuel Quality Project. Of those 15, five have been completed, eight are in development and two have been suspended as the result of budgetary constraints.
Tula (formerly Reconfiguration of the Miguel Hidalgo Refinery in TulaTula)
On August 12, 2009, we announcedThe Miguel Hidalgo refinery in Tula has been undergoing renovations since 2014. This project consists of the construction of a new refinery in Tula on land that was donated by the state government of Hidalgo. Upon completion of ourpre-investment studies relating to the new refinery in Tula, we determined that it would be more cost-effective to forgo construction of a new refinery and instead direct our investments to the reconfiguration of the existing Miguel Hidalgo refinery. Accordingly, on December 3, 2014, we announced the commencement of renovations to upgrade the refinery as part of theAprovechamiento de Residuales en la Refinería de Tula Hidalgo (Residue Usenine plants. The main ongoing project at the Tula Hidalgo Refinery, which we refer to as the Tula refinery reconfiguration project). The reconfiguredthis refinery is intended to (i) generally modernize crude oil processing; (ii) increase the efficiency with which vacuum residue is converted into high value fuels; (iii) produce higher value products; (iv) increase refining margins; and (v) reduce fuel oil handling problems.
Pemex Industrial Transformation plans to implement the reconfiguration project in two phases: (i) phase one for the development of engineering plans and (ii) phase two for detailed engineering, procurement and construction. In September 2013, ICA Fluor Daniel, S. de R.L. de C.V. (ICA Fluor) was awarded a U.S. $94.8 million contract to carry out studies and to provide engineering services for phase one. Site preparation work began in February 2014 and construction of the first processing unit began in October 2014.
By the end of 2016, the project was approximately 27% completed, but due to budgetary constraints certain tasks were delayed and rescheduled, including the construction ofcomplete the coking plant. Construction of the new coking plantThe project is part of the modernization of the refinery, which is intendedexpected to increase the production of various types of gasoline, diesel and jet fuel. We estimate that the modernization of the refinery will allow us to increase performance by over 40%, increasing production of refined oil products from 154315 thousand barrels per day to 220340 thousand barrels. The project is being carried out in two stages. The first stage, which is scheduled to be
completed by 2020, includesbarrels per day, as well as improve the buildingproduction of gasoline and commissioning of the delayed coking plant and the facilities necessary for its operation. The second stage, which is scheduled to be completed in 2022, covers the remaining new facilities, the modernization of current facilities and their integration.distillates. As of MarchDecember 31, 2018,2019, construction of the cokercoking plant, which was 60% completed and we63% complete, has been suspended due to budgetary constraints. We are currently evaluating funding alternatives through alliances and/or strategic partnerships in order to complete construction.
Residual Conversion of the Salamanca Refinery
The reconfiguration of the “IngenieroIng. Antonio M. Amor”Amor refinery in Salamanca, Guanajuato focuseshas focused on the conversion oflow-value residuals into high-valuehigh-steamhigh-value distillates (without a need for increased crude oil processing), as well as the modernization of the lubricants train to produce group II lubricants.lubricants of greater value and quality. As part of the reconfiguration, we will construct new plants and refurnish existing plants. This project also involves the construction of a perimeter wall surrounding the refinery with two security entrances, the relocation of CFE’s electric transmission lines and site improvements. Construction of the new plants includes a delayed coker unit, a catalytic cracking unit, a hydrogen plant, a coker naphthas hydro-desulfurization plant, a gasoil hydro-desulfurization plant, a new lubricants train, a naphtha reforming plant, a sulfur recovery unit, an amine regeneration unit and a sour water treatment facility. In addition,December 31, 2019, however, this project involves the construction of storage tanks, effluent treatment plants (at which industrial wastewater is treated for reuse) and infrastructure (including roads and street lights) in the areas surrounding the refinery, as well as services, electric power supply, high burner areas, buildings and other service and support facilities. Other units, including certain vacuum and atmospheric distillation units, will undergo renovations to enhance their ability to supply the coker plant and to increase the supply of gas oil to the new plants. Finally, the project includes the integration of pipelines, pumping equipment and electrical substations from existing facilities.
In accordance with the OBCE methodology, Pemex Industrial Transformation plans to implement the project in two phases as part of a strategy to increase efficiency, mitigate technical and economic risks, define the project’s scope and reduce uncertainty. Phase one includes the development of engineering plans, while phase two includes detailed engineering plans, together with procurement and construction. At the end of 2017, the project was approximately 12.8%12.9% complete and phase one was approximately 98% completed but has been suspended due to budgetary constraints. However,We are currently evaluating funding alternatives in light of the advanced engineering plans, site preparation and equipment design, this project is ready to commence procurement and construction and we are actively evaluating strategies and seeking partners to obtain fundingorder to resume the project. See “—Investments” below for more information regarding capital expenditures by project.
Pemex Industrial Transformation, together with the Department of Corporate Alliances and New Business, is currently seeking partners to continue the project.this reconfiguration.
Tuxpan Maritime Terminal
The Tuxpan Maritime TerminalThis project is intended to help meet the increasingincrease in the demand for refined products in the metropolitan area of the Mexico Valley. The total cost of the project is approximately Ps. 5,171.55,637.9 million, which includes the construction of a pipeline measuring 18 inches18-inches in diameter and 109 kilometers in length from Cima de Togo to Venta de Carpio, five storage tanks located at the Tuxpan Maritime Terminal with a capacity of 100,000 barrels each, a research study to determine the best option for the discharge of refined products from tankers and pipelines into these storage tanks and auxiliary and integration services.
As of April 2018, two of the three key phases of this project were completed: thepre-investment studies and the transportationconstruction of theTuxpan-Mexico pipelines, have been completed, and the pipeline, which is in operation.currently operating. The third phase, the storage system, is 98.4% complete, and we97.2% complete. We have requestedarranged an extension fromwith the SHCPMinistry of Finance and Public Credit to allow for additional time withinin which to complete this final phase.phase may be completed. Four of the five storage tanks have been delivered to the Tuxpan Maritime Terminal and are operational.in operation. The fifth and remaining tank is 99.7% complete and the overall Tuxpan-Mexico pipelines99.9% complete. Completion of this project is expectedcontingent upon budget availability to be completed in 2018.continue site works.
Maintenance at the Francisco I. Madero Refinery
On August 23, 2017, we commenced a scheduled gradual shutdown of our Francisco I. Madero refinery, located in Ciudad Madero, Tamaulipas, in order to implement a comprehensive general maintenance program for the plants at this refinery. Operations at the plants were restarted in February 2018, but we experiencedstart-upand stabilization difficulties which caused our Madero refinery to be out of operation during the second half of 2018.
In January 2019, we are currentlyrestarted our Mayan plant andU-901 reformer after performing maintenance at these plants. In June 2019, we restarted the operations of its process plants, including the Mayan distilling unit. In September 2019, we began the rehabilitation of the Madero refinery pursuant to our National Refining System Rehabilitation Program, and increased the levels of crude oil process in the process of stabilizing operations. We expect that this program will lead to improved safety andrefinery as well as the reliability of our operating processes and, in turn, improved performance of this refinery.its operational processes.
Hydrogen Supply for Refineries
PursuantIn order to permit us to specialize, maximize value, and focus on the energy reform and our 2017-2021 Business Plan,processing of crude oil, in the past we aim to partnerhave partnered with third parties and to enter into strategic alliances and joint ventures for projects related to auxiliary services, such as the supply of hydrogen to refineries, which will permit us to specialize, maximize value, and focus on the processing of crude oil.our refineries.
On September 1, 2017, we entered intolong-term agreements with Air Liquide for the supply of hydrogen to the Tula refinery.Miguel Hidalgo refinery in Tula. Air Liquide will operateoperates the existing hydrogen plant at the Tula refinery and will invest in the construction of a second plant. Air Liquide intends to provide the total supply of hydrogen required for both the existing plant and the refinery expansion projects.Miguel Hidalgo refinery. In December 2017,February 2018, we executed the plant’s performance and stabilization tests.
Additionally,tests, which was an important milestone under the contract with Air Liquide. In addition, in October 2017, we began the process of selecting partners that will provide the hydrogen supply for our Madero and Cadereyta refineries. In April 2018 we entered into a long-term agreement with the German company Linde AG for the supply of hydrogen to our Madero refinery. In July 2018, we signed several agreements related to the supply of hydrogen to our Cadereyta refinery. However, some of the conditions precedent required by these agreements were not met, and these agreements were subsequently terminated.
Rehabilitation of the National Refining System
As part of our efforts to stabilize the operations of our refineries, we adopted a program for the rehabilitation of the National Refining System. Pursuant to this program, we allocated additional resources for the repair and maintenance of our six existing refineries. Our rehabilitation program focuses on addressing critical risks of the facilities, such as mechanical integrity and safety, and improving the efficiency and stabilization of our crude oil processing. These activities began in September 2019 and increased in the last quarter of the year. Since the launched of our rehabilitation program, we have provided maintenance to 39 process plants,13 auxiliary services facilities and 21 storage tanks.
The budget for thePrograma de Rehabilitación del Sistema Nacional de Refinación (National Refining System Rehabilitation Program) for 2020 is Ps. 12,500 million. We have evaluated each of our six existing refineries and have identified specific maintenance requirements for each plant.
Dos Bocas Refinery
On December 7, 2018, the Board of Directors of Petróleos Mexicanos, in accordance with resolutionCA-161/2018, authorized the construction of a new refinery in Dos Bocas in the state of Tabasco as part of our institutional strategy plan. The project is estimated to add 340 million barrels per day of refined Maya oil, which we expect would, in turn, increase our production of gasoline and diesel by at least 290 million barrels per day. This project is supported by the Mexican Government, which has announced that a goal of constructing this refinery is to decrease Mexico’s reliance on imported energy resources by increasing our refining capacity and distillates production.
By December 31, 2019, we had made significant progress with respect to studies, site preparation, license contracting, phase I engineering and procurement of equipment with long delivery time. We are in the process of requesting authorization from Pemex’s Board of Directors to begin the FEL II(Front-End Loading II) phase of this project. The FEL methodology is applied in investment projects management by using the following three stages: FEL I (visualization), FEL II (conceptualization) and FEL III (definition).
Gas and Aromatics
Natural Gas and Condensates
All wet natural gas production is directed to our gas processing facilities. At the end of 2017,2019, we owned nine facilities.
The following facilities are located in the Southern region:
• | Nuevo |
• |
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• | Ciudad |
• | La |
• |
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The Morelos, Cangrejera and Pajaritos facilities form the Coatzacoalcos area gas processing complex (which we refer to as a GPC):
• |
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• |
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• | Pajaritos. This facility contains one plant, which wasnon-operational as of the date of this annual report. |
The following facilities are located in the Northern region:
• |
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• | Poza |
• |
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Petrochemical Complexes
In addition to our gas processing facilities, we also own the following two petrochemical complexes:
• | Independencia. The Independencia petrochemical complex consists of three plants and |
• | Cangrejera. The Cangrejera petrochemical complex consists of five plants and an aromatics line and is located in the Southern region. In 2019, this complex produced 919.6 thousand tons of aromatics and derivatives and 437.1 thousand tons of other petrochemical products (butanes, hexane, hydrogen, pentanes, BTX liquids, petroleum products, naphtha gas and heavy naphtha). |
The following tables set forth our processing capacity, as well as our total natural gas processing and production, for the five years ended December 31, 2017.2019.
Gas and Aromatics’ Processing and Production Capacity(1)
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017(5) | 2018 | 2019 | |||||||||||||||||||||||||||||||
(in millions of cubic feet per day, except where otherwise indicated) | (in millions of cubic feet per day, except where otherwise indicated) | |||||||||||||||||||||||||||||||||||||||
Sweetening plants | ||||||||||||||||||||||||||||||||||||||||
Sour condensates | 144 | 144 | 144 | 144 | 144 | 144 | 144 | 144 | 144 | 144 | ||||||||||||||||||||||||||||||
Sour natural gas | 4,503 | 4,523 | 4,523 | 4,523 | 4,523 | 4,523 | 4,523 | 4,523 | 4,523 | 4,523 | ||||||||||||||||||||||||||||||
Natural gas liquids recovery plants | ||||||||||||||||||||||||||||||||||||||||
Cryogenics | 5,912 | 5,912 | 5,912 | 5,912 | 5,912 | 5,912 | 5,912 | 5,912 | 5,912 | 5,912 | ||||||||||||||||||||||||||||||
Natural gas liquids fractionating | 569 | 569 | 569 | 569 | 569 | 569 | 569 | 569 | 569 | 569 | ||||||||||||||||||||||||||||||
Processing of hydrosulfuric acid | 219 | 219 | 219 | 219 | 229 | 219 | 219 | 229 | 229 | 229 | ||||||||||||||||||||||||||||||
Aromatic compounds and derivates(Cangrejera and Independencia)(5)(6) | — | — | 1,694 | 1,694 | 1,734 | |||||||||||||||||||||||||||||||||||
Aromatic compounds and derivatives(Cangrejera and Independencia)(3)(4) | 1,694 | 1,694 | 1,734 | 1,734 | 1,734 |
(1) | Production capacity refers to aromatic compounds and derivatives. |
(2) | In thousands of barrels per day. |
(3) | Thousand tons per |
(4) |
Since November 2015, the operation of |
(5) | Values of our CCR reforming plant were updated in 2017. |
Source: Pemex BDI.
Natural Gas, Condensates and Aromatics’ Processing and Production(1)
Year ended December 31, | 2017 vs. 2016 | Year ended December 31, | 2019 | |||||||||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | ||||||||||||||||||||||||||||||||||||||
(in millions of cubic feet per day, except where otherwise indicated) | (%) | (in millions of cubic feet per day, except where otherwise indicated) | (%) | |||||||||||||||||||||||||||||||||||||||||||||
Processing | ||||||||||||||||||||||||||||||||||||||||||||||||
Wet gas | 4,404 | 4,343 | 4,073 | 3,672 | 3,237 | (11.8 | ) | 4,073 | 3,672 | 3,237 | 2,952 | 2,826 | (4.3 | ) | ||||||||||||||||||||||||||||||||||
Sour gas | 3,330 | 3,356 | 3,225 | 2,997 | 2,688 | (10.3 | ) | 3,225 | 2,997 | 2,688 | 2,492 | 2,396 | (3.9 | ) | ||||||||||||||||||||||||||||||||||
Sweet gas(2) | 1,074 | 986 | 847 | 675 | 550 | (18.5 | ) | 847 | 675 | 550 | 459 | 431 | (6.3 | ) | ||||||||||||||||||||||||||||||||||
Condensates(3)(6) | 46 | 49 | 45 | 41 | 32 | (22.0 | ) | 45 | 41 | 32 | 27 | 22 | (18.2 | ) | ||||||||||||||||||||||||||||||||||
Gas to natural gas liquids extraction | 4,381 | 4,303 | 3,904 | 3,450 | 3,199 | (7.3 | ) | 3,904 | 3,450 | 3,199 | 2,782 | 2,651 | (4.7 | ) | ||||||||||||||||||||||||||||||||||
Wet gas | 4,234 | 4,172 | 3,745 | 3,394 | 3,086 | (9.1 | ) | 3,745 | 3,394 | 3,086 | 2,782 | 2,651 | (4.7 | ) | ||||||||||||||||||||||||||||||||||
Reprocessing streams(4) | 147 | 131 | 159 | 56 | 113 | 101.8 | 159 | 56 | 113 | — | — | — | ||||||||||||||||||||||||||||||||||||
Production | ||||||||||||||||||||||||||||||||||||||||||||||||
Dry gas(5) | 3,755 | 3,699 | 3,454 | 3,074 | 2,667 | (13.2 | ) | 3,454 | 3,074 | 2,667 | 2,422 | 2,305 | (4.8 | ) | ||||||||||||||||||||||||||||||||||
Natural gas liquids(6)(7) | 362 | 364 | 327 | 308 | 280 | (9.1 | ) | 327 | 308 | 280 | 240 | 221 | (7.8 | ) | ||||||||||||||||||||||||||||||||||
Liquefied petroleum gas(6)(8) | 206 | 205 | 174 | 159 | 144 | (9.4 | ) | 174 | 159 | 144 | 122 | 108 | (12.0 | ) | ||||||||||||||||||||||||||||||||||
Ethane(6) | 109 | 110 | 107 | 106 | 101 | (4.7 | ) | 107 | 106 | 101 | 85 | 77 | (9.5 | ) | ||||||||||||||||||||||||||||||||||
Naphtha(6) | 73 | 77 | 69 | 62 | 52 | (16.1 | ) | 69 | 62 | 52 | 43 | 43 | (0.9 | ) | ||||||||||||||||||||||||||||||||||
Sulfur(9)(11) | 1,029 | 962 | 858 | 673 | 551 | (18.1 | ) | 858 | 673 | 551 | 443 | 377 | (14.9 | ) | ||||||||||||||||||||||||||||||||||
Methanol(9) | 157 | 168 | 161 | 145 | 116 | (20.0 | ) | 161 | 145 | 116 | 148 | 141 | (4.6 | ) | ||||||||||||||||||||||||||||||||||
Aromatic compounds and derivatives(9)(10) | 799 | 1,017 | 1,022 | 940 | 622 | (33.8 | ) | 1,022 | 940 | 622 | 570 | 920 | 61.5 | |||||||||||||||||||||||||||||||||||
Others(9)(12) | 588 | 899 | 535 | 507 | 302 | (40.4 | ) | 535 | 507 | 302 | 269 | 465 | 73.0 |
Note: Numbers may not total due to rounding.
GPC=GPC = Gas Processing Complex
(1) | Excludes operations of our exploration and production segment, which produced |
(2) | Includes sweet vapor from condensates. |
(3) | Includes internal streams. |
(4) | Reprocessing of pipeline dry gas at the Pajaritos cryogenic plant. |
(5) | Includes ethane reinjected into the natural gas stream. |
(6) | In thousands of barrels per day. |
(7) | Includes stabilized condensates, reprocessing streams from the Cangrejera petrochemical complex and other streams for fractionating. |
(8) | Includes production from GPC, refineries and transfers from Pemex Exploration and Production. |
(9) | In thousands of tons. |
(10) | Includes aromine 100, benzene, styrene, |
(11) | Production of gas processing GPCs and refineries. In 2019, our Poza Rica and Arenque facilities ceased producing sulfur due to operational difficulties of the condenser units. |
(12) | Includes butanes, petrochemical specialties, pentanes, hexane, hydrogen, BTX liquids, isopentanes and petroleum products, naphtha gas, petrol octane base and heavy naphtha. |
Source: Pemex BDI.
Domestic consumption of dry gas totaled 2,623.0 million cubic feet per day in 2017, a 21.6% decrease from the 2016 domestic consumption of 3,347.3 million cubic feet per day.
We import dry gas to satisfy shortfalls in our production and to meet demand in areas of northern Mexico that, due to their distance from the fields, can be supplied more efficiently by importing natural gas from the United States. In 2017, we imported 1,766.0 million cubic feet per day of natural gas, a decrease of 8.7% from the 1,933.9 million cubic feet per day imported in 2016, mainly due to the fact theCFE is directly importing natural gas to supply its power generation plants. The total amount of natural gas imported per day in 2017 included 26.3 million cubic feet of liquefied natural gas imported through Manzanillo.
We process sour and sweet condensates from our exploration and production segment in order to obtain stabilized natural gas liquids and also recover liquid hydrocarbons obtained from the processing of sweet natural gas. In addition, we obtain natural gas liquids from internal streams and liquid hydrocarbons condensed in sour wet gas pipelines. Our production of natural gas liquids, including stabilized condensates, reprocessing and other fractionating streams, decreased by 9.1%7.8% from 308240 thousand barrels per day in 20162018 to 280221 thousand barrels per day in 2017.2019.
We process sour condensates, which have a higher sulfur content, to produce stabilized sweet condensates. The volume of sour condensates we processed from our exploration and production segment and internal streams of our gas and aromatic compoundsub-segment totaled 3222.4 thousand barrels per day in 2017,2019, a 21.9%18.2% decrease from the 4127.0 thousand barrels per day processed in 2016.2018. We also process sweet condensates at our Burgos facilities to produce light and heavy natural gasoline.
The production of sulfur totaled 377 thousand tons in 2019, a 14.9% decrease from 443 thousand tons in 2018. This decrease was due to the fact that our Poza Rica and Arenque facilities ceased producing sulfur, primarily due to operational difficulties of the condenser units.
The production of aromatic compounds and derivatives decreased 33.8%, from 940.2totaled 919.6 thousand tons in 2016 to 622.02019, a 61.5% increase from 569.5 thousand tons in 20172018. This increase was due to operational challenges in the continuous catalyst regeneration and styrene plantsfact that the aromatic production operated steadily throughout the year.
Natural Gas Supply Strategy
On August 13, 2013,year, whereas in 2018 our naptha reforming plant (CCR) operated only intermittently due to equipment failure and we and the Mexican Government prepared a strategy to address domestic natural gasexperienced shortages in the short-, medium-auxiliary services and long-term. On January 1, 2016, as part of the opening of the natural gas market, we transferred certain ofraw materials from our transportation assets to CENAGAS in a step towards that goal.Minatitlán refinery.
Over the five years ended December 31, 2017,2019, the value of our domestic sales was distributed as follows:
Value of Gas and Aromatics’ Domestic Sales(1)
Year ended December 31, | 2017 vs. 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | Year ended December 31, | 2019 vs. 2018 | ||||||||||||||||||||||||||||||||||||||||||
(in millions of pesos)(2) | (%) | 2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||||||||||||||||||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||||||||||||||||||||||||||||||||||
Natural gas | Ps. | 68,128.7 | Ps. | 78,666.4 | Ps. | 53,037.3 | Ps. | 67,536.5 | Ps. | 74,287.7 | 10.0 | Ps. | 53,037.3 | Ps. | 67,536.5 | Ps. | 74,287.7 | Ps. | 62,355.4 | Ps. | 41,735.5 | (33.1 | ) | |||||||||||||||||||||||||
Liquefied petroleum gas | 71,728.9 | 78,258.9 | 78,194.0 | 50,179.8 | 49,137.3 | (2.1 | ) | 78,194.0 | 50,179.8 | 49,137.3 | 52,053.6 | 32,161.8 | (38.2 | ) | ||||||||||||||||||||||||||||||||||
Ethane(3) | 32.3 | 283.6 | 310.7 | 1,284.7 | 2,989.7 | 132.7 | 310.7 | 1,284.7 | 2,989.7 | 3,203.4 | 2,365.0 | (26.2 | ) | |||||||||||||||||||||||||||||||||||
Heptane | 62.7 | 39.1 | 1.0 | — | 0.9 | — | 1.0 | — | 0.9 | 9.5 | 26.8 | 181.9 | ||||||||||||||||||||||||||||||||||||
Propane | 70.3 | 92.4 | 57.6 | 73.8 | 111.6 | 51.2 | 57.6 | 73.8 | 111.6 | 148.2 | 91.7 | (38.1 | ) | |||||||||||||||||||||||||||||||||||
Light naphtha | — | 2.8 | 39.7 | 84.5 | 158.8 | 87.9 | 39.7 | 84.5 | 158.8 | 221.4 | 212.7 | (3.9 | ) | |||||||||||||||||||||||||||||||||||
Heavy naphtha | 4.4 | 15.7 | 191.0 | 404.8 | 429.3 | 6.1 | 191.0 | 404.8 | 429.3 | 708.6 | 833.2 | 17.6 | ||||||||||||||||||||||||||||||||||||
Sulfur | 659.6 | 795.9 | 926.1 | 585.7 | 540.2 | (7.8 | ) | 926.1 | 585.7 | 540.2 | 766.0 | 534.3 | (30.2 | ) | ||||||||||||||||||||||||||||||||||
Methanol | 733.9 | 775.5 | 748.4 | 625.1 | 806.9 | 29.1 | 748.4 | 625.1 | 806.9 | 1,089.9 | 818.7 | (24.9 | ) | |||||||||||||||||||||||||||||||||||
Aromatic compounds and derivatives(4) | 3,641.4 | 4,427.5 | 3,479.4 | 2,122.1 | 1,673.1 | (21.2 | ) | 3,479.4 | 2,122.1 | 1,673.1 | 1,759.8 | 1,802.0 | 2.4 | |||||||||||||||||||||||||||||||||||
Others(5) | 347.7 | 658.9 | 400.2 | 261.4 | 309.5 | 18.4 | 399.1 | 261.4 | 308.5 | 296.1 | 258.9 | (12.6 | ) | |||||||||||||||||||||||||||||||||||
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Total | Ps. | 145,409.9 | Ps. | 164,016.7 | Ps. | 137,385.4 | Ps | .123,158.5 | Ps. | 130,445.0 | 5.9 | Ps. | 137,384.3 | Ps. | 123,158.4 | Ps. | 130,444.0 | Ps. | 122,611.9 | Ps. | 80,840.6 | (34.1 | ) | |||||||||||||||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
(3) | In January 2016, we began the supply of ethane to Braskem IDESA. |
(4) | Includes aromine 100, benzene, styrene, toluene, xylene. |
(5) | Includes petrochemical specialties, hydrogen, |
Source: Pemex BDI.
The volume of our domestic sales of gas and aromatics for thefive-year period ended December 31, 20162019 was distributed as follows:
Volume of Gas and Aromatics’ Domestic Sales
Year ended December 31, | 2017 vs. 2016 | |||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | ||||||||||||||||||||
(in thousands of barrels per day, except where otherwise indicated) | (%) | |||||||||||||||||||||||
Natural gas(1) | 3,463.5 | 3,451.2 | 3,246.8 | 3,347.3 | 2,623.0 | (21.6 | ) | |||||||||||||||||
Liquefied petroleum gas(2) | 284.3 | 282.1 | 278.8 | 202.1 | 171.3 | (15.2 | ) | |||||||||||||||||
Ethane(3) | 0.8 | 5.8 | 8.8 | 30.5 | 57.7 | 89.2 | ||||||||||||||||||
Heptane | 3.9 | 3.0 | 0.1 | — | 0.1 | — | ||||||||||||||||||
Propane | 9.3 | 9.7 | 10.1 | 11.3 | 11.3 | — | ||||||||||||||||||
Heavy naphtha(4) | 0.4 | 1.5 | 29.9 | 64.3 | 56.2 | (12.6 | ) | |||||||||||||||||
Light naphtha(4) | — | 0.3 | 6.2 | 13.3 | 19.9 | 49.6 | ||||||||||||||||||
Sulfur(4) | 520.7 | 655.3 | 572.7 | 580.5 | 529.9 | (8.7 | ) | |||||||||||||||||
Methanol(4) | 100.1 | 110.9 | 112.0 | 111.3 | 100.8 | (9.4 | ) | |||||||||||||||||
Aromatic compounds and derivatives(4)(5) | 197.4 | 246.8 | 240.0 | 155.1 | 111.3 | (28.2 | ) | |||||||||||||||||
Others(4)(6) | 25.9 | 51.3 | 40.6 | 29.6 | 28.2 | (4.7 | ) | |||||||||||||||||
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Total | 4,606.4 | 4,817.8 | 4,545.9 | 4,545.3 | 3,707.5 | (18.4 | ) | |||||||||||||||||
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Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in thousands of barrels per day, except where otherwise indicated) | (%) | |||||||||||||||||||||||
Natural gas(1) | 3,246.6 | 3,347.3 | 2,623.0 | 2,064.3 | 1,604.4 | (22.3 | ) | |||||||||||||||||
Liquefied petroleum gas(2) | 278.8 | 202.1 | 171.3 | 165.1 | 151.0 | (8.6 | ) | |||||||||||||||||
Ethane | 8.8 | 30.5 | 57.7 | 48.9 | 51.5 | 5.3 | ||||||||||||||||||
Heptane | 0.1 | — | 0.1 | 0.5 | 1.9 | 306.9 | ||||||||||||||||||
Propane | 10.1 | 11.3 | 11.3 | 11.8 | 11.5 | (3.1 | ) | |||||||||||||||||
Heavy naphtha(3) | 29.9 | 64.3 | 56.2 | 69.5 | 95.2 | 37.0 | ||||||||||||||||||
Light naphtha(3) | 6.2 | 13.3 | 19.9 | 21.3 | 27.4 | 28.7 | ||||||||||||||||||
Sulfur(3) | 572.7 | 580.5 | 529.9 | 450.5 | 382.5 | (15.1 | ) | |||||||||||||||||
Methanol(3) | 112.0 | 111.3 | 100.8 | 106.0 | 107.1 | 1.1 | ||||||||||||||||||
Aromatic compounds and derivatives(3)(4) | 240.0 | 155.1 | 111.3 | 101.6 | 120.0 | 18.1 | ||||||||||||||||||
Others(3)(5) | 40.5 | 29.6 | 28.2 | 22.8 | 26.7 | 17.2 |
Note: |
|
(1) | In millions of cubic feet per day. |
(2) | In thousands of barrels per day. |
(3) | In thousands of tons. |
(4) |
Includes aromine 100, benzene, styrene, toluene, ethylbenzene, fluxoil and xylene. |
Includes petrochemical specialties, hydrogen, |
Source:Source: Pemex BDIBDI..
In 2017,2019, the value of our domestic sales increasedin gas and aromatics decreased by 5.9%,34.1% as compared to 2016, to2018, reaching Ps. 130,445.0 million, primarily80,840.6 million. This decrease was mainly due to an increasea reduction in the average pricedomestic sales volume of natural gas and liquefied petroleum gas.
Domestic sales of LPG decreased by 15.2%, as compared to 2016, to 171.3 thousand barrels per day, primarily due to part of market demand being filled by foreign imports of LPG by private companies.
Domestic sales of natural gas decreased by 21.6%22.3%, as compared to 2016, to 2,623.02018, from 2,064.3 million cubic feet per day in 2018 to 1,604.4 million cubic feet per day in 2019. This decrease was mainly due to decreasing domestic demand in the electric sector. Demand in the electric sectorincreased competition from private companies importing foreign natural gas.
Domestic sales of gas LP decreased by 39.7% because the CFE, which uses electric power8.6%, as compared to supply its power generation plants, directly imported natural2018, from 165.1 thousand barrels per day in 2018 to 151.0 thousand barrels per day. This decrease was mainly due to continued increased competition from private companies importing foreign gas from abroad in order to supply its plants. DomesticLP since 2016.
Internal sales of sulfur decreased by 8.7%15.1%, as compared to 2016,2018, from 450.5 thousand tons in 2018 to 529.9382.5 thousand tons in 2019. This decrease was mainly due to a decrease in production inlower supply of gas for our refineries and complex gas processors. Domesticprocessing complexes, particularly the Cactus facility, as a result of maintenance.
Internal sales of aromatic compounds and derivatives decreasedaromatics increased by 28.2%18.1%, as compared to 2016, to 111.32018, from 101.6 thousand tons in 2018 to 120.0 thousand tons in 2019. This increase was mainly due to decreased production as a resultgreater supply of maintenance at our plants.these products.
Subsidiaries of Pemex Industrial Transformation
Pemex Industrial Transformation conducts certain management, real estate and distribution activities through its subsidiaries and through certain joint ventures. The following table lists its subsidiaries, their principal operating activities and Pemex Industrial Transformation’s ownership interest as of December 31, 2017.2019.
Subsidiaries of Pemex Industrial Transformation(1)
Subsidiary | Principal Activity | Ownership Interest | ||||
Mex Gas Internacional, S.L.(2) | Holding company | |||||
|
| 100.00 | ||||
Terrenos para Industrias, S.A. | Real estate holding company | 100.00 | ||||
PTI Infraestructura de Desarrollo, S.A. de C.V. | Dos Bocas refinery project development company | 99.99 |
(1) | As of December 31, |
(2) | Mex Gas Internacional, S.L. is the only subsidiary of Pemex Industrial Transformation that is a consolidated subsidiary company. See Note |
Source: Pemex Industrial Transformation
The following table lists Pemex Industrial Transformation’s joint ventures, its principal operating activities and Pemex Industrial Transformation’s ownership interests as of December 31, 2017.
Joint Ventures of Pemex Industrial Transformation(1)
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Source: Pemex Industrial Transformation
Divestitures
On July 31, 2015, we announced14, 2018, the Board of Directors of Petróleos Mexicanos authorized the divestiture of our 50% ownership interest5% indirect participation in the Gasoductos de Chihuahua,TAG Pipelines Sur, S. de R.L.R. L. de C.V. (Gasoductos de Chihuahua) joint venture with Infraestructura Energética Nova, S.A.B. de C.V. (IEnova). IEnova shareholders approved the transactionC. V. As of December 31, 2019, this operation was still in September 2015. On September 15, 2016, Mexico’sComisión Federal de Competencia Económica (Federal Economic Competition Commission or COFECE) approved the proposed direct sale to IEnova as it was structured, which included a competitive bidding process with respect to Gasoducto San Fernando and LPG Ducto TDF. The initial divestiture did not include Gasoductos de Chihuahua’s subsidiary company, Ductos y Energéticos del Norte, S. de R.L. de C.V., so Pemex Industrial Transformation retained a 50% share participation. On September 28, 2016, we announced the divestiture of our interest in Gasoductos de Chihuahua. IEnova’s interest in the company increased from 50% to 100%. The transaction was valued at U.S. $1,143.8 million.
On October 6, 2017, we announced the divestiture of our 50% ownership interest in the Ductos y Energéticos del Norte, S. de R.L. de C.V., joint venture. This divestiture included our 25% ownership interest in the Ramones II Norte gas pipeline. On November 16, 2017, the divestiture took place in favor of IEnova Pipelines, S. de R.L. de C.V. The transaction was valued at U.S.$260 million, which is within the range of valuations of comparable companies and past transactions in the hydrocarbon transporation and storage sector and which we believe reflected the fair market value. We expect the proceeds from this divestiture will contribute to improving our financial profile and decrease our need to raise capital in the debt markets.progress.
Pricing Decrees
The energy reform provides forAs of December 31, 2017, fuel price liberalization, which beganprices in early 2017 and was completed by the end of that year. Even though prices have beenMexico are fully liberalized,liberalized. However, the CRE reserves the right to intervene.
Therefore, until the Federal Economic Competition Commission determines that there is effective competition in the wholesale market, our sales prices continue to be subject to potential future regulations by the CRE , until theComisión Federal de Competencia Económica (Federal Economic Competition Commission) determines that there is effective competition in the wholesale market.
Prior to the energy reform, the Mexican Government determined natural gas prices for domestic sales, which were calculated in accordance with directives issued by the CRE on July 20, 2009 and the related Resolutions of December 20, 2010, March 3, 2011, December 20, 2012, January 17, 2013, March 21, 2013 and December 3, 2013, by which the CRE approved and issued a temporary methodology for determining the maximum prices of natural gas of first-hand sales. On February 15, 2016, the CRE issued a new methodology which, effective March 1, 2016, determined the maximum first-hand sales price of natural gas. These prices aimed to reflect natural gas opportunity costs and competitive conditions in international markets and at the point of sale.CRE.
As of July 1, 2017, the CRE will permit permitsthird-party participants to enter the gasoline and diesel market and has authorized the permanent regime offirst-hand sales of natural gas. This permanent regime allows us to sell natural gas under two separate pricing mechanisms: (1) the first hand sale price, wherein we may sell natural gas directly to customers without additional transportation or services and (2) the full marketing price, wherein we may charge a higher price that includes transportation and services costs associated with the commercialization of natural gas.
Since 2003, price control mechanisms for LPG have been implemented through governmental decrees.
In January 2010, the Mexican Government issued a decree establishing the maximum weighted averageend-user price of LPG before taxes of Ps. 8.08 per kilogram. Subsequently, as of February 2010, the Mexican Government established monthly maximum price increases in cents per kilogram before taxes, as follows:
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Beginning in August 2014, the methodology for calculatingend-user prices was modified from weighted average prices to simple average prices.
On January 1, 2016, the Mexican Government issued a decree establishing aone-time price increase of 34 Mexican cents per kilogram, which was effective until August 16, 2016. In addition, the IEPS Tax on Fossil Fuels of 13 Mexican cents per kilogram was in effect until February 29, 2016, at which point the Mexican Government eliminated the periodic price increases. On August 17, 2016, the Mexican Government authorized an end user discount of 9.97%, which was effective until December 31, 2016.
Since January 1, 2017, we have sold natural gasLPG in accordance with the new methodology authorized by CRE for determining the first handfirst-hand sales price at the point of delivery, and all end user prices are freely determined by the market.
Since December 16, 2019, PEMEX determines the marketing list prices according to the pricing mechanism authorized by ourComité de Precios y Aspectos Económicos de la Política Comercial de Petróleos Mexicanos y Empresas Productivas Subsidiarias(Committee on Prices and Economic Aspects of the Commercial Policy of Petróleos Mexicanos and its Productive Subsidiary Entities). This change is in compliance with Resolution 1008/2019 of the CRE, which considers the participation of PEMEX in first-hand sales and the marketing of LPG within a free market. Additionally, on December 16, 2019, the CRE issued resolution RES/1755/2019, which approved the commercialization contract agreement model addendum to the contract agreement.
As of January 1, 2018,2017 the IEPS Tax on Fossil Fuels iswas 13 Mexican cents per kilogram. As of January 1, 2018, this tax was 14 Mexican cents per kilogram, and, as of January 1, 2019, this tax was 15 Mexican cents per kilogram. We withhold IEPS tax. For more information, see “Item 4—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime for PEMEX.”
The Mexican Government could modify these price controls or impose additional price controls in the future. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government has historically imposed price controls in the domestic market on our products.”
Natural Gas Hedging Operations
We offer, as avalue-added service, various hedging contracts to our domestic customers to protect them against fluctuations in the prices of natural gas. For information on hedging contracts offered to natural gas domestic customers, see “Item 11—Quantitative and Qualitative Disclosures about Market Risk.”
Gas and Aromatics Capital Expenditures
Our gas and aromatics business invested Ps. 2,587489 million in capital expenditures in 20172019 and has budgeted Ps. 3,9842,000 million in capital expenditures for 2018.2020.
The following table sets forth our gas and aromatics business’ capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2017,2019, and the budget 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.
Gas and Aromatics’ Capital Expenditures
Year ended December 31,(1) | Budget 2018(2) | Year ended December 31,(1) | Budget 2020(2) | |||||||||||||||||||||||||||||
2015 | 2016 | 2017 | 2017 | 2018 | 2019 | |||||||||||||||||||||||||||
(in millions of pesos)(3) | (in millions of pesos)(3) | |||||||||||||||||||||||||||||||
Gas and Aromatics | ||||||||||||||||||||||||||||||||
Modernization of Transportation Areas of GPCs | Ps. | 534 | Ps. | 482 | Ps. | 239 | Ps. | 605 | ||||||||||||||||||||||||
Modernization of Measuring, Control and Security Systems of GPCs | 463 | 481 | — | — | ||||||||||||||||||||||||||||
Refurbishment and Modernization of Natural Gas Turbocompressors of the Cryogenic Plants at Nuevo Pemex GPC | 143 | 257 | 41 | — | ||||||||||||||||||||||||||||
Adaptation of Fractionation Plants and Conversion of the Liquids Sweetener at Nuevo Pemex GPC | Ps. | 271 | Ps. | 136 | Ps. | 61 | Ps. | — | ||||||||||||||||||||||||
Cryogenic Maintenance III Nuevo Pemex GPC | 39 | 92 | 26 | 258 | ||||||||||||||||||||||||||||
Conservation of the Main Services | — | 49 | 22 | 199 | ||||||||||||||||||||||||||||
Modernization of Systems and Processing Equipment of GPC La Venta | 20 | 18 | 18 | 111 | ||||||||||||||||||||||||||||
Maintenance of the Fractionation Plant I of the GPC Nuevo Pemex | 2 | 9 | 14 | 131 | ||||||||||||||||||||||||||||
Maintenance of Plants and Auxiliary Services of GPC Burgos | 9 | 31 | 7 | 114 | ||||||||||||||||||||||||||||
Maintenance of the Gas and Petrochemical Process Center Coatzacoalcos | — | — | — | 128 | ||||||||||||||||||||||||||||
Modernization of the Product Movement Areas of the GPCs | 239 | 644 | — | — | ||||||||||||||||||||||||||||
Modernization and Rehabilitation of Facilities of the Supply and Water Treatment System at Nuevo Pemex GPC | 344 | 255 | 216 | 6 | 216 | 241 | — | — | ||||||||||||||||||||||||
Conditioning of the Venting Systems at Cactus GPC | 147 | 131 | — | — | ||||||||||||||||||||||||||||
Integral Maintenance of Gas Sweetening Plants 1, 2, 3 and 12 at Cactus GPC | 64 | 53 | — | — | ||||||||||||||||||||||||||||
Security Requirements for Improvement of Operational Reliability of the GPCs | 31 | 41 | — | — | ||||||||||||||||||||||||||||
Conservation and Modernization of the Storage Area at Coatzacoalcos Area GPC | 32 | 22 | — | — | ||||||||||||||||||||||||||||
Rehabilitation and Modernization of Natural Gas Turbochargers of Cryogenic Plants of GPC Nuevo Pemex | 41 | — | — | — | ||||||||||||||||||||||||||||
Rehabilitation of Cooling Towers of GPC Cactus | 29 | 12 | — | 107 | ||||||||||||||||||||||||||||
Integral Project of Electric Reliability at GPCs | 474 | 177 | 22 | — | 22 | — | — | — | ||||||||||||||||||||||||
Adaptation of Fractionation Plants and Conversion of the Liquids Sweetener at Nuevo Pemex GPC | 320 | 174 | 271 | 23 | ||||||||||||||||||||||||||||
Refurbishment of Refrigerating and Ethane Turbocompressors of Fractionating Plants at Nuevo Pemex GPC | 199 | 119 | — | — | ||||||||||||||||||||||||||||
Integral Maintenance of Gas Sweetening Plants 1, 2, 3 and 12 at Cactus GPC | 109 | 116 | 64 | 97 | ||||||||||||||||||||||||||||
Conservation and Modernization of the Storage Area at Coatzacoalcos Area GPC | 208 | 88 | 32 | 134 | ||||||||||||||||||||||||||||
Security Requirements for Improvement of Operational Reliability of the GPCs | 211 | 87 | 31 | 39 | ||||||||||||||||||||||||||||
Conditioning of the Venting Systems at Cactus GPC | 109 | 75 | 147 | 131 | ||||||||||||||||||||||||||||
Conservation of Processing Capacity at Nuevo Pemex GPC | 180 | 70 | — | — | ||||||||||||||||||||||||||||
Conservation of Operational Reliability at Ciudad Pemex GPC | 196 | 31 | 6 | — | ||||||||||||||||||||||||||||
Conditioning of Facilities for Ethane Supply at Cactus GPC | 234 | 21 | 5 | — | ||||||||||||||||||||||||||||
Integral Facilities Maintenance at Cactus GPC | 137 | 21 | — | — | ||||||||||||||||||||||||||||
Conservation of the Operational Reliability of the GPC Ciudad Pemex | 6 | — | — | — | ||||||||||||||||||||||||||||
Facilities Conditioning in the GPC Cactus for Ethane Supply | 5 | — | — | — | ||||||||||||||||||||||||||||
Integral maintenance of the Modular Cryogenic Plant 5 of the GPC Cactus | — | — | — | 155 | ||||||||||||||||||||||||||||
Others | 1,793 | 992 | 1,514 | 2,949 | 1,414 | 1,428 | 341 | 797 | ||||||||||||||||||||||||
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Total | Ps. | 5,654 | Ps. | 3,446 | Ps. | 2,587 | Ps. | 3,984 | Ps. | 2,587 | Ps. | 2,907 | Ps. | 489 | Ps. | 2,000 | ||||||||||||||||
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Notes: | Numbers may not total due to rounding. |
Notes: Numbers may not total due to rounding.
GPC = Gas Processing Complex.
PC = Petrochemical Complex.
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the |
(3) | Figures are stated in nominal pesos. |
Source: Petróleos Mexicanos.
Ethane Supply Contract
On February 19, 2010, we entered into a contract to supply 66,000 barrels per day of ethane to the Etileno XXI project, a petrochemical complex in Nanchital, Veracruz that will produceproduces ethylene and polyethylene. The Etileno XXI project is being developed and will be owned and operated by Braskem-IDESA, a Brazilian-Mexican consortium. In order to meet the obligations of this contract, we made adjustments to the infrastructure of our gas processing plants in the Ciudad Pemex, Nuevo Pemex and Cactus. Additional ethane will be transported from the GPCs located in Tabasco, in southeastern Mexico, to Coatzacoalcos, Veracruz. This contract provides for “take or pay—delivery or pay” obligations for the parties, and thus, in case of breach of our supply obligation, we are subject to the payment of liquidated damages. In the event of termination as a consequence of our material default under the ethane supply contract, we may be obligated to pay to the other parties involved in the project an amount equal to the termination value of this project (the value of which is determined pursuant to the contract and takes into consideration, among other factors, the outstanding debt of the project and the amount invested in the project at such time). The Etileno XXI project commenced operations on March 18, 2016. By December 31, 2016,The Etileno XXI project is owned and operated by Braskem IDESA, S.A.P.I., or Baskem IDESA.
During 2019, we had supplied 562.8808.9 million cubic meters of ethane for a total of Ps. 1,426 million. Also2,365.0 million under this contract. We are currently in negotiations with Braskem IDESA regarding this contract.
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’ 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 the 1,830.3 thousand tons of petrochemical products produced in 2018. This decrease was mainly due to a decrease in the national supply of ethane, 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:
ethane derivatives, such as ethylene, polyethylene, ethylene oxide and glycols;
propylene and derivatives; and
others such as oxygen, nitrogen, hydrogen and butadiene, among other products.
The primary goal for our ethylene 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 storage capacity for imported ethane.
Capacity
• | Cangrejera Petrochemical Complex: This complex is located in the southern region of the country and has five plants and a line of aromatics. |
• | Morelos Petrochemical Complex: This complex is located in the southern region of the country and has six plants and auxiliary services. |
• | Pajaritos Petrochemical Complex: This complex is located in the Southern region of the country, has an ethylene plant and has not operated since 2016. |
In 2019, the Cangrejera and Morelos complexes together produced 1,104.9 thousand tons of ethane derivatives, 11.8 thousand tons of propylene and derivatives, and 494.2 thousand tons of other products.
• | Refrigerated Terminal for Ethylene and Shipping at Pajaritos: This terminal is currently used to import ethane due to a decrease in national ethane production. In 2019, we imported 164.5 thousand tons of ethane through this terminal. |
Total production capacity of our operating plants for the five years ended December 31, 2016, construction2019 was distributed among our facilities as set forth below.
Ethylene and Derivatives’ Production Capacity
Year ended December 31, | ||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||
(in thousands of tons) | ||||||||||||||||||||
Petrochemical Facility | ||||||||||||||||||||
Cangrejera(1) | 1,321.3 | 1,321.3 | 1,321.3 | 1,321.3 | 1,321.3 | |||||||||||||||
Morelos | 2,277.2 | 2,277.2 | 2,277.2 | 2,277.2 | 2,277.2 | |||||||||||||||
Pajaritos | — | — | — | 207.0 | 207.0 | |||||||||||||||
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Total | 3,598.5 | 3,598.5 | 3,598.5 | 3,805.5 | 3,805.5 | |||||||||||||||
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Notes: Numbers may not total due to rounding.
(1) | Our ethylene line of business’s capacity in Cangrejera does not include the production capacity of aromatics and derivatives. |
(2) | At the end of 2018, the assets of the Pajaritos Petrochemical Complex were transferred to Pemex because the alliance with Petroquímica Mexicana de Vinilo (PMV) was dissolved. |
Source: Pemex Ethylene.
Production
The following table sets forth our ethylene production for the five years ended December 31, 2019.
Ethylene’s Production(1)
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in thousands of tons) | (%) | |||||||||||||||||||||||
Ethane derivatives | 1,992.8 | 1,690.7 | 1,274.1 | 1,304.8 | 1,104.9 | (15.3 | ) | |||||||||||||||||
Propylene and derivatives | 66.0 | 42.8 | 12.9 | 16.5 | 11.8 | (28.6 | ) | |||||||||||||||||
Others | 910.9 | 795.2 | 597.0 | 509.0 | 494.2 | (2.9 | ) | |||||||||||||||||
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Total(1) | 2,969.7 | 2,528.7 | 1,884.0 | 1,830.3 | 1,610.8 | (12.0 | ) | |||||||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Figures include petrochemical products used as raw material to produce other petrochemicals. |
Source: Pemex BDI.
In 2019, our total production of our ethylene business decreased 12.0%, as compared to 2018, from 1,830.3 thousand tons in 2018 to 1,610.8 thousand tons in 2019. This decrease was primarily due to a decrease in the national supply of ethane, which impacted the production of ethylene and its derivatives, in particular ethylene oxide, glycols and high-density polyethylene.
During 2018, Pemex Ethylene reengineered its refrigerated terminal to provide ethane refrigeration rather than ethylene refrigeration, which allows us to import ethane, a raw material necessarily for our operations of which we have had a domestic shortage in recent years. We began to import ethane in January 2018. At the end of 2019, we installed a new vaporization system in our Pajaritos petrochemical complex, which allowed us to increase the vaporization of liquid ethane and the supply to our Cangrejera and Morelos complexes.
In addition, we are developing a vaporizer installation project for our ethane and ethylene refrigerated terminal. This project consists of the pipelinesupply and installation of vaporizer, pumps, pipes and other accessories needed in order to transportincrease our capacity to vaporize liquid ethane at this facility by 1,200 tons per day. We anticipate that this project will increase the capacity in our ethylene chain and is intended to offset the decrease in the domestic ethane supply.
Domestic Sales
The following table sets forth our ethylene domestic sales for the five years ended December 31, 2019.
Value of Ethylene’s Domestic Sales(1)
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||||||||||
Ethane derivatives | Ps. | 15,649.1 | Ps. | 14,539.4 | Ps. | 12,252.7 | Ps. | 12,472.8 | Ps. | 8,951.4 | (28.2 | ) | ||||||||||||
Propylene and derivatives | 1,156.5 | 788.3 | 340.7 | 314.4 | 114.8 | (63.5 | ) | |||||||||||||||||
Others | 104.0 | 64.8 | 28.3 | 45.9 | 56.5 | 23.1 | ||||||||||||||||||
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Total | Ps. | 16,909.6 | Ps. | 15,392.5 | Ps. | 12,621.7 | Ps. | 12,833.2 | Ps. | 9,122.7 | (28.9 | ) | ||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
Source:Pemex BDI.
In 2019, the value of our domestic sales decreased by 28.9% as compared to 2018, from Ps. 12,833.2 million in 2018 to Ps. 9,122.7 million in 2019. This decrease was primarily due to a decrease in revenues from the gas processing plants locatedsale of glycols,low-density polyethylene andlow-density linear polyethylene. This decrease was also due to the decline in Tabasco,ethylene prices around the world.
Sales to other Subsidiary Entities
The following table sets forth the intercompany sales of petrochemical products for the five years ended December 31, 2019.
Ethylene’s Intercompany Sales(1)
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||||||||||
Ethane and derivatives | Ps. | 82.1 | Ps. | 109.8 | Ps. | 1.1 | Ps. | 2.5 | Ps. | 3.8 | 52.0 | |||||||||||||
Others(3) | 86.9 | 457.8 | 284.2 | 62.0 | 59.2 | (4.5 | ) | |||||||||||||||||
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Total | Ps. | 169.0 | Ps. | 567.6 | Ps. | 285.3 | Ps. | 64.5 | Ps. | 63.0 | (2.3 | ) | ||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
(3) | Includes diethylene glycol, ethylene, hydrogen, ethylene pyrolysis liquids, monoethyleneglycol and nitrogen. |
Source: Pemex BDI.
In 2019, our intercompany sales decreased by 2.3% as compared to 2018, from Ps. 64.5 million in Southeastern Mexico,2018 to Coatzacoalcos, Veracurz,Ps. 63.0 million in 2019. This decrease was complete. mainly due to a reduction in the sales volume of ethylene hydrogen.
Ethylene Capital Expenditures
Our ethylene business invested Ps. 55 million in capital expenditures in 2019, and has budgeted Ps. 2,452 million for capital expenditures in 2020.
The following table sets forth our ethylene business’ capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2019, and the budget for 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.
Ethylene’s Capital Expenditures
Year ended December 31,(1) | Budget 2020(2) | |||||||||||||||
2017 | 2018 | 2019 | ||||||||||||||
(in millions of pesos)(3) | ||||||||||||||||
Ethylene(4) | ||||||||||||||||
Modernization of Fire Protection Network at Cangrejera PC | Ps. | 68 | Ps. | 171 | Ps. | 16 | Ps. | 43 | ||||||||
Modernization and Expansion of Production Capacity of Ethane Derivatives Chain I at Morelos PC | — | 168 | — | — | ||||||||||||
Maintaining the Production Capacity of the Swing Plant2015-2017 at Morelos PC | 16 | 78 | 22 | 40 | ||||||||||||
Sustainability of the Production Capacity of the Ethylene Plant at Morelos PC | 43 | 75 | 26 | 658 | ||||||||||||
Acquisition of Catalysts for Pemex Ethylene Plants | — | 72 | — | 7 | ||||||||||||
Maintaining the Production Capacity of Ethylene Oxide Plant2015-2017 at Morelos PC | 49 | 69 | 62 | 79 | ||||||||||||
Maintenance Program of the Capacity of the Low Density Polyethylene Plant at Cangrejera PC | 64 | 48 | 63 | 451 | ||||||||||||
Maintenance Program of the Ethylene Plant at Cangrejera PC | 39 | 48 | 4 | 455 | ||||||||||||
Rehabilitation of Maintenance Areas to Support Production at Cangrejera PC | 82 | 47 | — | — | ||||||||||||
Modernization and Optimization of Infrastructure and Auxiliary Services I at Cangrejera PC | 74 | 43 | — | 6 | ||||||||||||
Maintenance of the Production Capacity of the Asahi Plant2015-2017 at Morelos PC | 13 | 26 | 14 | 3 | ||||||||||||
Maintenance Program for the Production Capacity of the Ethylene Oxide Plant at Cangrejera PC | 2 | 20 | 2 | 300 | ||||||||||||
Maintaining the Production Capacity of Auxiliary Services at Morelos PC | 4 | 18 | — | 108 | ||||||||||||
Maintaining the Production Capacity of the Mitsui Plant2015-2017 at Morelos PC | 14 | 8 | 8 | 17 | ||||||||||||
Maintenance of the Production Capacity of the Ethylene Oxide Plant at Cangrejera PC | 38 | 3 | — | — | ||||||||||||
Safety and Environmental Protection Based on Observations and Regulations IV at Morelos PC | 1 | — | — | — | ||||||||||||
Maintaining Production Capacity of the Low Density Polyethylene Plant | 67 | — | — | — | ||||||||||||
Maintaining the Production Capacity of Ethane Derivatives Chain II at Morelos PC | 1 | — | — | — | ||||||||||||
Maintaining the Production Capacity of Auxiliary Services II | 16 | — | — | — | ||||||||||||
Maintaining the Production Capacity of Auxiliary Services III | 8 | — | — | — | ||||||||||||
Maintaining the Production Capacity of the Ethane Derivatives Chain III at Morelos PC | 1 | — | — | — | ||||||||||||
Steam Generation Plant Maintenance Program | — | — | — | 24 | ||||||||||||
Maintenance Program for the Electric Generation Plant | — | — | — | 253 | ||||||||||||
Maintenance and Sustaining Operations of the Refrigerated Terminal of Ethane Shipments at Pajaritos (TREEP) | — | — | — | 7 | ||||||||||||
Others | 18 | 81 | 1 | 1 | ||||||||||||
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Total | Ps. | 618 | Ps. | 975 | Ps. | 219 | Ps. | 2,452 | ||||||||
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Notes: Numbers may not total due to rounding.
PC = Petrochemical Complex.
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the Official Gazette of the Federation on December 11, 2019. |
(3) | Figures are stated in nominal pesos. |
(4) | Capital expenditures were made for certain projects in years following the original term indicated in the project title. |
Source: Petróleos Mexicanos.
Fertilizers
Our fertilizers segment operates through the productivestate-owned subsidiary Pemex Fertilizers produces ammonia and carbon dioxide and integrates the ammonia production chain up to the point of sale of fertilizers. Ourfertilizers, including agricultural and industrial nitrates, phosphate fertilizers and acids (produced by Fertinal). We also expect that our subsidiaryPro-Agroindustria will begin producing urea in the second quarter of 2020.
In 2020, we intend to focus our strategy for the fertilizers segment focuses onon: (1) increasing the economic valuenational production of fertilizers at competitive prices; (2) contributing to the segment by generating diverse investment opportunities instrengthening of the agricultural sector in Mexico and (2)through the supply of fertilizers; (3) ensuring a reliable supply of natural gas for the operation of our plants through a long-term contract that sustains operations forplants; and (4) continuing to make capital expenditure investments to improve the operational reliability of our four ammonia plants.
CertainIn addition, as part of our strategy we intend to integrate our Fertinal andPro-Agroindustria segments into the plants in Cosoleacaque are showing signsproduction chain of deterioration duenatural gas to ammonia to fertilizers. We expect that this integration will help us offer a lackwide range of proper maintenance. However,fertilizers, nitrogen and phosphates at competitive prices. Furthermore, we expect that establishing new commercial channels will allow us to have three plantsbring the supply of ammonia and fertilizers closer to industrial and agricultural producers throughout the country. Likewise, Pemex Fertilizers is in operating condition bynegotiations with the second quarterSecretaría de Agricultura y Desarrollo Rural(Ministry of 2018.Agriculture and Rural Development, or SADER), to fulfill the urea and diammonium phosphate demand of small agriculture producers through the Mexican Government programSembrando Vida.
Capacity
At the endAs of 2017,December 31, 2019, we owned four petrochemicalammonia plants, threeone of which resumed operations in December 2019 after undergoing major maintenance. Two of our plants are in operation, forscheduled to undergo major maintenance during 2020 and 2021. Finally, our remaining plant likewise requires further rehabilitation, and this rehabilitation will be scheduled based on the productionavailability of ammonia. We had a total production capacity of 1,440 thousand tons of ammonia per year in 2017.budgetary resources.
The total ammonia production capacity of our operating plants for the last three years was distributed among our facilities as set forth below:
Fertilizers Segment’sFertilizers’ Total Capacity
Year ended December 31, | ||||||||||||||||||||||||
2017 | 2018 | 2019 | ||||||||||||||||||||||
Year ended December 31, | (thousands of tons) | |||||||||||||||||||||||
Petrochemical Complexes | 2015 | 2016 | 2017 | |||||||||||||||||||||
(thousands of tons) | ||||||||||||||||||||||||
Cosoleacaque (ammonia) | 1,440 | 1,440 | 1,440 | 1,440 | 1,440 | 1,440 |
Source: Pemex Fertilizers.
Production
The following table summarizes the annual production of our fertilizers segment for the three years ended December 31, 2017.2019.
Fertilizers Segment’sFertilizers’ Production
Year ended December 31, | Year ended December 31, | 2019 | ||||||||||||||||||||||||||||||
2015 | 2016 | 2017 | 2017 vs. 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||||||||
(thousands of tons) | (%) | (thousands of tons) | (%) | |||||||||||||||||||||||||||||
Methane Derivatives | ||||||||||||||||||||||||||||||||
Ammonia | 575 | 533 | 500 | (6.2 | ) | 500 | 151 | — | (100.0 | ) | ||||||||||||||||||||||
Carbon dioxide | 830 | 786 | 844 | 7.4 | 844 | 372 | 7 | (98.1 | ) | |||||||||||||||||||||||
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| ||||||||||||||||||||||||||
Total | 1,406 | 1,319 | 1,343 | 1.8 | 1,343 | 523 | 7 | (98.7 | ) | |||||||||||||||||||||||
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|
|
|
|
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|
Note: Numbers may not total due to rounding.
Source: Pemex BDI.
Total annual production of methane derivatives in 2017 increased 1.8%2019 decreased 98.7% from 1,319523 thousand tons in 20162018 to 1,3437 thousand tons in 2017,2019. This decrease was mainly due to increased productionshortages in the supply of carbon dioxide.
In 2017 we produced 500 thousand tonsraw material that have kept our Cosoleacaque plant out of ammonia, which represents a decrease of 6.2% as compared to 533 thousand tons produced in 2016. In 2017, we produced 844 thousand tons of carbon dioxide, aoperation sinceby-productmid-August of the production process, which represents a 7.4% increase as compared to 2016.2018.
Sales of Fertilizersto other Subsidiary Entities
The following table sets forth the valueintercompany sales of our domestic salespetrochemical products for the threefive years ended December 31, 2017:2019.
Value of Fertilizers Segment’s DomesticEthylene’s Intercompany Sales(1)
Year ended December 31, | ||||||||||||||||
2015 | 2016 | 2017 | 2017 vs. 2016 | |||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||
Methane Derivatives | ||||||||||||||||
Ammonia | Ps. 4,414.6 | Ps. 4,593.1 | Ps. 4,676.5 | 1.8 | ||||||||||||
Carbon dioxide | 69.9 | 90.2 | 109.1 | 21.0 | ||||||||||||
Urea (resale) | 46.5 | 6.9 | — | (100 | ) | |||||||||||
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| |||||||||||
Total | Ps. 4,531.0 | Ps. 4,690.1 | Ps. 4,785.7 | 2.0 | ||||||||||||
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|
|
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||||||||||
Ethane and derivatives | Ps. | 82.1 | Ps. | 109.8 | Ps. | 1.1 | Ps. | 2.5 | Ps. | 3.8 | 52.0 | |||||||||||||
Others(3) | 86.9 | 457.8 | 284.2 | 62.0 | 59.2 | (4.5 | ) | |||||||||||||||||
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| |||||||||||||
Total | Ps. | 169.0 | Ps. | 567.6 | Ps. | 285.3 | Ps. | 64.5 | Ps. | 63.0 | (2.3 | ) | ||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
(3) | Includes diethylene glycol, ethylene, hydrogen, ethylene pyrolysis liquids, monoethyleneglycol and nitrogen. |
Source: Pemex BDI.
In 2017 the value of domestic2019, our intercompany sales in our fertilizers segment increaseddecreased by 2.0%,2.3% as compared to 2018, from Ps. 4,690.164.5 million in 20162018 to Ps. 4,785.763.0 million in 2017, primarily2019. This decrease was mainly due to an increasea reduction in the sales volume of sales of ammonia, as presentedethylene hydrogen.
Ethylene Capital Expenditures
Our ethylene business invested Ps. 55 million in more detail below.
Volume of salescapital expenditures in 2019, and has budgeted Ps. 2,452 million for capital expenditures in 2020.
The following table sets forth the value of our domestic sales for the three years ended December 31, 2017:
Volume of Fertilizers Segment’s Domestic Sales
Year ended December 31, | ||||||||||||||||
2015 | 2016 | 2017 | 2017 vs. 2016 | |||||||||||||
(thousands of tons) | (%) | |||||||||||||||
Methane Derivatives | ||||||||||||||||
Ammonia | 643.4 | 752.8 | 760.4 | 1.0 | ||||||||||||
Carbon dioxide | 166.0 | 179.7 | 207.6 | 15.5 | ||||||||||||
Urea (resale) | 10.0 | 1.7 | — | (100 | ) | |||||||||||
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Total | 819.5 | 934.3 | 968.0 | 3.6 | ||||||||||||
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Note: Numbers may not total due to rounding.
Source: Pemex BDI.
Fertilizers Capital Expenditures
Our fertilizers segment invested Ps. 264 million in capital expenditures in 2017 and has budgeted Ps. 444 million in capital expenditures for 2018. The following table sets forth our fertilizers segment’sethylene business’ capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 1, 2017,31, 2019, and the budget 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.
Fertilizers’Ethylene’s Capital Expenditures
Year ended December 31,(1) | Budget | |||||||||||||||
2015 | 2016 | 2017 | 2018(2) | |||||||||||||
(in millions of pesos)(3) | ||||||||||||||||
Fertilizers | ||||||||||||||||
Rehabilitation of Ammonia Plant IV and Integration and Auxiliary Services for Cosoleacaque PC | Ps. | 791 | Ps. | 295 | Ps. | 102 | Ps. | 68 | ||||||||
Efficiency in Storage and Distribution of Pemex-Petrochemicals | — | 45 | 38 | 127 | ||||||||||||
Maintaining the Production Capacity of Ammonia Plant VII and its Auxiliary Services at Cosoleacaque PC | 101 | 18 | 5 | 3 | ||||||||||||
Maintaining the Production Capacity of Ammonia Plant VI at Cosoleacaque PC | 97 | 16 | — | 3 | ||||||||||||
Safety and Environmental Protection, Derived from Observations and Regulations II in Cosoleacaque PC | 43 | 5 | — | — | ||||||||||||
Rehabilitation of Primary Reformers and Auxiliary Ammonia Plant VI and VII of Cosoleacaque PC | — | — | 75 | 90 | ||||||||||||
Others | 12 | — | 45 | 154 | ||||||||||||
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| |||||||||
Total | Ps. | 1,044 | Ps. | 379 | Ps. | 264 | Ps. | 444 | ||||||||
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|
Year ended December 31,(1) | Budget 2020(2) | |||||||||||||||
2017 | 2018 | 2019 | ||||||||||||||
(in millions of pesos)(3) | ||||||||||||||||
Ethylene(4) | ||||||||||||||||
Modernization of Fire Protection Network at Cangrejera PC | Ps. | 68 | Ps. | 171 | Ps. | 16 | Ps. | 43 | ||||||||
Modernization and Expansion of Production Capacity of Ethane Derivatives Chain I at Morelos PC | — | 168 | — | — | ||||||||||||
Maintaining the Production Capacity of the Swing Plant2015-2017 at Morelos PC | 16 | 78 | 22 | 40 | ||||||||||||
Sustainability of the Production Capacity of the Ethylene Plant at Morelos PC | 43 | 75 | 26 | 658 | ||||||||||||
Acquisition of Catalysts for Pemex Ethylene Plants | — | 72 | — | 7 | ||||||||||||
Maintaining the Production Capacity of Ethylene Oxide Plant2015-2017 at Morelos PC | 49 | 69 | 62 | 79 | ||||||||||||
Maintenance Program of the Capacity of the Low Density Polyethylene Plant at Cangrejera PC | 64 | 48 | 63 | 451 | ||||||||||||
Maintenance Program of the Ethylene Plant at Cangrejera PC | 39 | 48 | 4 | 455 | ||||||||||||
Rehabilitation of Maintenance Areas to Support Production at Cangrejera PC | 82 | 47 | — | — | ||||||||||||
Modernization and Optimization of Infrastructure and Auxiliary Services I at Cangrejera PC | 74 | 43 | — | 6 | ||||||||||||
Maintenance of the Production Capacity of the Asahi Plant2015-2017 at Morelos PC | 13 | 26 | 14 | 3 | ||||||||||||
Maintenance Program for the Production Capacity of the Ethylene Oxide Plant at Cangrejera PC | 2 | 20 | 2 | 300 | ||||||||||||
Maintaining the Production Capacity of Auxiliary Services at Morelos PC | 4 | 18 | — | 108 | ||||||||||||
Maintaining the Production Capacity of the Mitsui Plant2015-2017 at Morelos PC | 14 | 8 | 8 | 17 | ||||||||||||
Maintenance of the Production Capacity of the Ethylene Oxide Plant at Cangrejera PC | 38 | 3 | — | — | ||||||||||||
Safety and Environmental Protection Based on Observations and Regulations IV at Morelos PC | 1 | — | — | — | ||||||||||||
Maintaining Production Capacity of the Low Density Polyethylene Plant | 67 | — | — | — | ||||||||||||
Maintaining the Production Capacity of Ethane Derivatives Chain II at Morelos PC | 1 | — | — | — | ||||||||||||
Maintaining the Production Capacity of Auxiliary Services II | 16 | — | — | — | ||||||||||||
Maintaining the Production Capacity of Auxiliary Services III | 8 | — | — | — | ||||||||||||
Maintaining the Production Capacity of the Ethane Derivatives Chain III at Morelos PC | 1 | — | — | — | ||||||||||||
Steam Generation Plant Maintenance Program | — | — | — | 24 | ||||||||||||
Maintenance Program for the Electric Generation Plant | — | — | — | 253 | ||||||||||||
Maintenance and Sustaining Operations of the Refrigerated Terminal of Ethane Shipments at Pajaritos (TREEP) | — | — | — | 7 | ||||||||||||
Others | 18 | 81 | 1 | 1 | ||||||||||||
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| |||||||||
Total | Ps. | 618 | Ps. | 975 | Ps. | 219 | Ps. | 2,452 | ||||||||
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|
|
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|
|
Notes: Numbers may not total due to rounding.
PC = Petrochemical Complex.
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the |
(3) | Figures are stated in nominal pesos. |
(4) | Capital expenditures were made for certain projects in years following the original term indicated in the project title. |
Source: Petróleos Mexicanos..Mexicanos.
Pajaritos Petrochemical Complex
In 2014, we acquired a closed fertilizer
Fertilizers
Our fertilizers segment operates through the productivestate-owned subsidiary Pemex Fertilizers and integrates the ammonia production facility locatedchain up to the point of sale of fertilizers, including agricultural and industrial nitrates, phosphate fertilizers and acids (produced by Fertinal). We also expect that our subsidiaryPro-Agroindustria will begin producing urea in Pajaritos, Veracruz, Mexico, which we are currently renovating. The renovation of the facility involves restoring operations of our rotating, static and mechanical equipment, building a carbon dioxide compressor station, as well as other auxiliary projects and is expected to be finalized during the first quarter of 2018. By the second quarter of 2018, and assuming2020.
In 2020, we intend to focus our strategy on: (1) increasing the sufficientnational production of fertilizers at competitive prices; (2) contributing to the strengthening of the agricultural sector in Mexico through the supply of ammonia from Cosoleacaque, we expect to havefertilizers; (3) ensuring a production capacityreliable supply of 90 thousand tons of urea per month.
Acquisition of Fertinal
On January 28, 2016, PMX Fertilizantes Pacífico, S.A. de C.V., onenatural gas for the operation of our subsidiaries, acquired 99.99% of the outstanding shares of Fertinal, for a total purchase price of Ps. 4,322.8 million. Before this acquisition, Fertinal experienced a prolonged period without any investment, as well as problems with its cash flows. In July 2016, we added U.S.$120 million for workingplants; and (4) continuing to make capital needs and capital expenditures in orderexpenditure investments to improve Fertinal’s production capacity. By the fourth quarteroperational reliability of 2017, Fertinal’s financial position had improved significantly and it has seen improved performance on its production ratiosour four ammonia plants.
In addition, as part of the date of this annual report.
Fertinal’s total production capacity for the years ended December 31, 2016 and 2017 is as set forth below:
Fertinals Segment’s Total Capacity
Year ended December 31, | ||||||||
2016 | 2017 | |||||||
(thousands of tons) | ||||||||
Nitrate and phosphates | 1,299 | 1,420 |
Source: Fertinal Group
Fertinal’s total production for the years ended December 31, 2016 and 2017 is set forth below:
Fertinals Segment’s Production
Year ended December 31, | ||||||||||||
2016 | 2017 | 2017 vs. 2016 | ||||||||||
(thousands of tons) | % | |||||||||||
Phosphates | 682.0 | 763.9 | 12.0 | |||||||||
Nitrate | 187.3 | 220.8 | 18.0 | |||||||||
Others | 5.7 | 3.5 | (38.6 | ) | ||||||||
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| |||||||
Total | 875.0 | 988.2 | 13.0 | |||||||||
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Source: Fertinal Group
The following table sets forth the value of Fertinal’s domestic sales for the years ended December 31, 2016 and 2017:
Value of Fertinal’s Domestic Sales(1)
Year ended December 31, | ||||||||||||
2016 | 2017 | 2017 vs. 2016 | ||||||||||
(in millions in pesos)(2) | % | |||||||||||
Phosphates | Ps. 1,430.9 | Ps. 1,717.5 | 20.0 | |||||||||
Nitrogenated | 1,154.3 | 1,099.1 | (4.8 | ) | ||||||||
Others | 61.4 | 148.8 | 142.3 | |||||||||
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| |||||||
Total | Ps. 2,646.6 | Ps. 2,965.5 | 12.0 | |||||||||
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Note: Numbers may not total due to rounding.
Source: Fertinal Group.
Weour strategy we intend to incorporateintegrate our Fertinal andPro-Agroindustria segments into the production chain of natural gas to ammonia solid fertilizers value chain in order to fertilizers. We expect that this integration will help us offer a wide range of fertilizers, nitrogen and phosphates at competitive prices. Furthermore, we expect that establishing new commercial channels will allow us to cover approximately 50%bring the supply of ammonia and fertilizers closer to industrial and agricultural producers throughout the domestic market. We are also assessing the possibility of selling this integrated businesscountry. Likewise, Pemex Fertilizers is in the future.
On February 2, 2017, P.M.I. Holding B.V.(PMI-HBV) converted its long-term debt securities with Fertinal into 2,313,600,000 Fertinal shares, which represents 38.2% of the total shares. There was no effect on cash flow as a result of this transaction.
On June 14, 2017,PMI-NASA and P.M.I. Infraestructura de Desarrollo, S.A. de C.V.(PMI-ID) transferred 100% of their ownership interest inPro-Agroindustria, S.A. de C.V. to PMX Fertilizantes Holding, S.A. de C.V.(PMX-H) and PMX Fertilizantes Pacífico, S.A. de C.V.(PMX-P) as follows:PMI-NASA transferred 1% of the shares toPMX-H andPMI-ID transferred 99% of the shares toPMX-P. On the same date,PMI-HBV transferred 100% of its stock in Fertinal toPMX-P. There was no effect on cash flow from these transfers, which were performednegotiations with the authorizationSecretaría de Agricultura y Desarrollo Rural(Ministry of Agriculture and approvalRural Development, or SADER), to fulfill the urea and diammonium phosphate demand of the respective Boards of Directors and in accordance with theLey de Petróleos Mexicanos.
Ethylene
Our ethylene segment operatessmall agriculture producers through the productive state-owned subsidiary Pemex Ethylene and takes advantage of the integration of the ethylene production chain by manufacturing various petrochemical products. Our ethylene segment manufactures various petrochemical products, including:Mexican Government programSembrando Vida.
Capacity
TotalAs of December 31, 2019, we owned four ammonia plants, one of which resumed operations in December 2019 after undergoing major maintenance. Two of our plants are scheduled to undergo major maintenance during 2020 and 2021. Finally, our remaining plant likewise requires further rehabilitation, and this rehabilitation will be scheduled based on the availability of budgetary resources.
The total ammonia production capacity of our operating plants for the last three years was distributed among our facilities as set forth below:
Ethylene Segment’s ProductionFertilizers’ Total Capacity
Year ended December 31, | ||||||||||||
2015 | 2016 | 2017 | ||||||||||
(in thousands of tons) | ||||||||||||
Petrochemical Facility | ||||||||||||
Cangrejera(1) | 1,321.3 | 1,321.3 | 1,321.3 | |||||||||
Morelos | 2,277.2 | 2,277.2 | 2,277.2 | |||||||||
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| |||||||
Total | 3,598.5 | 3,598.5 | 3,598.5 | |||||||||
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|
Year ended December 31, | ||||||||||||
2017 | 2018 | 2019 | ||||||||||
(thousands of tons) | ||||||||||||
Petrochemical Complexes | ||||||||||||
Cosoleacaque (ammonia) | 1,440 | 1,440 | 1,440 |
Notes: Numbers may not total due to rounding.
Source: Pemex Ethylene.Fertilizers.
Production
The following table sets forthsummarizes the annual production of our ethylene segment’s productionfertilizers segment for the three years ended December 31, 2017:2019.
Ethylene Segment’sFertilizers’ Production(1)
Year ended December 31, | ||||||||||||||||
2015 | 2016 | 2017 | 2017 vs. 2016 | |||||||||||||
(in thousands of tons) | (%) | |||||||||||||||
Ethane derivatives | 1,992.8 | 1,690.7 | 1,274.1 | (24.6 | ) | |||||||||||
Propylene and derivatives | 66.0 | 42.8 | 12.9 | (69.9 | ) | |||||||||||
Others | 910.9 | 795.2 | 597.0 | (24.9 | ) | |||||||||||
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| |||||||||||
Total(1) | 2,969.7 | 2,528.7 | 1,884.0 | (25.5 | ) | |||||||||||
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|
Year ended December 31, | 2019 | |||||||||||||||
2017 | 2018 | 2019 | vs. 2018 | |||||||||||||
(thousands of tons) | (%) | |||||||||||||||
Methane Derivatives | ||||||||||||||||
Ammonia | 500 | 151 | — | (100.0 | ) | |||||||||||
Carbon dioxide | 844 | 372 | 7 | (98.1 | ) | |||||||||||
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| |||||||||
Total | 1,343 | 523 | 7 | (98.7 | ) | |||||||||||
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Note: Numbers may not total due to rounding.
Source: Pemex BDI.
In 2017, our totalTotal annual production of methane derivatives in the ethylene segment2019 decreased 25.5%,98.7% from 2,528.7523 thousand tons in 20162018 to 1,884.07 thousand tons in 2017, primarily2019. This decrease was mainly due to a decrease in the production of ethylene and derivatives of ethylene (high and low density polyethylene, ethylene oxide and glycols), which was the result of a 28% decreaseshortages in the supply of raw materials, including ethane gas, during 2017, and the closurematerial that have kept our Cosoleacaque plant out of our acrylonitrile plant.operation sincemid-August of 2018.
Domestic Sales
The following table sets forth our ethylene segment’s domestic sales for the three years ended December 31, 2017.
Value of Ethylene Segment’s Domestic Sales(1)
Year ended December 31, | ||||||||||||||||
2015 | 2016 | 2017 | 2017 vs. 2016 | |||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||
Ethane derivatives | Ps.15,649.1 | Ps. 14,539.4 | Ps. 12,252,7 | (15.7 | ) | |||||||||||
Propylene and derivatives | 1,156.5 | 788.3 | 340.7 | (56.8 | ) | |||||||||||
Others | 104.0 | 64.8 | 28.3 | (56.3 | ) | |||||||||||
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| |||||||||||
Total | Ps.16,909.6 | Ps. 15,392.5 | Ps. 12,621.7 | (18.0 | ) | |||||||||||
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|
Note: Numbers may not total due to rounding.
Source: Pemex BDI.
In 2017, our domestic sales decreased by 18.0% from Ps. 15,392.5 million in 2016 to Ps. 12,621.7 million in 2017. This decrease was primarily due to lower production of polyethylenes and ethylene oxid as a result of a decrease in the supply of raw materials, including ethane, and the closure of our acrylonitrile plant at the Morelos Petrochemical complex.
On July 7, 2017 Pemex Ethylene successfully concluded an electronic auction to allocate the supply of ethylene oxide. Ten domestic ethylene oxide companies participated in the auction, which resulted in all of the available volume being placed at a market price that was a higher than the historical price of ethylene oxide.
Sales
Drilling and Services
Prior to other Subsidiary Entities
The following table sets forthJuly 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 Pemex Exploration and Production. Therefore, our drilling and services segment operated through the intercompany salesproductive 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 petrochemical products for the three years ended December 31, 2017.
Ethylene Segment’s Intercompany Sales(1)
Year ended December 31, | ||||||||||||||||
2015 | 2016 | 2017 | 2017 vs. 2016 | |||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||
Ethane and derivatives | Ps. 82.1 | Ps.107.9 | Ps. — | (100 | ) | |||||||||||
Others | 86.9 | 373.7 | 284.2 | (23.9 | ) | |||||||||||
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| |||||||||
Total | Ps.169.0 | Ps. 481.6 | Ps. 284.2 | (41.0 | ) | |||||||||||
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Note: Numbers may not total duebusiness after July 1, 2019. Prior to rounding.
Source:July 1, 2019, Pemex Ethylene.Drilling and Services mainly provided services to Pemex Exploration and Production.
In 2017,2019, our intercompany sales decreased by 41.0%, from Ps. 481.6 milliondrilling and services business provided drilling, completion, workover and well services in 2016onshore and offshore fields both to Ps. 284.2 million in 2017. This decrease was primarily dueus and to a decrease inour external client Marinsa. Beginning July 1, 2019, such services were provided through Pemex Exploration and Production.
During 2019, we carried out the volumefollowing activities: drilling of sales74 wells, 54 of nitrogen, pyrolysis gasolinewhich were onshore and ethylene in 2017, as compared20 offshore, completion of 48 wells, 25 of which were onshore and 23 offshore and 328 workovers, 263 of which were onshore and 65 offshore. These services were performed with an average of 99 rigs, 61 of which were onshore and 38 offshore, including both owned and leased rigs.
In addition, during 2019 we carried out 10,460 well services for our own infrastructure, 48% of which were wirelines, 32% cementings, 17% registrations and perforations and 3% coiled tubing operations. We also provided well services to 2016, mainly due to a decrease in the supply of raw materials, including ethane gas.our external client Marinsa.
EthyleneDrilling and Services Capital Expenditures
Our ethylenedrilling and services segment invested Ps. 618738 million inon capital expenditures in 2017,2019. The 2020 budget for drilling and has budgeted Ps. 1,786 million forservices capital expenditures is included in 2018.the budget for Pemex Exploration and Production capital expenditures.
The following table sets forth our ethylenedrilling and services segment’s capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2015, 2016 and 2017, and the budget for 2018.2019. 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.
Ethylene’sDrilling and Services’ Capital Expenditures
Year ended December 31,(1) | Budget 2018(2) | |||||||||||||||
2015 | 2016 | 2017 | ||||||||||||||
(in millions of pesos)(3) | ||||||||||||||||
Ethylene | ||||||||||||||||
Maintaining the Production Capacity of Ethylene Plant 2013-2015 at Morelos PC | Ps. 93 | Ps. 122 | Ps. — | Ps. — | ||||||||||||
Modernization and Optimization of Auxiliary Services Infrastructure I at Morelos PC | 5 | 105 | 74 | 52 | ||||||||||||
Modernization of Fire Protection Network at Cangrejera PC | 102 | 71 | 68 | 146 | ||||||||||||
Safety and Environmental Protection Based on Observations and Regulations IV at Morelos PC | 114 | 43 | 1 | 11 | ||||||||||||
Maintaining Production Capacity of the Low Density Polyethylene Plant | 112 | 40 | 67 | — | ||||||||||||
Maintaining the Production Capacity of Ethane Derivatives Chain II at Morelos PC | 87 | 38 | 1 | — | ||||||||||||
Maintaining the Production Capacity of Auxiliary Services II | 78 | 27 | 16 | — | ||||||||||||
Maintaining the production capacity of ethylene oxide plant 2015-2017 at Morelos PC | 1 | 23 | 49 | 144 | ||||||||||||
Maintaining the Production Capacity of Auxiliary Services III | 59 | 17 | 8 | 35 | ||||||||||||
Maintaining the Production Capacity of Auxiliary Services at Morelos PC | 48 | 17 | 4 | 153 | ||||||||||||
Maintaining the Production Capacity of the Ethane Derivatives Chain III at Morelos PC | 54 | 8 | 1 | — | ||||||||||||
Maintaining the Production Capacity of the Mitsui plant 2015-2017 at Morelos PC | 4 | 8 | 14 | 15 | ||||||||||||
Maintaining the Production Capacity of the Swing Plant 2015-2017 at Morelos PC | 7 | 6 | 16 | 258 | ||||||||||||
Modernization and Expansion of Production Capacity of Ethane Derivatives Chain I at Morelos PC | 402 | 3 | — | 5 | ||||||||||||
Others | 426 | 219 | 299 | 968 | ||||||||||||
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| |||||||||
Total | Ps. 1,869 | Ps. 746 | Ps. 618 | Ps. 1,786 | ||||||||||||
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Year ended December 31,(1) | Budget | |||||||||||||||
2017 | 2018 | 2019(2) | 2020(3)(4) | |||||||||||||
(in millions of pesos)(5) | ||||||||||||||||
Drilling and Services | ||||||||||||||||
Acquisition of TwoJack-Up Platforms | Ps. | 794 | Ps. | 804 | Ps. | 403 | n.a. | |||||||||
Acquisition of NineLand-Based Drilling Rigs | 352 | 353 | 178 | n.a. | ||||||||||||
Drilling Rig Equipment and Well Service Equipment Maintenance Program | 96 | 83 | 60 | n.a. | ||||||||||||
Acquisition of Two Modular Drilling Rigs | 3 | 2 | 7 | n.a. | ||||||||||||
Others | 307 | 146 | 90 | n.a. | ||||||||||||
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| |||||||||
Total | Ps. | 1,550 | Ps. | 1,388 | Ps. | 738 | n.a |
Note: Numbers may not total due to rounding.
(1) | Amounts based on cash basis method of accounting. |
(2) | Figures include our drilling and services segment’s capital expenditures for thesix-month period ended June 30, 2019. Prior to July 1, 2019, Pemex Drilling and Services operated as an additional productive state-owned subsidiary. As of July 1, 2019, Pemex Drilling and Services was merged into Pemex Exploration and Production. |
(3) | As a result the merger of Pemex Drilling and Services into Pemex Exploration and Production on July 1, 2019, our drilling and services segment ceased to operate as a separate segment, but rather was consolidated as a line of business within our exploration and development segment. 2020 budget figures for our drilling and services line of business are included within our capital expenditures for our exploration and development segment. See “Item 4—Business Overview—Exploration and Development Capital Expenditures.”. |
(4) | Original budget published in the Official Gazette of the Federation on December 11, 2019. |
(5) | Figures are stated in nominal pesos. |
Source: Petróleos Mexicanos.
Industrial Transformation
Our industrial transformation segment is comprised of three principal activities: (i) refining, (ii) gas and aromatics and (iii) since July 1, 2019, ethylene and derivatives:
Refining
Refining Processes and Capacity
Our refining production processes include the following:
• | Atmospheric distillation. This process heats crude oil in a tube furnace at atmospheric pressure to distill refined products. The primary products produced are gasoline, jet fuel, diesel, atmospheric gas oil and atmospheric residual crude oil. |
• | Vacuum distillation. This process heats crude oil or other feedstock in a vacuum distillation column, which is operated at low pressures. The objective of this process is to maximize production of heavy vacuum gas oil, which is produced by boiling crude oil. |
• | Cracking. This process uses either heat and pressure or a catalytic agent to increase gasoline yields from crude oil. |
• | Visbreaking. This is a thermal cracking process, which uses ahorizontal-tube heater fired to a high temperature. Visbreaking reduces flasher bottom viscosity and produces some heavy gas oil. |
• | Reforming processes. These processes use heat and catalysts to transform smaller or unstable hydrocarbon molecules into larger, more useful refining or blending products. For example, we use reforming processes to convert low octane gasoline into higher octane stocks that are suitable for blending into finished gasoline and to convert naphthas into more volatile, higher octane products. |
• | Hydrotreatment or residual hydrocracking. This process uses a catalyst and hydrogen at high temperature and pressure to remove sulfur, nitrogen and some aromatic compounds. Hydrotreatment also processes some lighter liquid productoff-take. |
• | Alkylation and isomerization. This polymerization process unites olefins and isoparaffins. Butylenes and isobutanes are combined with sulfuric acid or hydrofluoric acid to rearrangestraight-chain hydrocarbon molecules intobranched-chain products. Pentanes and hexanes, which are difficult to reform, are isomerized through the use of aluminum chloride and otherprecious-metal catalysts. Normal butane may be isomerized to provide a portion of the isobutene feed needed for the alkylation process. The process produces a high octane, low sensitivity blending agent for gasoline. |
• | Coking. This process is a severe method of thermal cracking used to upgrade heavy residuals into lighter products or distillates. Coking producesstraight-run gasoline (coker naphtha) and variousmiddle-distillate fractions used as catalytic feedstock, thus generating a concentrated solid material. |
These production processes together constitute our production capacity as set forth in the table below.
Refining Capacity by Production Process
At December 31, | ||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||
(in thousands of barrels per day) | ||||||||||||||||||||
Production Process | ||||||||||||||||||||
Atmospheric distillation | 1,640.0 | 1,602.0 | 1,627.0 | 1,640.0 | 1,640.0 | |||||||||||||||
Vacuum distillation | 772.4 | 767.5 | 772.2 | 772.2 | 772.2 | |||||||||||||||
Cracking | 422.5 | 422.5 | 422.5 | 422.5 | 422.5 | |||||||||||||||
Visbreaking | 91.0 | 91.0 | 91.0 | 91.0 | 91.0 | |||||||||||||||
Reforming | 279.3 | 279.3 | 279.3 | 279.3 | 279.3 | |||||||||||||||
Hydrotreatment | 1,099.9 | 1,230.0 | 1,230.0 | 1,230.0 | 1,230.0 | |||||||||||||||
Alkylation and isomerization | 154.8 | 154.3 | 154.3 | 154.3 | 154.3 | |||||||||||||||
Coking | 155.8 | 155.8 | 155.8 | 155.8 | 155.8 |
Source: Base de Datos Institucional (Pemex Institutional Database, or Pemex BDI).
As of December 31, 2019, we owned and operated six refineries: Cadereyta, Madero, Minatitlán, Salamanca, Salina Cruz and Tula. Our refineries consist of atmospheric and vacuum distillation units, where the bulk of crude oil input is processed. Secondary processing facilities include desulfurization units and facilities for catalytic cracking, reforming and hydrotreating.
During 2019, our refineries processed 592.0 thousand barrels per day of crude oil (103.2 thousand barrels per day at Cadereyta, 58.0 thousand barrels per day at Madero, 91.6 thousand barrels per day at Minatitlán, 92.9 thousand barrels per day at Salamanca, 125.1 thousand barrels per day at Salina Cruz and 121.2 thousand barrels per day at Tula), which in total consisted of 299.9 thousand barrels per day of Olmeca and Isthmus crude oil and 292.1 thousand barrels per day of Maya crude oil.
In the first nine months of 2019, we processed 151.7 thousand barrels per day of crude oil above the 504.9 thousand barrels per day we processed during the fourth quarter of 2018. This recovery was mainly due to improved levels of processing and production that resulted from the maintenance carried out in our refineries since March 2019. Such maintenance was financed with operating cash flow. Specific factors that contributed to this recovery include: the stabilization of process levels at our Minatitlan refinery, the restart of operations of the Mayan distilling unit at our Madero refinery in June 2019, the stabilization of operations at our Cadereyta refinery during the first nine months of 2019, with an average production level of 107.9 thousand barrels per day, and the stabilization of operations at our Salamanca refinery through August 2019 due to the restart of two distilling units.
In the last quarter of 2019, we processed 557.1 thousand barrels per day of crude oil. This decrease, which began at the end of the third quarter, was due to increased refinery maintenance activities that temporarily reduced our refining capacity since September 2019. During 2019, we processed 592.0 thousand barrels per day of crude oil, a decrease of 3.2% compared to 2018.
We began maintenance of our refineries pursuant to our refinery rehabilitation program in 2019, which emphasizes addressing critical risks of our facilities, improving efficiency and stabilizing our crude oil processing. We anticipate that this rehabilitation program will conclude in 2020. Among others, our refinery rehabilitation program has included maintenance of the following equipment: a crude distilling unit, a distilling unit, a visbreaker, a delayed coking unit, a fluid catalytic unit, a solvent desalphalting unit, a catalytic reformer unit, a methyl tert-butyl ether (MTBE) unit, an alkylation unit, an isomerization unit, hydrotreaters and sulfur recovery units.
Since 1993, through our subsidiary company,PMI-NASA, we have participated in a limited partnership with Shell Oil Company in a refinery located in Deer Park, Texas, which has the capacity to process 340 thousand barrels per day of crude oil. Under the Deer Park Limited Partnership agreement,PMI-NASA and Shell Oil Company each provide 50% of the refinery’s crude oil input and own 50% of the refinery’s output. This agreement is limited to the specific purpose of operating the Deer Park refinery.
Production
We produce a wide range of products derived from crude oil and natural gas, including LPG, gasoline, jet fuel, diesel, fuel oil, asphalts, lubricants and other refined products. In 2019, we produced 625.6 thousand barrels per day of refined products (including dry gasby-products of the refining process), as compared to 628.5 thousand barrels per day in 2018, representing a decrease of 0.5%. Despite the overall decrease in refined products, the production of distillates (gasoline, diesel and jet fuel) increased during the fourth quarter of 2019, mainly due to increased performance as a result of the maintenance carried out in our refineries.
The following table sets forth, by category, our production of petroleum products for the five years ended December 31, 2019.
Refining Production
Year ended December31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in thousands of barrels per day) | (%) | |||||||||||||||||||||||
Refinery Crude Oil Runs | 1,064.5 | 933.1 | 767.0 | 611.9 | 592.0 | (3.2 | ) | |||||||||||||||||
Refined Products | ||||||||||||||||||||||||
Liquefied petroleum gas | 21.4 | 17.2 | 15.8 | 10.1 | 7.2 | (28.7 | ) | |||||||||||||||||
Gasoline | ||||||||||||||||||||||||
Pemex Magna | 272.5 | 150.6 | 11.0 | 8.8 | 13.9 | 57.6 | ||||||||||||||||||
Ultra-Low Sulfur Magna | 88.4 | 165.5 | 238.7 | 196.4 | 187.1 | (4.7 | ) | |||||||||||||||||
Pemex Premium(1) | 16.8 | 7.7 | 5.6 | 1.9 | 1.7 | (9.4 | ) | |||||||||||||||||
Base | 3.6 | 1.6 | 1.8 | — | 0.8 | — | ||||||||||||||||||
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Total | 381.4 | 325.3 | 257.0 | 207.1 | 203.5 | (1.7 | ) | |||||||||||||||||
Kerosene (Jet fuel) | 47.8 | 42.8 | 40.5 | 34.7 | 29.0 | (16.3 | ) | |||||||||||||||||
Diesel | ||||||||||||||||||||||||
Pemex Diesel(2) | 191.5 | 130.1 | 87.4 | 67.8 | 54.8 | (19.1 | ) | |||||||||||||||||
Ultra-Low Sulfur Diesel | 83.0 | 85.1 | 63.8 | 48.9 | 74.1 | 51.7 | ||||||||||||||||||
Others | 0.2 | 1.0 | 2.4 | 0.1 | 1.3 | 871.1 | ||||||||||||||||||
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Total | 274.7 | 216.2 | 153.6 | 116.8 | 130.3 | 11.5 | ||||||||||||||||||
Fuel oil(3) | 237.4 | 228.1 | 217.3 | 185.1 | 149.8 | (19.1 | ) | |||||||||||||||||
Other refined products | ||||||||||||||||||||||||
Asphalts | 17.7 | 16.9 | 16.5 | 13.8 | 10.0 | (27.3 | ) | |||||||||||||||||
Lubricants | 2.3 | 3.0 | 1.9 | 1.9 | 0.9 | (52.0 | ) | |||||||||||||||||
Paraffins | 0.5 | 0.6 | 0.4 | 0.5 | 0.2 | (57.2 | ) | |||||||||||||||||
Still gas | 62.2 | 61.9 | 47.9 | 34.8 | 45.4 | 30.4 | ||||||||||||||||||
Other refined products(4) | 68.9 | 65.3 | 35.5 | 23.7 | 49.3 | 107.6 | ||||||||||||||||||
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Total | 151.6 | 147.6 | 102.1 | 74.7 | 105.8 | 41.6 | ||||||||||||||||||
Total refined products | 1,114.3 | 977.2 | 786.2 | 628.5 | 625.6 | (0.5 | ) | |||||||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Pemex Premium is anultra-low sulfur gasoline with 0.003% sulfur content. |
(2) | Pemex Diesel is sold in the northern border market with 0.003% sulfur content. |
(3) | Includes heavy fuel oil and intermediate 15. |
(4) | Includes mainly coke, along with other products such as aeroflex, furfural extract, and light cyclic oil |
Source: Pemex BDI.
Our refining production mostly consist of gasoline, diesel and fuel oil. In 2019, gasoline represented 32.5%, fuel oil represented 23.9%, diesel fuel represented 20.8%, jet fuel represented 4.6% and LPG represented 1.2% of total petroleum products production. The remainder, 16.9% of our production, consisted of a variety of other refined products.
Variable Refining Margin
During 2019, the National Refining System recorded a variable refining margin of U.S. $0.80 per barrel, a decrease of U.S. $0.16 per barrel as compared to U.S. $0.96 in 2018. This decrease was primarily a result of a decline in prices and weak refining margins in the north coast of the Gulf of Mexico, which were caused by decreased demand for gasoline and heightened levels of refinery production. The decrease was partially offset by increased operational performance of the National Refining System due to an increase in the yield of distillates.
The following table sets forth the variable refining margin for the five years ended December 31, 2019.
Variable Refining Margin
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(U.S. dollars per barrel) | (%) | |||||||||||||||||||||||
Variable margin | 3.35 | 4.48 | 5.43 | 0.96 | 0.80 | (16.6 | ) |
Domestic Sales
We market a full range of refined products, including gasoline, jet fuel, diesel, fuel oil and petrochemicals. We are one of a few major producers of crude oil worldwide that experiences significant domestic demand for our refined products.
For the five years ended December 31, 2019, the value of our domestic sales of refined products and petrochemicals was as follows.
Value of Refining’s Domestic Sales(1)
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||||||||||
Refined Products | ||||||||||||||||||||||||
Gasoline | ||||||||||||||||||||||||
Pemex Magna | Ps. | 274,006.9 | Ps. | 248,595.2 | Ps. | 361,021.7 | Ps. | 428,838.0 | Ps. | 374,020.2 | (12.8 | ) | ||||||||||||
Pemex Premium | 81,813.5 | 87,422.8 | 82,028.7 | 83,837.1 | 75,538.0 | (9.9 | ) | |||||||||||||||||
Aviation fuels (Others) | 339.8 | 342.4 | 371.1 | 433.1 | 404.7 | (6.6 | ) | |||||||||||||||||
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Total | Ps. | 356,160.2 | Ps. | 336,360.4 | Ps. | 443,421.5 | Ps. | 513,108.2 | Ps. | 449,962.9 | (12.3 | ) | ||||||||||||
Kerosene (Jet fuel) | 27,077.2 | 28,945.2 | 39,024.5 | 56,793.9 | 55,716.4 | (1.9 | ) | |||||||||||||||||
Diesel | ||||||||||||||||||||||||
Pemex Diesel | 139,796.2 | 117,556.3 | 181,854.4 | 207,499.4 | 171,405.9 | (17.4 | ) | |||||||||||||||||
Others | 22,930.4 | 19,236.4 | 28,195.1 | 26,669.3 | 23,659.7 | (11.3 | ) | |||||||||||||||||
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Total | Ps. | 162,726.7 | Ps. | 136,792.7 | Ps. | 210,049.5 | Ps. | 234,168.6 | Ps. | 195,065.6 | (16.7 | ) | ||||||||||||
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Fuel oil | ||||||||||||||||||||||||
Total | 25,906.0 | 16,436.3 | 35,622.9 | 43,779.1 | 28,789.8 | (34.2 | ) | |||||||||||||||||
Other refined products | ||||||||||||||||||||||||
Asphalts | 7,575.5 | 5,468.7 | 5,895.8 | 7,062.0 | 6,058.3 | (14.2 | ) | |||||||||||||||||
Lubricants | 1,297.5 | 1,473.0 | 1,061.4 | 1,277.4 | 673.3 | (47.3 | ) | |||||||||||||||||
Paraffins | 257.9 | 267.0 | 230.9 | 291.4 | 135.8 | (53.4 | ) | |||||||||||||||||
Coke | 669.5 | 501.9 | 421.1 | 200.5 | 666.0 | 232.3 | ||||||||||||||||||
Citroline | 0.9 | 4.6 | 3.6 | — | — | — | ||||||||||||||||||
Gas oil for domestic use | 587.4 | 424.2 | — | — | — | — | ||||||||||||||||||
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| |||||||||||||
Total | Ps. | 10,388.8 | Ps. | 8,139.4 | Ps. | 7,612.8 | Ps. | 8,831.2 | Ps. | 7,533.5 | (14.7 | ) | ||||||||||||
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Total Refined Products | Ps. | 582,258.9 | Ps. | 526,673.9 | Ps. | 735,731.2 | Ps. | 856,681.0 | Ps. | 737,068.2 | (14.0 | ) | ||||||||||||
Petrochemicals(3) | Ps. | 3,930.9 | Ps. | 3,118.0 | Ps. | 3,905.6 | Ps. | 3,795.9 | Ps. | 2,422.4 | (36.2 | ) | ||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Excludes IEPS tax and value added tax. See “—Taxes, Duties and Other Payments to the Mexican Government” in this Item 4. |
(2) | Figures are stated in nominal pesos. See “Item 3—Key Information—Selected Financial Data.” |
(3) | Petrochemical products produced at refineries operated by our industrial transformation segment (carbon black feedstocks and propylene). |
Source: Pemex BDI.
In 2019, our domestic sales of refined products decreased by Ps. 119,612.8 million, or 14.0% in value as compared to 2018 levels (excluding IEPS tax and value added tax). This was primarily due to a 12.3% decrease in the value of our gasolines sales, a decrease of 16.7% in the value of our diesel sales and a 34.2% decrease in the value of our fuel oil sales, in each case primarily as a result of decreased average prices.
The volume of our domestic sales of refined products for thefive-year period ended December 31, 2019 was distributed as follows.
Volume of Refining’s Domestic Sales
Year ended December 31, | 2019 vs. 2018 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||||||
(in thousands of barrels per day, except where otherwise indicated) | (%) | |||||||||||||||||||||||
Refined Products | ||||||||||||||||||||||||
Gasoline | ||||||||||||||||||||||||
Pemex Magna | 638.0 | 637.5 | 660.5 | 646.2 | 607.5 | (6.0 | ) | |||||||||||||||||
Pemex Premium | 154.8 | 185.1 | 136.6 | 117.5 | 112.7 | (4.1 | ) | |||||||||||||||||
Aviation fuels (Others) | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 | (1.5 | ) | |||||||||||||||||
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Total | 793.3 | 823.1 | 797.5 | 764.2 | 720.6 | (5.7 | ) | |||||||||||||||||
Kerosenes (jet fuel) | 70.8 | 76.2 | 81.7 | 85.6 | 83.3 | (2.7 | ) | |||||||||||||||||
Diesel | ||||||||||||||||||||||||
Pemex Diesel | 330.6 | 335.5 | 317.6 | 292.8 | 256.9 | (12.3 | ) | |||||||||||||||||
Others | 54.2 | 51.8 | 47.9 | 38.5 | 36.1 | (6.0 | ) | |||||||||||||||||
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Total | 384.7 | 387.2 | 365.5 | 331.3 | 293.0 | (11.6 | ) | |||||||||||||||||
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Fuel oil | ||||||||||||||||||||||||
Total | 111.7 | 102.6 | 124.7 | 105.1 | 76.5 | (27.2 | ) | |||||||||||||||||
Other refined products | ||||||||||||||||||||||||
Asphalts | 15.9 | 15.9 | 15.4 | 12.9 | 9.5 | (26.3 | ) | |||||||||||||||||
Lubricants | 2.6 | 3.1 | 2.0 | 2.0 | 1.0 | (51.6 | ) | |||||||||||||||||
Paraffins | 0.6 | 0.6 | 0.4 | 0.5 | 0.2 | (57.2 | ) | |||||||||||||||||
Coke | 45.9 | 36.3 | 21.3 | 13.2 | 27.4 | 107.8 | ||||||||||||||||||
Citroline | — | 0.01 | 0.01 | — | — | — | ||||||||||||||||||
Gas oil for domestic use | 1.2 | 0.9 | — | — | — | — | ||||||||||||||||||
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Total | 66.2 | 56.9 | 39.1 | 28.5 | 38.1 | 33.3 | ||||||||||||||||||
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Total refined products | 1,426.7 | 1,446.0 | 1,408.4 | 1,314.8 | 1,211.5 | (7.9 | ) | |||||||||||||||||
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Petrochemicals(1) | 620.9 | 543.5 | 464.5 | 411.1 | 362.8 | (11.8 | ) |
Note: Numbers may not total due to rounding.
(1) | In thousands of metric tons. These are petrochemical products produced in our refineries (raw material for black carbon and propylene). |
Source: Pemex BDI.
The volume of our domestic gasoline sales decreased by 5.7% in 2019, from 764.2 thousand barrels per day in 2018 to 720.6 thousand barrels per day in 2019. The volume of our diesel sales decreased by 11.6%, from 331.3 thousand barrels per day in 2018 to 293.0 thousand barrels per day in 2019. The decrease in the volume of our domestic gasoline and diesel sales was mainly due to increased competition in the supply of products in the open market. The volume of our domestic sales of fuel oil decreased by 27.2 %, from 105.1 thousand barrels per day in 2018 to 76.5 thousand barrels per day in 2019, primarily due to a decrease in CFE’s demand for fuel oil.
In 2019, sales of Pemex Premium gasoline decreased 4.1% as compared to 2018, to 112.7 thousand barrels per day, while those of Pemex Magna decreased 6.0% as compared to 2018, to 607.5 thousand barrels per day.
We have also made concerted efforts to build and enhance our brands. Pursuant to these efforts, on June 5, 2016, Pemex Industrial Transformation announced the establishment of a joint branding program between us and various entities that own and operate retail service stations in Mexico. The joint branding program allowed our franchisees to rename their retail service stations while continuing to sell our products under our brand. In addition, we continued to provide technical and operational assistance to such franchisees. We believe that this program has strengthened our relationship with entities that own and operate retail service stations in Mexico, and we plan to continue our commercial branding strategy.
On November 15, 2017, we relaunched the “Pemex Franchise” image program with a new business model that includes new products and a variety of association structures. The goal of this program, which consists of nearly 10,000 service stations throughout Mexico, is to provide better service to end users and to strengthen the PEMEX brand.
On October 11, 2018, we launched the seventh generation of ourhigh-end performance additive that blends with our Pemex Magna and Pemex Premium gasolines. This additive is promoted as Pemex Aditec. Pemex Aditec is a multifunctional additive and is formulated to help obtain optimum performance, cleanliness and protection of the engine. We believe that Pemex Aditec technology may provide a competitive advantage for the Pemex Franchise scheme.
At the end of 2018 and during the first quarter of 2019, we implemented an advertising campaign in digital media to publicize the benefits and characteristics of gasoline with Pemex Aditec technology.
During the last quarter of 2019, we began the development of the eighth generation of the performance additive for Pemex gasolines in conjunction with theInstituto Mexicano del Petróleo (Mexican Petroleum Institute or IMP). The development of this additive includes innovations such a molecular tracer, new high-spectrum detergent molecules and corrosion and oxidation inhibition.
As part of the Pemex Franchise program, we operate three association structures: (i) PEMEX Franchise, (ii) sublicensing of branded products and (iii) the sale of generic, unbranded products. We also have two options for wholesale distribution: (i) independent retailers of unbranded products and (ii) associate distributors ofPEMEX-branded gasoline and diesel. In order to strengthen the PEMEX brand, in 2018 we introduced an optional redesign for service stations. As of December 31, 2019, 345 service stations have been redesigned and more than 665 are in the process of being redesigned.
As of December 31, 2019, there were 8,593 retail service stations in Mexico, of which 8,548 were privately owned and operated as franchises, while the remaining 45 were owned by Pemex Industrial Transformation. This total number of retail service stations represents a decrease of 13.5% from the 9,930 service stations as of December 31, 2018. This decrease was mainly due to increased competition in the open market. As of December 31, 2019, we had 6,432 marketing contracts, a decrease of 3,501 marketing contracts as compared to 9,933 marketing contracts as of December 31, 2018. The decrease in the number of marketing contracts is mainly due to the higher concentration of customer volume in each contract as a result of new commercial contract models. These 6,432 contracts include 20 of the largest volume trading and distribution customers nationwide. In addition, Pemex Industrial Transformation supplies oil products to 2,992 service stations outside the Pemex Franchise program. Of these service stations, 568 operate under a sublicense of PEMEX brands and 2,424 usethird-party brands.
In order to gain market presence, competitors often transfer well-established Pemex gas stations to third-party brands. As a result, we are working to counteract this by opening new gas stations under our franchise model and strengthening the Pemex brand among our existing gas stations. During December 2019, 593 Pemex gas stations were undergoing transformation to our Pemex franchise model. Additionally, we received 126 requests for gas stations to register under the Pemex franchise model.
Despite the aggressive competitive environment and our relatively limited marketing investment, we maintained approximately 77% of market share with our franchised andsub-licensed Pemex gas stations by the end of December 2019.
Pricing Decrees
As of December 31, 2017, fuel prices in Mexico are fully liberalized. However, the CRE reserves the right to intervene. Therefore, our sales prices continue to be subject to potential future regulations by the CRE, until theComisión Federal de Competencia Económica (Federal Economic Competition Commission) determines that there is effective competition in the wholesale market.
Gasoline and Diesel
As of December 31, 2017, sale prices of gasoline and diesel have been fully liberalized and are determined by the free market. For more information, see “Item 5—Operating and Financial Review and Prospects—IEPS Tax, Hydrocarbon Duties and Other Taxes.”
On January 1, 2019, in accordance with reports issued by the CRE, average national regular retail gasoline prices decreased by Ps. 0.29 per liter, as compared to December 31, 2018. Similarly, average national retail diesel prices decreased by Ps. 0.08 per liter on January 1, 2019, as compared to December 31, 2018.
On December 16, 2019, the CRE issued agreement A/043/2019, which terminated agreement A/057/2018 and allowed Pemex to set the prices for its gasoline and diesel.
Fuel Oil
We determine the fuel oil price methodology based on the guidelines issued by the CRE in resolution RES/047/2016. Prices using this methodology are calculated weekly and apply to all customers, including the CFE.
We withhold IEPS tax. While it is included in the price to our customers, we pay this tax to the authorities upon collection of the sale of our products and it is not included in our revenues. For more information, see “Item 4—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime for PEMEX.”
As of January 1, 2018, the IEPSa los Combustibles Fósiles(IEPS Tax on Fossil Fuels) was 15.76 Mexican cents per liter, as of January 1, 2019, the IEPS Tax on Fossil Fuels was 16.50 Mexican cents per liter and as of January 1, 2020, the IEPS Tax on Fossil Fuels was 16.99 Mexican cents per liter.
The Mexican Government could modify these price controls or impose additional price controls in the future. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government has historically imposed price controls in the domestic market on our products.”
Refining’s Capital Expenditures
Investments
Over the past several years, we have focused our investment program on enhancing the quality of the gasoline and diesel we produce to meet Mexico’s environmental standards. In 2019, we shifted our focus to the maintenance of our existing refineries and the expansion of our refinery system in order to increase our hydrocarbon production. Our continued objective is to stabilize and improve our ability to process heavy crude oil in order to optimize our refinery production and increase our production of other hydrocarbons in order to supply the growing national demand.
Our refining business invested Ps. 8,409 million in capital expenditures in 2019 and has budgeted Ps. 12,500 million in capital expenditures for 2020.
This increase in our capital expenditures budget for 2020 as compared to 2019 is because in 2020, our entire capital expenditures budget is to be used for the rehabilitation of our six refineries that form the National Refining System. Pursuant to this rehabilitation program, we have evaluated each of our six existing refineries and have identified specific maintenance requirements for each plant. Our rehabilitation program focuses on addressing critical risks of the facilities such as mechanical integrity and safety, and improving the efficiency and the stabilization of our crude oil processing.
The following table sets forth our refining business’ capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2019, and the budget for 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.
Refining’s Capital Expenditures
Year ended December 31,(1) | Budget | |||||||||||||||
2017 | 2018 | 2019 | 2020(2) | |||||||||||||
(in millions of pesos)(3) | ||||||||||||||||
Refining | ||||||||||||||||
Maintenance of the Production Capacity at the Madero Refinery | Ps. | 766 | Ps. | 1,933 | Ps. | 1,717 | Ps. | — | ||||||||
Fuel Quality Investments(4) | 5,196 | 2,639 | 1,374 | — | ||||||||||||
National Refining System Rehabilitation Program | — | — | 1,196 | 12,500 | ||||||||||||
Maintaining the Production Capacity at the Cadereyta Refinery | 733 | 1,139 | 1,140 | — | ||||||||||||
Residual Use at the Miguel Hidalgo Refinery in Tula (Formerly Reconfiguration of Miguel Hidalgo Refinery in Tula) | 1,912 | 306 | 948 | — | ||||||||||||
Rehabilitation of Electrical Substations Miguel Hidalgo Refinery | 391 | 1,281 | 843 | — | ||||||||||||
Maintenance of the Production Capacity at the Minatitlán Refinery | 3,673 | 1,884 | 519 | — | ||||||||||||
Maintenance of the Production Capacity at the Salina Cruz Refinery | 1,338 | 2,429 | 296 | — | ||||||||||||
Installation of a 250 T/hr. Steam Boiler at the Minatitlan Refinery | 19 | — | 115 | — | ||||||||||||
Adequacy of the Burner System and Installation of an Elevated Burner at the Francisco I. Madero Refinery | — | 163 | 62 | — | ||||||||||||
Maintenance of the Production Capacity at the Salamanca Refinery | 762 | 406 | 33 | — | ||||||||||||
Integral Maintenance Program and Process Compressor Technology Update at the Miguel Hidalgo Refinery | — | 1 | 25 | — | ||||||||||||
Residual Conversion from Salamanca Refinery | 773 | 101 | 17 | — | ||||||||||||
Cadereyta Refinery Energy Train | — | — | 15 | — | ||||||||||||
Acquisition of Capitalizable Catalysts for the Hydrotreatment Process in the Tula Refinery | 5 | 112 | 12 | — | ||||||||||||
Supervision and Administration Work for the Use of Waste at the Salina Cruz Refinery | 22 | 16 | 8 | — | ||||||||||||
Tuxpan Pipeline and Storage and Distribution Terminals | 67 | 342 | 3 | — | ||||||||||||
Project Refinery in Tula(5) | — | 18 | — | — | ||||||||||||
Others | 330 | 1,351 | 87 | — | ||||||||||||
Total | Ps. | 15,988 | Ps. | 14,119 | Ps. | 8,409 | Ps. | 12,500 | ||||||||
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Notes: Numbers may not total due to rounding.
PC = Petrochemical Complex.
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the Official Gazette of the Federation on December 11, 2019. |
(3) | Figures are stated in nominal pesos. |
(4) | Includes clean fuels investments for gasoline and diesel in our six refineries. |
(5) | Includespre-investments studies,on-site preparation and other expenses related to this project. This project concluded in 2018. |
(6) | 2019 figures reflect the decrease caused by budget adjustment authorized by the Board of Directors of Petróleos Mexicanos |
Source: Petróleos Mexicanos.
In 2019, we imported approximately 544.3 thousand barrels per day of gasoline, which represented approximately 75.5% of total domestic demand for gasoline in that year. Our priority in 2020 is to increase our production of oil products by focusing on the maintenance of our existing refineries and the development of the new Dos Bocas refinery in order to increase our production capacity.
Additionally, we are exploring alternative investment projects, including our fuel quality project, the reconfiguration of the Miguel Hidalgo refinery in Tula and the residual conversion at the Salamanca refinery.
Our projects are described in further detail below.
Joint VentureFuel Quality Project, Gasolines Phase (ULSG)
This project consisted of the installation of ULSGpost-treatment units in our six refineries in order to improve the quality of our gasoline. As of the date of this annual report, all gasoline produced in Mexico meets international environmental standards and the plants are operating, pending the completion of various complementary projects suspended due to budgetary restrictions.
Fuel Quality Project, Diesel Phase (ULSD)
This project consists of the construction of five ULSD facilities, five hydrogen plants, four sulfur recovery units, five sour water treatment plants and the reconfiguration of 17 existing units to produce ULSD. However, as of December 31, 2019, this project has been suspended and our capital expenditures budget is focused on other areas of priority. We continue to evaluate funding alternatives for the completion of this project, which would aid our compliance with Mexichemenvironmental regulations. However, the CRE has approved extending the deadline for our compliance with the relevant regulation,NOM-016-2016, which governs sulfur content in commercial diesel.
Residual Use at the Miguel Hidalgo Refinery in Tula (formerly Reconfiguration of the Miguel Hidalgo Refinery in Tula)
The Miguel Hidalgo refinery in Tula has been undergoing renovations since 2014. This project consists of the construction of nine plants. The main ongoing project at this refinery is to complete the coking plant. The project is expected to increase production of refined oil products from 315 thousand barrels per day to 340 thousand barrels per day, as well as improve the production of gasoline and distillates. As of December 31, 2019, construction of the coking plant, which was 63% complete, has been suspended due to budgetary constraints. We are currently evaluating funding alternatives in order to complete construction.
Residual Conversion of the Salamanca Refinery
The reconfiguration of the Ing. Antonio M. Amor refinery in Salamanca, Guanajuato has focused on the conversion oflow-value residuals intohigh-steamhigh-value distillates (without a need for increased crude oil processing), as well as the modernization of the lubricants train to produce lubricants of greater value and quality. As of December 31, 2019, however, this project was approximately 12.9% complete and has been suspended due to budgetary constraints. We are currently evaluating funding alternatives in order to resume this reconfiguration.
Tuxpan Maritime Terminal
This project is intended to help meet the increase in the demand for refined products in the metropolitan area of the Mexico Valley. The total cost of the project is Ps. 5,637.9 million, which includes the construction of a pipeline measuring18-inches in diameter and 109 kilometers in length from Cima de Togo to Venta de Carpio, five storage tanks located at the Tuxpan Maritime Terminal with a capacity of 100,000 barrels each, a research study to determine the best option for the discharge of refined products from tankers and pipelines into these storage tanks and auxiliary services.
As of April 2018, two of the three key phases of this project were completed: thepre-investment studies and construction of theTuxpan-Mexico pipeline, which is currently operating. The third phase, the storage system, is 97.2% complete. We have arranged an extension with the Ministry of Finance and Public Credit to allow for additional time in which this final phase may be completed. Four of the five storage tanks have been delivered to the Tuxpan Maritime Terminal and are in operation. The fifth and remaining tank is 99.9% complete. Completion of this project is contingent upon budget availability to continue site works.
Maintenance at the Francisco I. Madero Refinery
On August 23, 2017, we commenced a scheduled gradual shutdown of our Francisco I. Madero refinery, located in Ciudad Madero, Tamaulipas, in order to implement a comprehensive general maintenance program for the plants at this refinery. Operations at the plants were restarted in February 2018, but we experiencedstart-up and stabilization difficulties which caused our Madero refinery to be out of operation during the second half of 2018.
In January 2019, we restarted our Mayan plant andU-901 reformer after performing maintenance at these plants. In June 2019, we restarted the operations of its process plants, including the Mayan distilling unit. In September 2019, we began the rehabilitation of the Madero refinery pursuant to our National Refining System Rehabilitation Program, and increased the levels of crude oil process in this refinery as well as the reliability of its operational processes.
Hydrogen Supply for Refineries
In order to permit us to specialize, maximize value, and focus on the processing of crude oil, in the past we have partnered with third parties for projects related to auxiliary services, such as the supply of hydrogen to our refineries.
On September 1, 2017, we entered intolong-term agreements with Air Liquide for the supply of hydrogen to the Miguel Hidalgo refinery in Tula. Air Liquide operates the existing hydrogen plant at the Miguel Hidalgo refinery. In February 2018, we executed the plant’s performance and stabilization tests, which was an important milestone under the contract with Air Liquide. In addition, in April 2018 we entered into a long-term agreement with Linde AG for the supply of hydrogen to our Madero refinery. In July 2018, we signed several agreements related to the supply of hydrogen to our Cadereyta refinery. However, some of the conditions precedent required by these agreements were not met, and these agreements were subsequently terminated.
Rehabilitation of the National Refining System
As part of our efforts to stabilize the operations of our refineries, we adopted a program for the rehabilitation of the National Refining System. Pursuant to this program, we allocated additional resources for the repair and maintenance of our six existing refineries. Our rehabilitation program focuses on addressing critical risks of the facilities, such as mechanical integrity and safety, and improving the efficiency and stabilization of our crude oil processing. These activities began in September 2019 and increased in the last quarter of the year. Since the launched of our rehabilitation program, we have provided maintenance to 39 process plants,13 auxiliary services facilities and 21 storage tanks.
The budget for thePrograma de Rehabilitación del Sistema Nacional de Refinación (National Refining System Rehabilitation Program) for 2020 is Ps. 12,500 million. We have evaluated each of our six existing refineries and have identified specific maintenance requirements for each plant.
Dos Bocas Refinery
On December 20, 2017, Mexichem, S.A.B. de C.V. (Mexichem) announced that7, 2018, the Board of Directors of its joint venture, Petroquímica Mexicana de Vinilo S.A.Petróleos Mexicanos, in accordance with resolutionCA-161/2018, authorized the construction of C.V. (PMV)a new refinery in Dos Bocas in the state of Tabasco as part of our institutional strategy plan. The project is estimated to add 340 million barrels per day of refined Maya oil, which we expect would, in turn, increase our production of gasoline and diesel by at least 290 million barrels per day. This project is supported by the Mexican Government, which has announced that a goal of constructing this refinery is to decrease Mexico’s reliance on imported energy resources by increasing our refining capacity and distillates production.
By December 31, 2019, we had made significant progress with respect to studies, site preparation, license contracting, phase I engineering and procurement of equipment with long delivery time. We are in the process of requesting authorization from Pemex’s Board of Directors to begin the FEL II(Front-End Loading II) phase of this project. The FEL methodology is applied in investment projects management by using the following three stages: FEL I (visualization), FEL II (conceptualization) and FEL III (definition).
Gas and Aromatics
Natural Gas and Condensates
All wet natural gas production is directed to our gas processing facilities. At the end of 2019, we owned nine facilities.
The following facilities are located in the Southern region:
• | Nuevo Pemex. This facility contains 13 plants that together in 2019 produced 673.4 million cubic feet per day of dry gas, 28.4 thousand barrels per day of ethane, 33.3 thousand barrels per day of liquefied gas, 13.3 thousand barrels per day of naphtha and 55.6 thousand tons of sulfur. |
• | Cactus. This facility contains 22 plants that together in 2019 produced 449.4 million cubic feet per day of dry gas, 23.7 thousand barrels per day of ethane, 26.3 thousand barrels per day of liquefied gas, 26.3 thousand barrels per day of naphtha and 64.8 thousand tons of sulfur. |
• | Ciudad Pemex. This facility contains eight plants that together in 2019 produced 609.7 million cubic feet per day of dry gas and 180.3 thousand tons of sulfur. |
• | La Venta. This facility contains one plant that in 2019 produced 86.7 million cubic feet of dry gas per day. |
• | Matapionche. This facility contains five plants that together in 2019 produced 11.2 million cubic feet per day of dry gas, 0.5 thousand barrels per day of liquefied gas, 0.2 thousand barrels per day of naphtha and 2.5 thousand tons of sulfur. |
The Morelos, Cangrejera and Pajaritos facilities form the Coatzacoalcos area gas processing complex (which we refer to as a GPC):
• | Morelos. This facility contains one plant that in 2019 produced 12.5 thousand barrels per day of ethane, 14.5 thousand barrels per day of liquefied gas and 4.0 thousand barrels per day of naphtha. |
• | Cangrejera. This facility contains two plants that together in 2019 produced 12.2 thousand barrels per day of ethane, 15.8 thousand barrels per day of liquefied gas and 5.1 thousand barrels per day of naphtha. |
• | Pajaritos. This facility contains one plant, which wasnon-operational as of the date of this annual report. |
The following facilities are located in the Northern region:
• | Burgos. This facility contains nine plants that together in 2019 produced 375.5 million cubic feet per day of dry gas, 8.0 thousand barrels per day of liquefied gas and 8.8 thousand barrels per day of naphtha. |
• | Poza Rica. This facility contains five plants that together in 2019 produced 81.8 million cubic feet per day of dry gas, 1.7 thousand barrels per day of liquefied gas and 0.7 thousand barrels per day of naphtha. |
• | Arenque. This facility contains three plants that together in 2019 produced 15.9 million cubic feet per day of dry gas. |
Petrochemical Complexes
In addition to our gas processing facilities, we also own the following two petrochemical complexes:
• | Independencia. The Independencia petrochemical complex consists of three plants and is located in the Central region. In 2019, this complex produced 141.5 thousand tons of methanol and 27.8 thousand tons of petrochemical specialties. |
• | Cangrejera. The Cangrejera petrochemical complex consists of five plants and an aromatics line and is located in the Southern region. In 2019, this complex produced 919.6 thousand tons of aromatics and derivatives and 437.1 thousand tons of other petrochemical products (butanes, hexane, hydrogen, pentanes, BTX liquids, petroleum products, naphtha gas and heavy naphtha). |
The following tables set forth our processing capacity, as well as our total natural gas processing and production, for the five years ended December 31, 2019.
Gas and Aromatics’ Processing and Production Capacity(1)
Year ended December 31, | ||||||||||||||||||||
2015 | 2016 | 2017(5) | 2018 | 2019 | ||||||||||||||||
(in millions of cubic feet per day, except where otherwise indicated) | ||||||||||||||||||||
Sweetening plants | ||||||||||||||||||||
Sour condensates(2) | 144 | 144 | 144 | 144 | 144 | |||||||||||||||
Sour natural gas | 4,523 | 4,523 | 4,523 | 4,523 | 4,523 | |||||||||||||||
Natural gas liquids recovery plants | ||||||||||||||||||||
Cryogenics | 5,912 | 5,912 | 5,912 | 5,912 | 5,912 | |||||||||||||||
Natural gas liquids fractionating(2) | 569 | 569 | 569 | 569 | 569 | |||||||||||||||
Processing of hydrosulfuric acid | 219 | 219 | 229 | 229 | 229 | |||||||||||||||
Aromatic compounds and derivatives(Cangrejera and Independencia)(3)(4) | 1,694 | 1,694 | 1,734 | 1,734 | 1,734 |
(1) | Production capacity refers to aromatic compounds and derivatives. |
(2) | In thousands of barrels per day. |
(3) | Thousand tons per year |
(4) | Since November 2015, the operation of Methanol I and II plants, the CPQ Independencia petrochemical specialties plant and the CPQ Cangrejera aromatic compounds plants have been assigned to Pemex Industrial Transformation. |
(5) | Values of our CCR reforming plant were updated in 2017. |
Source: Pemex BDI.
Natural Gas, Condensates and Aromatics’ Processing and Production(1)
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in millions of cubic feet per day, except where otherwise indicated) | (%) | |||||||||||||||||||||||
Processing | ||||||||||||||||||||||||
Wet gas | 4,073 | 3,672 | 3,237 | 2,952 | 2,826 | (4.3 | ) | |||||||||||||||||
Sour gas | 3,225 | 2,997 | 2,688 | 2,492 | 2,396 | (3.9 | ) | |||||||||||||||||
Sweet gas(2) | 847 | 675 | 550 | 459 | 431 | (6.3 | ) | |||||||||||||||||
Condensates(3)(6) | 45 | 41 | 32 | 27 | 22 | (18.2 | ) | |||||||||||||||||
Gas to natural gas liquids extraction | 3,904 | 3,450 | 3,199 | 2,782 | 2,651 | (4.7 | ) | |||||||||||||||||
Wet gas | 3,745 | 3,394 | 3,086 | 2,782 | 2,651 | (4.7 | ) | |||||||||||||||||
Reprocessing streams(4) | 159 | 56 | 113 | — | — | — | ||||||||||||||||||
Production | ||||||||||||||||||||||||
Dry gas(5) | 3,454 | 3,074 | 2,667 | 2,422 | 2,305 | (4.8 | ) | |||||||||||||||||
Natural gas liquids(6)(7) | 327 | 308 | 280 | 240 | 221 | (7.8 | ) | |||||||||||||||||
Liquefied petroleum gas(6)(8) | 174 | 159 | 144 | 122 | 108 | (12.0 | ) | |||||||||||||||||
Ethane(6) | 107 | 106 | 101 | 85 | 77 | (9.5 | ) | |||||||||||||||||
Naphtha(6) | 69 | 62 | 52 | 43 | 43 | (0.9 | ) | |||||||||||||||||
Sulfur(9)(11) | 858 | 673 | 551 | 443 | 377 | (14.9 | ) | |||||||||||||||||
Methanol(9) | 161 | 145 | 116 | 148 | 141 | (4.6 | ) | |||||||||||||||||
Aromatic compounds and derivatives(9)(10) | 1,022 | 940 | 622 | 570 | 920 | 61.5 | ||||||||||||||||||
Others(9)(12) | 535 | 507 | 302 | 269 | 465 | 73.0 |
Note: Numbers may not total due to rounding.
GPC = Gas Processing Complex
(1) | Excludes operations of our exploration and production segment, which produced 4,816.2 million cubic feet per day in 2019. |
(2) | Includes sweet vapor from condensates. |
(3) | Includes internal streams. |
(4) | Reprocessing of pipeline dry gas at the Pajaritos cryogenic plant. |
(5) | Includes ethane reinjected into the natural gas stream. |
(6) | In thousands of barrels per day. |
(7) | Includes stabilized condensates, reprocessing streams from the Cangrejera petrochemical complex and other streams for fractionating. |
(8) | Includes production from GPC, refineries and transfers from Pemex Exploration and Production. |
(9) | In thousands of tons. |
(10) | Includes aromine 100, benzene, styrene, ethylbenzene, fluxoil, high octane hydrocarbon, toluene and xylenes. |
(11) | Production of gas processing GPCs and refineries. In 2019, our Poza Rica and Arenque facilities ceased producing sulfur due to operational difficulties of the condenser units. |
(12) | Includes butanes, petrochemical specialties, pentanes, hexane, hydrogen, BTX liquids, isopentanes and petroleum products, naphtha gas, petrol octane base and heavy naphtha. |
Source: Pemex BDI.
We process sour and sweet condensates from our exploration and production segment in order to obtain stabilized natural gas liquids and also recover liquid hydrocarbons obtained from the processing of sweet natural gas. In addition, we obtain liquids from internal streams and hydrocarbons condensed in sour wet gas pipelines. Our production of natural gas liquids, including stabilized condensates, reprocessing and other fractionating streams, decreased by 7.8% from 240 thousand barrels per day in 2018 to 221 thousand barrels per day in 2019.
We process sour condensates, which have a higher sulfur content, to produce stabilized sweet condensates. The volume of sour condensates we processed and internal streams of our gas and aromatic compoundco-investmentsub-segment with PPQ Cadena Productiva S.L.totaled 22.4 thousand barrels per day in 2019, a 18.2% decrease from the 27.0 thousand barrels per day processed in 2018. We also process sweet condensates at our Burgos facilities to produce light and heavy natural gasoline.
The production of sulfur totaled 377 thousand tons in 2019, a 14.9% decrease from 443 thousand tons in 2018. This decrease was due to the fact that our Poza Rica and Arenque facilities ceased producing sulfur, primarily due to operational difficulties of the condenser units.
The production of aromatic compounds and derivatives totaled 919.6 thousand tons in 2019, a 61.5% increase from 569.5 thousand tons in 2018. This increase was due to the fact that the aromatic production operated steadily throughout the year, whereas in 2018 our naptha reforming plant (CCR) operated only intermittently due to equipment failure and we experienced shortages in auxiliary services and raw materials from our Minatitlán refinery.
Over the five years ended December 31, 2019, the value of our domestic sales was distributed as follows:
Value of Gas and Aromatics’ Domestic Sales(1)
Year ended December 31, | 2019 vs. 2018 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||||||||||
Natural gas | Ps. | 53,037.3 | Ps. | 67,536.5 | Ps. | 74,287.7 | Ps. | 62,355.4 | Ps. | 41,735.5 | (33.1 | ) | ||||||||||||
Liquefied petroleum gas | 78,194.0 | 50,179.8 | 49,137.3 | 52,053.6 | 32,161.8 | (38.2 | ) | |||||||||||||||||
Ethane(3) | 310.7 | 1,284.7 | 2,989.7 | 3,203.4 | 2,365.0 | (26.2 | ) | |||||||||||||||||
Heptane | 1.0 | — | 0.9 | 9.5 | 26.8 | 181.9 | ||||||||||||||||||
Propane | 57.6 | 73.8 | 111.6 | 148.2 | 91.7 | (38.1 | ) | |||||||||||||||||
Light naphtha | 39.7 | 84.5 | 158.8 | 221.4 | 212.7 | (3.9 | ) | |||||||||||||||||
Heavy naphtha | 191.0 | 404.8 | 429.3 | 708.6 | 833.2 | 17.6 | ||||||||||||||||||
Sulfur | 926.1 | 585.7 | 540.2 | 766.0 | 534.3 | (30.2 | ) | |||||||||||||||||
Methanol | 748.4 | 625.1 | 806.9 | 1,089.9 | 818.7 | (24.9 | ) | |||||||||||||||||
Aromatic compounds and derivatives(4) | 3,479.4 | 2,122.1 | 1,673.1 | 1,759.8 | 1,802.0 | 2.4 | ||||||||||||||||||
Others(5) | 399.1 | 261.4 | 308.5 | 296.1 | 258.9 | (12.6 | ) | |||||||||||||||||
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Total | Ps. | 137,384.3 | Ps. | 123,158.4 | Ps. | 130,444.0 | Ps. | 122,611.9 | Ps. | 80,840.6 | (34.1 | ) | ||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
(3) | In January 2016, we began the supply of ethane to Braskem IDESA. |
(4) | Includes aromine 100, benzene, styrene, toluene, xylene. |
(5) | Includes petrochemical specialties, hydrogen, isopropanol, hexane, pentane and naphtha gas. |
Source: Pemex BDI.
The volume of our domestic sales of gas and aromatics for thefive-year period ended December 31, 2019 was distributed as follows:
Volume of Gas and Aromatics’ Domestic Sales
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in thousands of barrels per day, except where otherwise indicated) | (%) | |||||||||||||||||||||||
Natural gas(1) | 3,246.6 | 3,347.3 | 2,623.0 | 2,064.3 | 1,604.4 | (22.3 | ) | |||||||||||||||||
Liquefied petroleum gas(2) | 278.8 | 202.1 | 171.3 | 165.1 | 151.0 | (8.6 | ) | |||||||||||||||||
Ethane | 8.8 | 30.5 | 57.7 | 48.9 | 51.5 | 5.3 | ||||||||||||||||||
Heptane | 0.1 | — | 0.1 | 0.5 | 1.9 | 306.9 | ||||||||||||||||||
Propane | 10.1 | 11.3 | 11.3 | 11.8 | 11.5 | (3.1 | ) | |||||||||||||||||
Heavy naphtha(3) | 29.9 | 64.3 | 56.2 | 69.5 | 95.2 | 37.0 | ||||||||||||||||||
Light naphtha(3) | 6.2 | 13.3 | 19.9 | 21.3 | 27.4 | 28.7 | ||||||||||||||||||
Sulfur(3) | 572.7 | 580.5 | 529.9 | 450.5 | 382.5 | (15.1 | ) | |||||||||||||||||
Methanol(3) | 112.0 | 111.3 | 100.8 | 106.0 | 107.1 | 1.1 | ||||||||||||||||||
Aromatic compounds and derivatives(3)(4) | 240.0 | 155.1 | 111.3 | 101.6 | 120.0 | 18.1 | ||||||||||||||||||
Others(3)(5) | 40.5 | 29.6 | 28.2 | 22.8 | 26.7 | 17.2 |
Note: | Numbers may not total due to rounding. |
(1) | In millions of cubic feet per day. |
(2) | In thousands of barrels per day. |
(3) | In thousands of tons. |
(4) | Includes aromine 100, benzene, styrene, toluene, ethylbenzene, fluxoil and xylene. |
(5) | Includes petrochemical specialties, hydrogen, isopropanol, hexane, pentane and naphtha gas. |
Source: Pemex BDI.
In 2019, the value of our domestic sales in gas and aromatics decreased by 34.1% as compared to 2018, reaching Ps. 80,840.6 million. This decrease was mainly due to a reduction in domestic sales volume of natural gas and liquefied petroleum gas.
Domestic sales of natural gas decreased by 22.3%, as compared to 2018, from 2,064.3 million cubic feet per day in 2018 to 1,604.4 million cubic feet per day in 2019. This decrease was mainly due to increased competition from private companies importing foreign natural gas.
Domestic sales of gas LP decreased by 8.6%, as compared to 2018, from 165.1 thousand barrels per day in 2018 to 151.0 thousand barrels per day. This decrease was mainly due to continued increased competition from private companies importing foreign gas LP since 2016.
Internal sales of sulfur decreased by 15.1%, as compared to 2018, from 450.5 thousand tons in 2018 to 382.5 thousand tons in 2019. This decrease was mainly due to a subsidiarylower supply of gas for our processing complexes, particularly the Cactus facility, as a result of maintenance.
Internal sales of aromatics increased by 18.1%, as compared to 2018, from 101.6 thousand tons in 2018 to 120.0 thousand tons in 2019. This increase was mainly due to a greater supply of these products.
Subsidiaries of Pemex Ethylene,Industrial Transformation
Pemex Industrial Transformation conducts certain management, real estate and of Mexichem’s Vinyl Business Group, has decided not to rebuilddistribution activities through its Vinyl Monochloride (VCM) production capacity. Therefore, thesubsidiaries and through certain joint venture’s VCM production, and the assets and liabilities associated with ethylene production and auxiliary services associated with VCM and ethylene will be classified as discontinued operations.
This represents the exit of PMV from the VCM and ethylene businesses in Mexico. Mexichemventures. The following table lists its subsidiaries, their principal operating activities and Pemex Ethylene will continueIndustrial Transformation’s ownership interest as of December 31, 2019.
Subsidiaries of Pemex Industrial Transformation(1)
Subsidiary | Principal Activity | Ownership Interest (%) | ||||
Mex Gas Internacional, S.L.(2) | Holding company | 100.00 | ||||
Terrenos para Industrias, S.A. | Real estate holding company | 100.00 | ||||
PTI Infraestructura de Desarrollo, S.A. de C.V. | Dos Bocas refinery project development company | 99.99 |
(1) | As of December 31, 2019. |
(2) | Mex Gas Internacional, S.L. is the only subsidiary of Pemex Industrial Transformation that is a consolidated subsidiary company. See Note 5 to our consolidated financial statements included herein. |
Source: Pemex Industrial Transformation Divestitures
On July 14, 2018, the Board of Directors of Petróleos Mexicanos authorized the divestiture of our 5% indirect participation in TAG Pipelines Sur, S. de R. L. de C. V. As of December 31, 2019, this operation was still in progress.
Pricing Decrees
As of December 31, 2017, fuel prices in Mexico are fully liberalized. However, the CRE reserves the right to evaluateintervene. Therefore, until the possibility of investingFederal Economic Competition Commission determines that there is effective competition in the future, jointly or separately, through PMV or another vehicle, in businesses related to VMC and ethylene production or otherwise. Moreover, the chlorine-soda plant willwholesale market, our sales prices continue to be subject to potential future regulations by the CRE.
As of July 1, 2017, the CRE permitsthird-party participants to enter the gasoline and diesel market and has authorized the permanent regime offirst-hand sales of natural gas. This permanent regime allows us to sell natural gas under two separate pricing mechanisms: (1) the first hand sale price, wherein we may sell natural gas directly to customers without additional transportation or services and (2) the full marketing price, wherein we may charge a higher price that includes transportation and services costs associated with the commercialization of natural gas.
Since 2003, price control mechanisms for LPG have been implemented through governmental decrees. Since January 1, 2017, we have sold LPG in accordance with the methodology authorized by CRE for determining thefirst-hand sales price at the point of delivery, and all end user prices are freely determined by the market.
Since December 16, 2019, PEMEX determines the marketing list prices according to the pricing mechanism authorized by ourComité de Precios y Aspectos Económicos de la Política Comercial de Petróleos Mexicanos y Empresas Productivas Subsidiarias(Committee on Prices and Economic Aspects of the Commercial Policy of Petróleos Mexicanos and its Productive Subsidiary Entities). This change is in compliance with Resolution 1008/2019 of the CRE, which considers the participation of PEMEX in first-hand sales and the marketing of LPG within a free market. Additionally, on December 16, 2019, the CRE issued resolution RES/1755/2019, which approved the commercialization contract agreement model addendum to the contract agreement.
As of January 1, 2017 the IEPS Tax on Fossil Fuels was 13 Mexican cents per kilogram. As of January 1, 2018, this tax was 14 Mexican cents per kilogram, and, as of January 1, 2019, this tax was 15 Mexican cents per kilogram. We withhold IEPS tax. For more information, see “Item 4—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime for PEMEX.”
The Mexican Government could modify these price controls or impose additional price controls in the future. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government has historically imposed price controls in the domestic market on our products.”
Natural Gas Hedging Operations
We offer, as avalue-added service, hedging contracts to our domestic customers to protect them against fluctuations in the prices of natural gas. For information on hedging contracts offered to natural gas domestic customers, see “Item 11—Quantitative and Qualitative Disclosures about Market Risk.”
Gas and Aromatics Capital Expenditures
Our gas and aromatics business invested Ps. 489 million in capital expenditures in 2019 and has budgeted Ps. 2,000 million in capital expenditures for 2020.
The following table sets forth our gas and aromatics business’ capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2019, and the budget for 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.
Gas and Aromatics’ Capital Expenditures
Year ended December 31,(1) | Budget 2020(2) | |||||||||||||||
2017 | 2018 | 2019 | ||||||||||||||
(in millions of pesos)(3) | ||||||||||||||||
Gas and Aromatics | ||||||||||||||||
Adaptation of Fractionation Plants and Conversion of the Liquids Sweetener at Nuevo Pemex GPC | Ps. | 271 | Ps. | 136 | Ps. | 61 | Ps. | — | ||||||||
Cryogenic Maintenance III Nuevo Pemex GPC | 39 | 92 | 26 | 258 | ||||||||||||
Conservation of the Main Services | — | 49 | 22 | 199 | ||||||||||||
Modernization of Systems and Processing Equipment of GPC La Venta | 20 | 18 | 18 | 111 | ||||||||||||
Maintenance of the Fractionation Plant I of the GPC Nuevo Pemex | 2 | 9 | 14 | 131 | ||||||||||||
Maintenance of Plants and Auxiliary Services of GPC Burgos | 9 | 31 | 7 | 114 | ||||||||||||
Maintenance of the Gas and Petrochemical Process Center Coatzacoalcos | — | — | — | 128 | ||||||||||||
Modernization of the Product Movement Areas of the GPCs | 239 | 644 | — | — | ||||||||||||
Modernization and Rehabilitation of Facilities of the Supply and Water Treatment System at Nuevo Pemex GPC | 216 | 241 | — | — | ||||||||||||
Conditioning of the Venting Systems at Cactus GPC | 147 | 131 | — | — | ||||||||||||
Integral Maintenance of Gas Sweetening Plants 1, 2, 3 and 12 at Cactus GPC | 64 | 53 | — | — | ||||||||||||
Security Requirements for Improvement of Operational Reliability of the GPCs | 31 | 41 | — | — | ||||||||||||
Conservation and Modernization of the Storage Area at Coatzacoalcos Area GPC | 32 | 22 | — | — | ||||||||||||
Rehabilitation and Modernization of Natural Gas Turbochargers of Cryogenic Plants of GPC Nuevo Pemex | 41 | — | — | — | ||||||||||||
Rehabilitation of Cooling Towers of GPC Cactus | 29 | 12 | — | 107 | ||||||||||||
Integral Project of Electric Reliability at GPCs | 22 | — | — | — | ||||||||||||
Conservation of the Operational Reliability of the GPC Ciudad Pemex | 6 | — | — | — | ||||||||||||
Facilities Conditioning in the GPC Cactus for Ethane Supply | 5 | — | — | — | ||||||||||||
Integral maintenance of the Modular Cryogenic Plant 5 of the GPC Cactus | — | — | — | 155 | ||||||||||||
Others | 1,414 | 1,428 | 341 | 797 | ||||||||||||
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Total | Ps. | 2,587 | Ps. | 2,907 | Ps. | 489 | Ps. | 2,000 | ||||||||
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Notes: | Numbers may not total due to rounding. |
GPC = Gas Processing Complex.
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the Official Gazette of the Federation on December 11, 2019. |
(3) | Figures are stated in nominal pesos. |
Source: Petróleos Mexicanos.
Ethane Supply Contract
On February 19, 2010, we entered into a contract to supply 66,000 barrels per day of ethane to the Etileno XXI project, a petrochemical complex in Nanchital, Veracruz that produces ethylene and polyethylene. The Etileno XXI project commenced operations on March 18, 2016. The Etileno XXI project is owned and operated by PMV,Braskem IDESA, S.A.P.I., or Baskem IDESA.
During 2019, we supplied 808.9 million cubic meters of ethane for a total of Ps. 2,365.0 million under this contract. We are currently in negotiations with Braskem IDESA regarding this contract.
Ethylene and therefore the alliance betweenDerivatives
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 Mexichemthrough the productive state-owned subsidiary Pemex Industrial Transformation as a line of business after July 1, 2019.
This line of business’ 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 the 1,830.3 thousand tons of petrochemical products produced in 2018. This decrease was mainly due to a decrease in the national supply of ethane, 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:
ethane derivatives, such as ethylene, polyethylene, ethylene oxide and glycols;
propylene and derivatives; and
others such as oxygen, nitrogen, hydrogen and butadiene, among other products.
The primary goal for our ethylene 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 storage capacity for imported ethane.
Capacity
• | Cangrejera Petrochemical Complex: This complex is located in the southern region of the country and has five plants and a line of aromatics. |
• | Morelos Petrochemical Complex: This complex is located in the southern region of the country and has six plants and auxiliary services. |
• | Pajaritos Petrochemical Complex: This complex is located in the Southern region of the country, has an ethylene plant and has not operated since 2016. |
In 2019, the Cangrejera and Morelos complexes together produced 1,104.9 thousand tons of ethane derivatives, 11.8 thousand tons of propylene and derivatives, and 494.2 thousand tons of other products.
• | Refrigerated Terminal for Ethylene and Shipping at Pajaritos: This terminal is currently used to import ethane due to a decrease in national ethane production. In 2019, we imported 164.5 thousand tons of ethane through this terminal. |
Total production capacity of our operating plants for the five years ended December 31, 2019 was distributed among our facilities as set forth below.
Ethylene and Derivatives’ Production Capacity
Year ended December 31, | ||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||
(in thousands of tons) | ||||||||||||||||||||
Petrochemical Facility | ||||||||||||||||||||
Cangrejera(1) | 1,321.3 | 1,321.3 | 1,321.3 | 1,321.3 | 1,321.3 | |||||||||||||||
Morelos | 2,277.2 | 2,277.2 | 2,277.2 | 2,277.2 | 2,277.2 | |||||||||||||||
Pajaritos | — | — | — | 207.0 | 207.0 | |||||||||||||||
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Total | 3,598.5 | 3,598.5 | 3,598.5 | 3,805.5 | 3,805.5 | |||||||||||||||
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Notes: Numbers may not total due to rounding.
(1) | Our ethylene line of business’s capacity in Cangrejera does not include the production capacity of aromatics and derivatives. |
(2) | At the end of 2018, the assets of the Pajaritos Petrochemical Complex were transferred to Pemex because the alliance with Petroquímica Mexicana de Vinilo (PMV) was dissolved. |
Source: Pemex Ethylene.
Production
The following table sets forth our ethylene production for the five years ended December 31, 2019.
Ethylene’s Production(1)
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in thousands of tons) | (%) | |||||||||||||||||||||||
Ethane derivatives | 1,992.8 | 1,690.7 | 1,274.1 | 1,304.8 | 1,104.9 | (15.3 | ) | |||||||||||||||||
Propylene and derivatives | 66.0 | 42.8 | 12.9 | 16.5 | 11.8 | (28.6 | ) | |||||||||||||||||
Others | 910.9 | 795.2 | 597.0 | 509.0 | 494.2 | (2.9 | ) | |||||||||||||||||
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Total(1) | 2,969.7 | 2,528.7 | 1,884.0 | 1,830.3 | 1,610.8 | (12.0 | ) | |||||||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Figures include petrochemical products used as raw material to produce other petrochemicals. |
Source: Pemex BDI.
In 2019, our total production of our ethylene business decreased 12.0%, as compared to 2018, from 1,830.3 thousand tons in 2018 to 1,610.8 thousand tons in 2019. This decrease was primarily due to a decrease in the national supply of ethane, which impacted the production of ethylene and its derivatives, in particular ethylene oxide, glycols and high-density polyethylene.
During 2018, Pemex Ethylene reengineered its refrigerated terminal to provide ethane refrigeration rather than ethylene refrigeration, which allows us to import ethane, a raw material necessarily for our operations of which we have had a domestic shortage in recent years. We began to import ethane in January 2018. At the end of 2019, we installed a new vaporization system in our Pajaritos petrochemical complex, which allowed us to increase the vaporization of liquid ethane and the supply to our Cangrejera and Morelos complexes.
In addition, we are developing a vaporizer installation project for our ethane and ethylene refrigerated terminal. This project consists of the supply and installation of vaporizer, pumps, pipes and other accessories needed in order to increase our capacity to vaporize liquid ethane at this facility by 1,200 tons per day. We anticipate that this project will remainincrease the capacity in place.our ethylene chain and is intended to offset the decrease in the domestic ethane supply.
Domestic Sales
The following table sets forth our ethylene domestic sales for the five years ended December 31, 2019.
Value of Ethylene’s Domestic Sales(1)
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||||||||||
Ethane derivatives | Ps. | 15,649.1 | Ps. | 14,539.4 | Ps. | 12,252.7 | Ps. | 12,472.8 | Ps. | 8,951.4 | (28.2 | ) | ||||||||||||
Propylene and derivatives | 1,156.5 | 788.3 | 340.7 | 314.4 | 114.8 | (63.5 | ) | |||||||||||||||||
Others | 104.0 | 64.8 | 28.3 | 45.9 | 56.5 | 23.1 | ||||||||||||||||||
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Total | Ps. | 16,909.6 | Ps. | 15,392.5 | Ps. | 12,621.7 | Ps. | 12,833.2 | Ps. | 9,122.7 | (28.9 | ) | ||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
Source:Pemex BDI.
In 2019, the value of our domestic sales decreased by 28.9% as compared to 2018, from Ps. 12,833.2 million in 2018 to Ps. 9,122.7 million in 2019. This decrease was primarily due to a decrease in revenues from the sale of glycols,low-density polyethylene andlow-density linear polyethylene. This decrease was also due to the decline in ethylene prices around the world.
Drilling and Services
OurPrior 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 Pemex Exploration and Production. Therefore, our drilling and services segment operatesoperated through the productive state-owned subsidiary Pemex Drilling and Services until July 1, 2019 and provides drilling, completion, work-overthrough the productive state-owned subsidiary Pemex Exploration and other services for wells in offshoreProduction as a line of business after July 1, 2019. Prior to July 1, 2019, Pemex Drilling and onshore fields. During 2017, this segmentServices mainly provided drilling services to Pemex Exploration and Production, but also provided services to third-party clients such as CONAGUA, Marinsa, Latina, Fieldwood and Key Energy.Production.
As a result of our corporate reorganization, for the year ended December 31, 2015, we have presented operating results forIn 2019, our drilling and services segment together with results forbusiness provided drilling, completion, workover and well services in onshore and offshore fields both to us and to our exploration and production segment. We have summarized some of these results below. For additional results for this segment, please see “—external client Marinsa. Beginning July 1, 2019, such services were provided through Pemex Exploration and Production—Exploration and Drilling” above in this Item 4. Operating results for these segments are presented separately for periods beginning January 1, 2016. When reviewing these results, please note that our exploration and production segment receives drilling services not only from our drilling and services segment but also from third parties. Accordingly, the amounts presented above under drilling activity do not relate only to services provided by our drilling and services segment. For a detailed description of the financial results of each segment, see our consolidated financial statements included herein.Production.
During 2017,2019, we drilled 52carried out the following activities: drilling of 74 wells, 1354 of which were onshore and 39 offshore; completed 5420 offshore, completion of 48 wells, 1125 of which were onshore and 43 offshore;23 offshore and made 496328 workovers, 393263 of which were onshore and 10365 offshore. Of the wells completed, one was for CONAGUA. ThoseThese services were performed with an average of 47 drilling99 rigs, 61 of which were onshore and workover rigs, 20 terrestrial and 27 marine,38 offshore, including both owned and leased equipment. Moreover,rigs.
In addition, during 2019 we conducted 20,658carried out 10,460 well services in 2017,for our own infrastructure, 48% of which 48% were wireline operations, 30% were cementing jobs, 18% were logging operationswirelines, 32% cementings, 17% registrations and perforations and 4% were3% coiled tubing operations. In addition, weWe also provided drilling andwell services to our external customers such as CONAGUA, Marinsa, Latina, Fieldwood and Key Energy.client Marinsa.
Given the current state of the oil and gas industry and relatively low global oil prices, the demand for well drilling and services decreased in 2017 by approximately 35% as compared to 2016. In 2018, we expect well interventions to increase by approximately 28% compared to 2017, and we expect to operate an average of 50 rigs—23 land and 27 marine—including both owned and leased equipment, which represents a 6% increase as compared to 2017. Of these, we expect that 21 land and 5 marine will be rigs we own, which is a 24% decrease as compared to 2017.
In 2017, in accordance with our “Programa de modernización de la infraestructura de perforación” (Drilling Infrastructure Modernization Program), we carried out the modernization of two drilling land rigs of 2000 HP for an amount of U.S. $16.6 million. In addition, we are evaluating the acquisition of two workover land rigs of 200-350 HP.
Drilling and Services Capital Expenditures
Our drilling and services segment invested Ps. 1,550738 million on capital expenditures in 20172019. The 2020 budget for drilling and has budgeted Ps. 1,434 million forservices capital expenditures is included in 2018.the budget for Pemex Exploration and Production capital expenditures.
The following table sets forth our drilling and services segment’s capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2015, 2016 and 2017, and the budget for 2018.2019. 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.
Drilling and Services’ Capital Expenditures
Year ended December 31,(1) | Budget 2018(3) | Year ended December 31,(1) | Budget | |||||||||||||||||||||||||||||
2015(2) | 2016 | 2017 | 2017 | 2018 | 2019(2) | 2020(3)(4) | ||||||||||||||||||||||||||
(in millions of pesos)(4) | (in millions of pesos)(5) | |||||||||||||||||||||||||||||||
Drilling and Services | ||||||||||||||||||||||||||||||||
Acquisition of TwoJack-Up Platforms | Ps. | 553 | Ps. | 772 | Ps. | 794 | Ps. | 834 | Ps. | 794 | Ps. | 804 | Ps. | 403 | n.a. | |||||||||||||||||
Acquisition of Nine Land-Based Drilling Rigs | 288 | 340 | 352 | 386 | 352 | 353 | 178 | n.a. | ||||||||||||||||||||||||
Drilling Rig Equipment and Well Service Equipment Maintenance Program | — | 74 | 96 | 24 | 96 | 83 | 60 | n.a. | ||||||||||||||||||||||||
Acquisition of Two Modular Drilling Rigs | 723 | — | 3 | — | 3 | 2 | 7 | n.a. | ||||||||||||||||||||||||
Others | — | 1,501 | 307 | 190 | 307 | 146 | 90 | n.a. | ||||||||||||||||||||||||
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Total | Ps. | 1,564 | Ps. | 2,688 | Ps. | 1,550 | Ps. | 1,434 | Ps. | 1,550 | Ps. | 1,388 | Ps. | 738 | n.a | |||||||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Amounts based on cash basis method of accounting. |
(2) | Figures include our drilling and services segment’s capital expenditures for thesix-month period ended June 30, 2019. Prior to July 1, 2019, Pemex Drilling and Services operated as an additional productive state-owned subsidiary. As of July 1, 2019, Pemex Drilling and Services was merged into Pemex Exploration and Production. |
(3) | As a result the merger of Pemex Drilling and Services into Pemex Exploration and Production on July 1, 2019, our drilling and services segment ceased to operate as a separate segment, but rather was consolidated as a line of business within our exploration and development segment. 2020 budget figures for our drilling and services line of business are included within our capital expenditures for our exploration and development segment. See “Item 4—Business Overview—Exploration and Development Capital Expenditures.”. |
(4) | Original budget published in the Official Gazette of the Federation on December 11, 2019. |
(5) | Figures are stated in nominal pesos. |
Source: Petróleos Mexicanos.
Industrial Transformation
Our industrial transformation segment is comprised of three principal activities: (i) refining, (ii) gas and aromatics and (iii) since July 1, 2019, ethylene and derivatives:
Refining
Refining Processes and Capacity
Our refining production processes include the following:
• | Atmospheric distillation. This process heats crude oil in a tube furnace at atmospheric pressure to distill refined products. The primary products produced are gasoline, jet fuel, diesel, atmospheric gas oil and atmospheric residual crude oil. |
• | Vacuum distillation. This process heats crude oil or other feedstock in a vacuum distillation column, which is operated at low pressures. The objective of this process is to maximize production of heavy vacuum gas oil, which is produced by boiling crude oil. |
• | Cracking. This process uses either heat and pressure or a catalytic agent to increase gasoline yields from crude oil. |
• | Visbreaking. This is a thermal cracking process, which uses ahorizontal-tube heater fired to a high temperature. Visbreaking reduces flasher bottom viscosity and produces some heavy gas oil. |
• | Reforming processes. These processes use heat and catalysts to transform smaller or unstable hydrocarbon molecules into larger, more useful refining or blending products. For example, we use reforming processes to convert low octane gasoline into higher octane stocks that are suitable for blending into finished gasoline and to convert naphthas into more volatile, higher octane products. |
• | Hydrotreatment or residual hydrocracking. This process uses a catalyst and hydrogen at high temperature and pressure to remove sulfur, nitrogen and some aromatic compounds. Hydrotreatment also processes some lighter liquid productoff-take. |
• | Alkylation and isomerization. This polymerization process unites olefins and isoparaffins. Butylenes and isobutanes are combined with sulfuric acid or hydrofluoric acid to rearrangestraight-chain hydrocarbon molecules intobranched-chain products. Pentanes and hexanes, which are difficult to reform, are isomerized through the use of aluminum chloride and otherprecious-metal catalysts. Normal butane may be isomerized to provide a portion of the isobutene feed needed for the alkylation process. The process produces a high octane, low sensitivity blending agent for gasoline. |
• | Coking. This process is a severe method of thermal cracking used to upgrade heavy residuals into lighter products or distillates. Coking producesstraight-run gasoline (coker naphtha) and variousmiddle-distillate fractions used as catalytic feedstock, thus generating a concentrated solid material. |
These production processes together constitute our production capacity as set forth in the table below.
Refining Capacity by Production Process
At December 31, | ||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||
(in thousands of barrels per day) | ||||||||||||||||||||
Production Process | ||||||||||||||||||||
Atmospheric distillation | 1,640.0 | 1,602.0 | 1,627.0 | 1,640.0 | 1,640.0 | |||||||||||||||
Vacuum distillation | 772.4 | 767.5 | 772.2 | 772.2 | 772.2 | |||||||||||||||
Cracking | 422.5 | 422.5 | 422.5 | 422.5 | 422.5 | |||||||||||||||
Visbreaking | 91.0 | 91.0 | 91.0 | 91.0 | 91.0 | |||||||||||||||
Reforming | 279.3 | 279.3 | 279.3 | 279.3 | 279.3 | |||||||||||||||
Hydrotreatment | 1,099.9 | 1,230.0 | 1,230.0 | 1,230.0 | 1,230.0 | |||||||||||||||
Alkylation and isomerization | 154.8 | 154.3 | 154.3 | 154.3 | 154.3 | |||||||||||||||
Coking | 155.8 | 155.8 | 155.8 | 155.8 | 155.8 |
Source: Base de Datos Institucional (Pemex Institutional Database, or Pemex BDI).
As of December 31, 2019, we owned and operated six refineries: Cadereyta, Madero, Minatitlán, Salamanca, Salina Cruz and Tula. Our refineries consist of atmospheric and vacuum distillation units, where the bulk of crude oil input is processed. Secondary processing facilities include desulfurization units and facilities for catalytic cracking, reforming and hydrotreating.
During 2019, our refineries processed 592.0 thousand barrels per day of crude oil (103.2 thousand barrels per day at Cadereyta, 58.0 thousand barrels per day at Madero, 91.6 thousand barrels per day at Minatitlán, 92.9 thousand barrels per day at Salamanca, 125.1 thousand barrels per day at Salina Cruz and 121.2 thousand barrels per day at Tula), which in total consisted of 299.9 thousand barrels per day of Olmeca and Isthmus crude oil and 292.1 thousand barrels per day of Maya crude oil.
In the first nine months of 2019, we processed 151.7 thousand barrels per day of crude oil above the 504.9 thousand barrels per day we processed during the fourth quarter of 2018. This recovery was mainly due to improved levels of processing and production that resulted from the maintenance carried out in our refineries since March 2019. Such maintenance was financed with operating cash flow. Specific factors that contributed to this recovery include: the stabilization of process levels at our Minatitlan refinery, the restart of operations of the Mayan distilling unit at our Madero refinery in June 2019, the stabilization of operations at our Cadereyta refinery during the first nine months of 2019, with an average production level of 107.9 thousand barrels per day, and the stabilization of operations at our Salamanca refinery through August 2019 due to the restart of two distilling units.
In the last quarter of 2019, we processed 557.1 thousand barrels per day of crude oil. This decrease, which began at the end of the third quarter, was due to increased refinery maintenance activities that temporarily reduced our refining capacity since September 2019. During 2019, we processed 592.0 thousand barrels per day of crude oil, a decrease of 3.2% compared to 2018.
We began maintenance of our refineries pursuant to our refinery rehabilitation program in 2019, which emphasizes addressing critical risks of our facilities, improving efficiency and stabilizing our crude oil processing. We anticipate that this rehabilitation program will conclude in 2020. Among others, our refinery rehabilitation program has included maintenance of the following equipment: a crude distilling unit, a distilling unit, a visbreaker, a delayed coking unit, a fluid catalytic unit, a solvent desalphalting unit, a catalytic reformer unit, a methyl tert-butyl ether (MTBE) unit, an alkylation unit, an isomerization unit, hydrotreaters and sulfur recovery units.
Since 1993, through our subsidiary company,PMI-NASA, we have participated in a limited partnership with Shell Oil Company in a refinery located in Deer Park, Texas, which has the capacity to process 340 thousand barrels per day of crude oil. Under the Deer Park Limited Partnership agreement,PMI-NASA and Shell Oil Company each provide 50% of the refinery’s crude oil input and own 50% of the refinery’s output. This agreement is limited to the specific purpose of operating the Deer Park refinery.
Production
We produce a wide range of products derived from crude oil and natural gas, including LPG, gasoline, jet fuel, diesel, fuel oil, asphalts, lubricants and other refined products. In 2019, we produced 625.6 thousand barrels per day of refined products (including dry gasby-products of the refining process), as compared to 628.5 thousand barrels per day in 2018, representing a decrease of 0.5%. Despite the overall decrease in refined products, the production of distillates (gasoline, diesel and jet fuel) increased during the fourth quarter of 2019, mainly due to increased performance as a result of the maintenance carried out in our refineries.
The following table sets forth, by category, our production of petroleum products for the five years ended December 31, 2019.
Refining Production
Year ended December31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in thousands of barrels per day) | (%) | |||||||||||||||||||||||
Refinery Crude Oil Runs | 1,064.5 | 933.1 | 767.0 | 611.9 | 592.0 | (3.2 | ) | |||||||||||||||||
Refined Products | ||||||||||||||||||||||||
Liquefied petroleum gas | 21.4 | 17.2 | 15.8 | 10.1 | 7.2 | (28.7 | ) | |||||||||||||||||
Gasoline | ||||||||||||||||||||||||
Pemex Magna | 272.5 | 150.6 | 11.0 | 8.8 | 13.9 | 57.6 | ||||||||||||||||||
Ultra-Low Sulfur Magna | 88.4 | 165.5 | 238.7 | 196.4 | 187.1 | (4.7 | ) | |||||||||||||||||
Pemex Premium(1) | 16.8 | 7.7 | 5.6 | 1.9 | 1.7 | (9.4 | ) | |||||||||||||||||
Base | 3.6 | 1.6 | 1.8 | — | 0.8 | — | ||||||||||||||||||
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Total | 381.4 | 325.3 | 257.0 | 207.1 | 203.5 | (1.7 | ) | |||||||||||||||||
Kerosene (Jet fuel) | 47.8 | 42.8 | 40.5 | 34.7 | 29.0 | (16.3 | ) | |||||||||||||||||
Diesel | ||||||||||||||||||||||||
Pemex Diesel(2) | 191.5 | 130.1 | 87.4 | 67.8 | 54.8 | (19.1 | ) | |||||||||||||||||
Ultra-Low Sulfur Diesel | 83.0 | 85.1 | 63.8 | 48.9 | 74.1 | 51.7 | ||||||||||||||||||
Others | 0.2 | 1.0 | 2.4 | 0.1 | 1.3 | 871.1 | ||||||||||||||||||
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Total | 274.7 | 216.2 | 153.6 | 116.8 | 130.3 | 11.5 | ||||||||||||||||||
Fuel oil(3) | 237.4 | 228.1 | 217.3 | 185.1 | 149.8 | (19.1 | ) | |||||||||||||||||
Other refined products | ||||||||||||||||||||||||
Asphalts | 17.7 | 16.9 | 16.5 | 13.8 | 10.0 | (27.3 | ) | |||||||||||||||||
Lubricants | 2.3 | 3.0 | 1.9 | 1.9 | 0.9 | (52.0 | ) | |||||||||||||||||
Paraffins | 0.5 | 0.6 | 0.4 | 0.5 | 0.2 | (57.2 | ) | |||||||||||||||||
Still gas | 62.2 | 61.9 | 47.9 | 34.8 | 45.4 | 30.4 | ||||||||||||||||||
Other refined products(4) | 68.9 | 65.3 | 35.5 | 23.7 | 49.3 | 107.6 | ||||||||||||||||||
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Total | 151.6 | 147.6 | 102.1 | 74.7 | 105.8 | 41.6 | ||||||||||||||||||
Total refined products | 1,114.3 | 977.2 | 786.2 | 628.5 | 625.6 | (0.5 | ) | |||||||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Pemex Premium is anultra-low sulfur gasoline with 0.003% sulfur content. |
(2) | Pemex Diesel is sold in the northern border market with 0.003% sulfur content. |
(3) | Includes heavy fuel oil and intermediate 15. |
(4) | Includes mainly coke, along with other products such as aeroflex, furfural extract, and light cyclic oil |
Source: Pemex BDI.
Our refining production mostly consist of gasoline, diesel and fuel oil. In 2019, gasoline represented 32.5%, fuel oil represented 23.9%, diesel fuel represented 20.8%, jet fuel represented 4.6% and LPG represented 1.2% of total petroleum products production. The remainder, 16.9% of our production, consisted of a variety of other refined products.
Variable Refining Margin
During 2019, the National Refining System recorded a variable refining margin of U.S. $0.80 per barrel, a decrease of U.S. $0.16 per barrel as compared to U.S. $0.96 in 2018. This decrease was primarily a result of a decline in prices and weak refining margins in the north coast of the Gulf of Mexico, which were caused by decreased demand for gasoline and heightened levels of refinery production. The decrease was partially offset by increased operational performance of the National Refining System due to an increase in the yield of distillates.
The following table sets forth the variable refining margin for the five years ended December 31, 2019.
Variable Refining Margin
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(U.S. dollars per barrel) | (%) | |||||||||||||||||||||||
Variable margin | 3.35 | 4.48 | 5.43 | 0.96 | 0.80 | (16.6 | ) |
Domestic Sales
We market a full range of refined products, including gasoline, jet fuel, diesel, fuel oil and petrochemicals. We are one of a few major producers of crude oil worldwide that experiences significant domestic demand for our refined products.
For the five years ended December 31, 2019, the value of our domestic sales of refined products and petrochemicals was as follows.
Value of Refining’s Domestic Sales(1)
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||||||||||
Refined Products | ||||||||||||||||||||||||
Gasoline | ||||||||||||||||||||||||
Pemex Magna | Ps. | 274,006.9 | Ps. | 248,595.2 | Ps. | 361,021.7 | Ps. | 428,838.0 | Ps. | 374,020.2 | (12.8 | ) | ||||||||||||
Pemex Premium | 81,813.5 | 87,422.8 | 82,028.7 | 83,837.1 | 75,538.0 | (9.9 | ) | |||||||||||||||||
Aviation fuels (Others) | 339.8 | 342.4 | 371.1 | 433.1 | 404.7 | (6.6 | ) | |||||||||||||||||
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Total | Ps. | 356,160.2 | Ps. | 336,360.4 | Ps. | 443,421.5 | Ps. | 513,108.2 | Ps. | 449,962.9 | (12.3 | ) | ||||||||||||
Kerosene (Jet fuel) | 27,077.2 | 28,945.2 | 39,024.5 | 56,793.9 | 55,716.4 | (1.9 | ) | |||||||||||||||||
Diesel | ||||||||||||||||||||||||
Pemex Diesel | 139,796.2 | 117,556.3 | 181,854.4 | 207,499.4 | 171,405.9 | (17.4 | ) | |||||||||||||||||
Others | 22,930.4 | 19,236.4 | 28,195.1 | 26,669.3 | 23,659.7 | (11.3 | ) | |||||||||||||||||
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Total | Ps. | 162,726.7 | Ps. | 136,792.7 | Ps. | 210,049.5 | Ps. | 234,168.6 | Ps. | 195,065.6 | (16.7 | ) | ||||||||||||
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Fuel oil | ||||||||||||||||||||||||
Total | 25,906.0 | 16,436.3 | 35,622.9 | 43,779.1 | 28,789.8 | (34.2 | ) | |||||||||||||||||
Other refined products | ||||||||||||||||||||||||
Asphalts | 7,575.5 | 5,468.7 | 5,895.8 | 7,062.0 | 6,058.3 | (14.2 | ) | |||||||||||||||||
Lubricants | 1,297.5 | 1,473.0 | 1,061.4 | 1,277.4 | 673.3 | (47.3 | ) | |||||||||||||||||
Paraffins | 257.9 | 267.0 | 230.9 | 291.4 | 135.8 | (53.4 | ) | |||||||||||||||||
Coke | 669.5 | 501.9 | 421.1 | 200.5 | 666.0 | 232.3 | ||||||||||||||||||
Citroline | 0.9 | 4.6 | 3.6 | — | — | — | ||||||||||||||||||
Gas oil for domestic use | 587.4 | 424.2 | — | — | — | — | ||||||||||||||||||
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Total | Ps. | 10,388.8 | Ps. | 8,139.4 | Ps. | 7,612.8 | Ps. | 8,831.2 | Ps. | 7,533.5 | (14.7 | ) | ||||||||||||
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Total Refined Products | Ps. | 582,258.9 | Ps. | 526,673.9 | Ps. | 735,731.2 | Ps. | 856,681.0 | Ps. | 737,068.2 | (14.0 | ) | ||||||||||||
Petrochemicals(3) | Ps. | 3,930.9 | Ps. | 3,118.0 | Ps. | 3,905.6 | Ps. | 3,795.9 | Ps. | 2,422.4 | (36.2 | ) | ||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Excludes IEPS tax and value added tax. See “—Taxes, Duties and Other Payments to the Mexican Government” in this Item 4. |
(2) | Figures are stated in nominal pesos. See “Item 3—Key Information—Selected Financial Data.” |
(3) | Petrochemical products produced at refineries operated by our industrial transformation segment (carbon black feedstocks and propylene). |
Source: Pemex BDI.
In 2019, our domestic sales of refined products decreased by Ps. 119,612.8 million, or 14.0% in value as compared to 2018 levels (excluding IEPS tax and value added tax). This was primarily due to a 12.3% decrease in the value of our gasolines sales, a decrease of 16.7% in the value of our diesel sales and a 34.2% decrease in the value of our fuel oil sales, in each case primarily as a result of decreased average prices.
The volume of our domestic sales of refined products for thefive-year period ended December 31, 2019 was distributed as follows.
Volume of Refining’s Domestic Sales
Year ended December 31, | 2019 vs. 2018 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||||||
(in thousands of barrels per day, except where otherwise indicated) | (%) | |||||||||||||||||||||||
Refined Products | ||||||||||||||||||||||||
Gasoline | ||||||||||||||||||||||||
Pemex Magna | 638.0 | 637.5 | 660.5 | 646.2 | 607.5 | (6.0 | ) | |||||||||||||||||
Pemex Premium | 154.8 | 185.1 | 136.6 | 117.5 | 112.7 | (4.1 | ) | |||||||||||||||||
Aviation fuels (Others) | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 | (1.5 | ) | |||||||||||||||||
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Total | 793.3 | 823.1 | 797.5 | 764.2 | 720.6 | (5.7 | ) | |||||||||||||||||
Kerosenes (jet fuel) | 70.8 | 76.2 | 81.7 | 85.6 | 83.3 | (2.7 | ) | |||||||||||||||||
Diesel | ||||||||||||||||||||||||
Pemex Diesel | 330.6 | 335.5 | 317.6 | 292.8 | 256.9 | (12.3 | ) | |||||||||||||||||
Others | 54.2 | 51.8 | 47.9 | 38.5 | 36.1 | (6.0 | ) | |||||||||||||||||
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Total | 384.7 | 387.2 | 365.5 | 331.3 | 293.0 | (11.6 | ) | |||||||||||||||||
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Fuel oil | ||||||||||||||||||||||||
Total | 111.7 | 102.6 | 124.7 | 105.1 | 76.5 | (27.2 | ) | |||||||||||||||||
Other refined products | ||||||||||||||||||||||||
Asphalts | 15.9 | 15.9 | 15.4 | 12.9 | 9.5 | (26.3 | ) | |||||||||||||||||
Lubricants | 2.6 | 3.1 | 2.0 | 2.0 | 1.0 | (51.6 | ) | |||||||||||||||||
Paraffins | 0.6 | 0.6 | 0.4 | 0.5 | 0.2 | (57.2 | ) | |||||||||||||||||
Coke | 45.9 | 36.3 | 21.3 | 13.2 | 27.4 | 107.8 | ||||||||||||||||||
Citroline | — | 0.01 | 0.01 | — | — | — | ||||||||||||||||||
Gas oil for domestic use | 1.2 | 0.9 | — | — | — | — | ||||||||||||||||||
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Total | 66.2 | 56.9 | 39.1 | 28.5 | 38.1 | 33.3 | ||||||||||||||||||
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Total refined products | 1,426.7 | 1,446.0 | 1,408.4 | 1,314.8 | 1,211.5 | (7.9 | ) | |||||||||||||||||
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Petrochemicals(1) | 620.9 | 543.5 | 464.5 | 411.1 | 362.8 | (11.8 | ) |
Note: Numbers may not total due to rounding.
(1) | In thousands of metric tons. These are petrochemical products produced in our refineries (raw material for black carbon and propylene). |
Source: Pemex BDI.
The volume of our domestic gasoline sales decreased by 5.7% in 2019, from 764.2 thousand barrels per day in 2018 to 720.6 thousand barrels per day in 2019. The volume of our diesel sales decreased by 11.6%, from 331.3 thousand barrels per day in 2018 to 293.0 thousand barrels per day in 2019. The decrease in the volume of our domestic gasoline and diesel sales was mainly due to increased competition in the supply of products in the open market. The volume of our domestic sales of fuel oil decreased by 27.2 %, from 105.1 thousand barrels per day in 2018 to 76.5 thousand barrels per day in 2019, primarily due to a decrease in CFE’s demand for fuel oil.
In 2019, sales of Pemex Premium gasoline decreased 4.1% as compared to 2018, to 112.7 thousand barrels per day, while those of Pemex Magna decreased 6.0% as compared to 2018, to 607.5 thousand barrels per day.
We have also made concerted efforts to build and enhance our brands. Pursuant to these efforts, on June 5, 2016, Pemex Industrial Transformation announced the establishment of a joint branding program between us and various entities that own and operate retail service stations in Mexico. The joint branding program allowed our franchisees to rename their retail service stations while continuing to sell our products under our brand. In addition, we continued to provide technical and operational assistance to such franchisees. We believe that this program has strengthened our relationship with entities that own and operate retail service stations in Mexico, and we plan to continue our commercial branding strategy.
On November 15, 2017, we relaunched the “Pemex Franchise” image program with a new business model that includes new products and a variety of association structures. The goal of this program, which consists of nearly 10,000 service stations throughout Mexico, is to provide better service to end users and to strengthen the PEMEX brand.
On October 11, 2018, we launched the seventh generation of ourhigh-end performance additive that blends with our Pemex Magna and Pemex Premium gasolines. This additive is promoted as Pemex Aditec. Pemex Aditec is a multifunctional additive and is formulated to help obtain optimum performance, cleanliness and protection of the engine. We believe that Pemex Aditec technology may provide a competitive advantage for the Pemex Franchise scheme.
At the end of 2018 and during the first quarter of 2019, we implemented an advertising campaign in digital media to publicize the benefits and characteristics of gasoline with Pemex Aditec technology.
During the last quarter of 2019, we began the development of the eighth generation of the performance additive for Pemex gasolines in conjunction with theInstituto Mexicano del Petróleo (Mexican Petroleum Institute or IMP). The development of this additive includes innovations such a molecular tracer, new high-spectrum detergent molecules and corrosion and oxidation inhibition.
As part of the Pemex Franchise program, we operate three association structures: (i) PEMEX Franchise, (ii) sublicensing of branded products and (iii) the sale of generic, unbranded products. We also have two options for wholesale distribution: (i) independent retailers of unbranded products and (ii) associate distributors ofPEMEX-branded gasoline and diesel. In order to strengthen the PEMEX brand, in 2018 we introduced an optional redesign for service stations. As of December 31, 2019, 345 service stations have been redesigned and more than 665 are in the process of being redesigned.
As of December 31, 2019, there were 8,593 retail service stations in Mexico, of which 8,548 were privately owned and operated as franchises, while the remaining 45 were owned by Pemex Industrial Transformation. This total number of retail service stations represents a decrease of 13.5% from the 9,930 service stations as of December 31, 2018. This decrease was mainly due to increased competition in the open market. As of December 31, 2019, we had 6,432 marketing contracts, a decrease of 3,501 marketing contracts as compared to 9,933 marketing contracts as of December 31, 2018. The decrease in the number of marketing contracts is mainly due to the higher concentration of customer volume in each contract as a result of new commercial contract models. These 6,432 contracts include 20 of the largest volume trading and distribution customers nationwide. In addition, Pemex Industrial Transformation supplies oil products to 2,992 service stations outside the Pemex Franchise program. Of these service stations, 568 operate under a sublicense of PEMEX brands and 2,424 usethird-party brands.
In order to gain market presence, competitors often transfer well-established Pemex gas stations to third-party brands. As a result, we are working to counteract this by opening new gas stations under our franchise model and strengthening the Pemex brand among our existing gas stations. During December 2019, 593 Pemex gas stations were undergoing transformation to our Pemex franchise model. Additionally, we received 126 requests for gas stations to register under the Pemex franchise model.
Despite the aggressive competitive environment and our relatively limited marketing investment, we maintained approximately 77% of market share with our franchised andsub-licensed Pemex gas stations by the end of December 2019.
Pricing Decrees
As of December 31, 2017, fuel prices in Mexico are fully liberalized. However, the CRE reserves the right to intervene. Therefore, our sales prices continue to be subject to potential future regulations by the CRE, until theComisión Federal de Competencia Económica (Federal Economic Competition Commission) determines that there is effective competition in the wholesale market.
Gasoline and Diesel
As of December 31, 2017, sale prices of gasoline and diesel have been fully liberalized and are determined by the free market. For more information, see “Item 5—Operating and Financial Review and Prospects—IEPS Tax, Hydrocarbon Duties and Other Taxes.”
On January 1, 2019, in accordance with reports issued by the CRE, average national regular retail gasoline prices decreased by Ps. 0.29 per liter, as compared to December 31, 2018. Similarly, average national retail diesel prices decreased by Ps. 0.08 per liter on January 1, 2019, as compared to December 31, 2018.
On December 16, 2019, the CRE issued agreement A/043/2019, which terminated agreement A/057/2018 and allowed Pemex to set the prices for its gasoline and diesel.
Fuel Oil
We determine the fuel oil price methodology based on the guidelines issued by the CRE in resolution RES/047/2016. Prices using this methodology are calculated weekly and apply to all customers, including the CFE.
We withhold IEPS tax. While it is included in the price to our customers, we pay this tax to the authorities upon collection of the sale of our products and it is not included in our revenues. For more information, see “Item 4—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime for PEMEX.”
As of January 1, 2018, the IEPSa los Combustibles Fósiles(IEPS Tax on Fossil Fuels) was 15.76 Mexican cents per liter, as of January 1, 2019, the IEPS Tax on Fossil Fuels was 16.50 Mexican cents per liter and as of January 1, 2020, the IEPS Tax on Fossil Fuels was 16.99 Mexican cents per liter.
The Mexican Government could modify these price controls or impose additional price controls in the future. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government has historically imposed price controls in the domestic market on our products.”
Refining’s Capital Expenditures
Investments
Over the past several years, we have focused our investment program on enhancing the quality of the gasoline and diesel we produce to meet Mexico’s environmental standards. In 2019, we shifted our focus to the maintenance of our existing refineries and the expansion of our refinery system in order to increase our hydrocarbon production. Our continued objective is to stabilize and improve our ability to process heavy crude oil in order to optimize our refinery production and increase our production of other hydrocarbons in order to supply the growing national demand.
Our refining business invested Ps. 8,409 million in capital expenditures in 2019 and has budgeted Ps. 12,500 million in capital expenditures for 2020.
This increase in our capital expenditures budget for 2020 as compared to 2019 is because in 2020, our entire capital expenditures budget is to be used for the rehabilitation of our six refineries that form the National Refining System. Pursuant to this rehabilitation program, we have evaluated each of our six existing refineries and have identified specific maintenance requirements for each plant. Our rehabilitation program focuses on addressing critical risks of the facilities such as mechanical integrity and safety, and improving the efficiency and the stabilization of our crude oil processing.
The following table sets forth our refining business’ capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2019, and the budget for 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.
Refining’s Capital Expenditures
Year ended December 31,(1) | Budget | |||||||||||||||
2017 | 2018 | 2019 | 2020(2) | |||||||||||||
(in millions of pesos)(3) | ||||||||||||||||
Refining | ||||||||||||||||
Maintenance of the Production Capacity at the Madero Refinery | Ps. | 766 | Ps. | 1,933 | Ps. | 1,717 | Ps. | — | ||||||||
Fuel Quality Investments(4) | 5,196 | 2,639 | 1,374 | — | ||||||||||||
National Refining System Rehabilitation Program | — | — | 1,196 | 12,500 | ||||||||||||
Maintaining the Production Capacity at the Cadereyta Refinery | 733 | 1,139 | 1,140 | — | ||||||||||||
Residual Use at the Miguel Hidalgo Refinery in Tula (Formerly Reconfiguration of Miguel Hidalgo Refinery in Tula) | 1,912 | 306 | 948 | — | ||||||||||||
Rehabilitation of Electrical Substations Miguel Hidalgo Refinery | 391 | 1,281 | 843 | — | ||||||||||||
Maintenance of the Production Capacity at the Minatitlán Refinery | 3,673 | 1,884 | 519 | — | ||||||||||||
Maintenance of the Production Capacity at the Salina Cruz Refinery | 1,338 | 2,429 | 296 | — | ||||||||||||
Installation of a 250 T/hr. Steam Boiler at the Minatitlan Refinery | 19 | — | 115 | — | ||||||||||||
Adequacy of the Burner System and Installation of an Elevated Burner at the Francisco I. Madero Refinery | — | 163 | 62 | — | ||||||||||||
Maintenance of the Production Capacity at the Salamanca Refinery | 762 | 406 | 33 | — | ||||||||||||
Integral Maintenance Program and Process Compressor Technology Update at the Miguel Hidalgo Refinery | — | 1 | 25 | — | ||||||||||||
Residual Conversion from Salamanca Refinery | 773 | 101 | 17 | — | ||||||||||||
Cadereyta Refinery Energy Train | — | — | 15 | — | ||||||||||||
Acquisition of Capitalizable Catalysts for the Hydrotreatment Process in the Tula Refinery | 5 | 112 | 12 | — | ||||||||||||
Supervision and Administration Work for the Use of Waste at the Salina Cruz Refinery | 22 | 16 | 8 | — | ||||||||||||
Tuxpan Pipeline and Storage and Distribution Terminals | 67 | 342 | 3 | — | ||||||||||||
Project Refinery in Tula(5) | — | 18 | — | — | ||||||||||||
Others | 330 | 1,351 | 87 | — | ||||||||||||
Total | Ps. | 15,988 | Ps. | 14,119 | Ps. | 8,409 | Ps. | 12,500 | ||||||||
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Notes: Numbers may not total due to rounding.
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the |
(3) | Figures are stated in nominal pesos. |
(4) | Includes clean fuels investments for gasoline and diesel in our six refineries. |
(5) | Includespre-investments studies,on-site preparation and other expenses related to this project. This project concluded in 2018. |
(6) | 2019 figures reflect the decrease caused by budget adjustment authorized by the Board of Directors of Petróleos Mexicanos |
Source: Petróleos Mexicanos.
In 2019, we imported approximately 544.3 thousand barrels per day of gasoline, which represented approximately 75.5% of total domestic demand for gasoline in that year. Our priority in 2020 is to increase our production of oil products by focusing on the maintenance of our existing refineries and the development of the new Dos Bocas refinery in order to increase our production capacity.
Additionally, we are exploring alternative investment projects, including our fuel quality project, the reconfiguration of the Miguel Hidalgo refinery in Tula and the residual conversion at the Salamanca refinery.
Our projects are described in further detail below.
Fuel Quality Project, Gasolines Phase (ULSG)
This project consisted of the installation of ULSGpost-treatment units in our six refineries in order to improve the quality of our gasoline. As of the date of this annual report, all gasoline produced in Mexico meets international environmental standards and the plants are operating, pending the completion of various complementary projects suspended due to budgetary restrictions.
Fuel Quality Project, Diesel Phase (ULSD)
This project consists of the construction of five ULSD facilities, five hydrogen plants, four sulfur recovery units, five sour water treatment plants and the reconfiguration of 17 existing units to produce ULSD. However, as of December 31, 2019, this project has been suspended and our capital expenditures budget is focused on other areas of priority. We continue to evaluate funding alternatives for the completion of this project, which would aid our compliance with environmental regulations. However, the CRE has approved extending the deadline for our compliance with the relevant regulation,NOM-016-2016, which governs sulfur content in commercial diesel.
Residual Use at the Miguel Hidalgo Refinery in Tula (formerly Reconfiguration of the Miguel Hidalgo Refinery in Tula)
The Miguel Hidalgo refinery in Tula has been undergoing renovations since 2014. This project consists of the construction of nine plants. The main ongoing project at this refinery is to complete the coking plant. The project is expected to increase production of refined oil products from 315 thousand barrels per day to 340 thousand barrels per day, as well as improve the production of gasoline and distillates. As of December 31, 2019, construction of the coking plant, which was 63% complete, has been suspended due to budgetary constraints. We are currently evaluating funding alternatives in order to complete construction.
Residual Conversion of the Salamanca Refinery
The reconfiguration of the Ing. Antonio M. Amor refinery in Salamanca, Guanajuato has focused on the conversion oflow-value residuals intohigh-steamhigh-value distillates (without a need for increased crude oil processing), as well as the modernization of the lubricants train to produce lubricants of greater value and quality. As of December 31, 2019, however, this project was approximately 12.9% complete and has been suspended due to budgetary constraints. We are currently evaluating funding alternatives in order to resume this reconfiguration.
Tuxpan Maritime Terminal
This project is intended to help meet the increase in the demand for refined products in the metropolitan area of the Mexico Valley. The total cost of the project is Ps. 5,637.9 million, which includes the construction of a pipeline measuring18-inches in diameter and 109 kilometers in length from Cima de Togo to Venta de Carpio, five storage tanks located at the Tuxpan Maritime Terminal with a capacity of 100,000 barrels each, a research study to determine the best option for the discharge of refined products from tankers and pipelines into these storage tanks and auxiliary services.
As of April 2018, two of the three key phases of this project were completed: thepre-investment studies and construction of theTuxpan-Mexico pipeline, which is currently operating. The third phase, the storage system, is 97.2% complete. We have arranged an extension with the Ministry of Finance and Public Credit to allow for additional time in which this final phase may be completed. Four of the five storage tanks have been delivered to the Tuxpan Maritime Terminal and are in operation. The fifth and remaining tank is 99.9% complete. Completion of this project is contingent upon budget availability to continue site works.
Maintenance at the Francisco I. Madero Refinery
On August 23, 2017, we commenced a scheduled gradual shutdown of our Francisco I. Madero refinery, located in Ciudad Madero, Tamaulipas, in order to implement a comprehensive general maintenance program for the plants at this refinery. Operations at the plants were restarted in February 2018, but we experiencedstart-up and stabilization difficulties which caused our Madero refinery to be out of operation during the second half of 2018.
In January 2019, we restarted our Mayan plant andU-901 reformer after performing maintenance at these plants. In June 2019, we restarted the operations of its process plants, including the Mayan distilling unit. In September 2019, we began the rehabilitation of the Madero refinery pursuant to our National Refining System Rehabilitation Program, and increased the levels of crude oil process in this refinery as well as the reliability of its operational processes.
Hydrogen Supply for Refineries
In order to permit us to specialize, maximize value, and focus on the processing of crude oil, in the past we have partnered with third parties for projects related to auxiliary services, such as the supply of hydrogen to our refineries.
On September 1, 2017, we entered intolong-term agreements with Air Liquide for the supply of hydrogen to the Miguel Hidalgo refinery in Tula. Air Liquide operates the existing hydrogen plant at the Miguel Hidalgo refinery. In February 2018, we executed the plant’s performance and stabilization tests, which was an important milestone under the contract with Air Liquide. In addition, in April 2018 we entered into a long-term agreement with Linde AG for the supply of hydrogen to our Madero refinery. In July 2018, we signed several agreements related to the supply of hydrogen to our Cadereyta refinery. However, some of the conditions precedent required by these agreements were not met, and these agreements were subsequently terminated.
Rehabilitation of the National Refining System
As part of our efforts to stabilize the operations of our refineries, we adopted a program for the rehabilitation of the National Refining System. Pursuant to this program, we allocated additional resources for the repair and maintenance of our six existing refineries. Our rehabilitation program focuses on addressing critical risks of the facilities, such as mechanical integrity and safety, and improving the efficiency and stabilization of our crude oil processing. These activities began in September 2019 and increased in the last quarter of the year. Since the launched of our rehabilitation program, we have provided maintenance to 39 process plants,13 auxiliary services facilities and 21 storage tanks.
The budget for thePrograma de Rehabilitación del Sistema Nacional de Refinación (National Refining System Rehabilitation Program) for 2020 is Ps. 12,500 million. We have evaluated each of our six existing refineries and have identified specific maintenance requirements for each plant.
Dos Bocas Refinery
On December 7, 2018, the Board of Directors of Petróleos Mexicanos, in accordance with resolutionCA-161/2018, authorized the construction of a new refinery in Dos Bocas in the state of Tabasco as part of our institutional strategy plan. The project is estimated to add 340 million barrels per day of refined Maya oil, which we expect would, in turn, increase our production of gasoline and diesel by at least 290 million barrels per day. This project is supported by the Mexican Government, which has announced that a goal of constructing this refinery is to decrease Mexico’s reliance on imported energy resources by increasing our refining capacity and distillates production.
By December 31, 2019, we had made significant progress with respect to studies, site preparation, license contracting, phase I engineering and procurement of equipment with long delivery time. We are in the process of requesting authorization from Pemex’s Board of Directors to begin the FEL II(Front-End Loading II) phase of this project. The FEL methodology is applied in investment projects management by using the following three stages: FEL I (visualization), FEL II (conceptualization) and FEL III (definition).
Gas and Aromatics
Natural Gas and Condensates
All wet natural gas production is directed to our gas processing facilities. At the end of 2019, we owned nine facilities.
The following facilities are located in the Southern region:
• | Nuevo Pemex. This facility contains 13 plants that together in 2019 produced 673.4 million cubic feet per day of dry gas, 28.4 thousand barrels per day of ethane, 33.3 thousand barrels per day of liquefied gas, 13.3 thousand barrels per day of naphtha and 55.6 thousand tons of sulfur. |
• | Cactus. This facility contains 22 plants that together in 2019 produced 449.4 million cubic feet per day of dry gas, 23.7 thousand barrels per day of ethane, 26.3 thousand barrels per day of liquefied gas, 26.3 thousand barrels per day of naphtha and 64.8 thousand tons of sulfur. |
• | Ciudad Pemex. This facility contains eight plants that together in 2019 produced 609.7 million cubic feet per day of dry gas and 180.3 thousand tons of sulfur. |
• | La Venta. This facility contains one plant that in 2019 produced 86.7 million cubic feet of dry gas per day. |
• | Matapionche. This facility contains five plants that together in 2019 produced 11.2 million cubic feet per day of dry gas, 0.5 thousand barrels per day of liquefied gas, 0.2 thousand barrels per day of naphtha and 2.5 thousand tons of sulfur. |
The Morelos, Cangrejera and Pajaritos facilities form the Coatzacoalcos area gas processing complex (which we refer to as a GPC):
• | Morelos. This facility contains one plant that in 2019 produced 12.5 thousand barrels per day of ethane, 14.5 thousand barrels per day of liquefied gas and 4.0 thousand barrels per day of naphtha. |
• | Cangrejera. This facility contains two plants that together in 2019 produced 12.2 thousand barrels per day of ethane, 15.8 thousand barrels per day of liquefied gas and 5.1 thousand barrels per day of naphtha. |
• | Pajaritos. This facility contains one plant, which wasnon-operational as of the date of this annual report. |
The following facilities are located in the Northern region:
• | Burgos. This facility contains nine plants that together in 2019 produced 375.5 million cubic feet per day of dry gas, 8.0 thousand barrels per day of liquefied gas and 8.8 thousand barrels per day of naphtha. |
• | Poza Rica. This facility contains five plants that together in 2019 produced 81.8 million cubic feet per day of dry gas, 1.7 thousand barrels per day of liquefied gas and 0.7 thousand barrels per day of naphtha. |
• | Arenque. This facility contains three plants that together in 2019 produced 15.9 million cubic feet per day of dry gas. |
Petrochemical Complexes
In addition to our gas processing facilities, we also own the following two petrochemical complexes:
• | Independencia. The Independencia petrochemical complex consists of three plants and is located in the Central region. In 2019, this complex produced 141.5 thousand tons of methanol and 27.8 thousand tons of petrochemical specialties. |
• | Cangrejera. The Cangrejera petrochemical complex consists of five plants and an aromatics line and is located in the Southern region. In 2019, this complex produced 919.6 thousand tons of aromatics and derivatives and 437.1 thousand tons of other petrochemical products (butanes, hexane, hydrogen, pentanes, BTX liquids, petroleum products, naphtha gas and heavy naphtha). |
The following tables set forth our processing capacity, as well as our total natural gas processing and production, for the five years ended December 31, 2019.
Gas and Aromatics’ Processing and Production Capacity(1)
Year ended December 31, | ||||||||||||||||||||
2015 | 2016 | 2017(5) | 2018 | 2019 | ||||||||||||||||
(in millions of cubic feet per day, except where otherwise indicated) | ||||||||||||||||||||
Sweetening plants | ||||||||||||||||||||
Sour condensates(2) | 144 | 144 | 144 | 144 | 144 | |||||||||||||||
Sour natural gas | 4,523 | 4,523 | 4,523 | 4,523 | 4,523 | |||||||||||||||
Natural gas liquids recovery plants | ||||||||||||||||||||
Cryogenics | 5,912 | 5,912 | 5,912 | 5,912 | 5,912 | |||||||||||||||
Natural gas liquids fractionating(2) | 569 | 569 | 569 | 569 | 569 | |||||||||||||||
Processing of hydrosulfuric acid | 219 | 219 | 229 | 229 | 229 | |||||||||||||||
Aromatic compounds and derivatives(Cangrejera and Independencia)(3)(4) | 1,694 | 1,694 | 1,734 | 1,734 | 1,734 |
(1) | Production capacity refers to aromatic compounds and derivatives. |
(2) | In thousands of barrels per day. |
(3) | Thousand tons per year |
(4) | Since November 2015, the operation of Methanol I and II plants, the CPQ Independencia petrochemical specialties plant and the CPQ Cangrejera aromatic compounds plants have been assigned to Pemex Industrial Transformation. |
(5) | Values of our CCR reforming plant were updated in 2017. |
Source: Pemex BDI.
Natural Gas, Condensates and Aromatics’ Processing and Production(1)
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in millions of cubic feet per day, except where otherwise indicated) | (%) | |||||||||||||||||||||||
Processing | ||||||||||||||||||||||||
Wet gas | 4,073 | 3,672 | 3,237 | 2,952 | 2,826 | (4.3 | ) | |||||||||||||||||
Sour gas | 3,225 | 2,997 | 2,688 | 2,492 | 2,396 | (3.9 | ) | |||||||||||||||||
Sweet gas(2) | 847 | 675 | 550 | 459 | 431 | (6.3 | ) | |||||||||||||||||
Condensates(3)(6) | 45 | 41 | 32 | 27 | 22 | (18.2 | ) | |||||||||||||||||
Gas to natural gas liquids extraction | 3,904 | 3,450 | 3,199 | 2,782 | 2,651 | (4.7 | ) | |||||||||||||||||
Wet gas | 3,745 | 3,394 | 3,086 | 2,782 | 2,651 | (4.7 | ) | |||||||||||||||||
Reprocessing streams(4) | 159 | 56 | 113 | — | — | — | ||||||||||||||||||
Production | ||||||||||||||||||||||||
Dry gas(5) | 3,454 | 3,074 | 2,667 | 2,422 | 2,305 | (4.8 | ) | |||||||||||||||||
Natural gas liquids(6)(7) | 327 | 308 | 280 | 240 | 221 | (7.8 | ) | |||||||||||||||||
Liquefied petroleum gas(6)(8) | 174 | 159 | 144 | 122 | 108 | (12.0 | ) | |||||||||||||||||
Ethane(6) | 107 | 106 | 101 | 85 | 77 | (9.5 | ) | |||||||||||||||||
Naphtha(6) | 69 | 62 | 52 | 43 | 43 | (0.9 | ) | |||||||||||||||||
Sulfur(9)(11) | 858 | 673 | 551 | 443 | 377 | (14.9 | ) | |||||||||||||||||
Methanol(9) | 161 | 145 | 116 | 148 | 141 | (4.6 | ) | |||||||||||||||||
Aromatic compounds and derivatives(9)(10) | 1,022 | 940 | 622 | 570 | 920 | 61.5 | ||||||||||||||||||
Others(9)(12) | 535 | 507 | 302 | 269 | 465 | 73.0 |
Note: Numbers may not total due to rounding.
GPC = Gas Processing Complex
(1) | Excludes operations of our exploration and production segment, which produced 4,816.2 million cubic feet per day in 2019. |
(2) | Includes sweet vapor from condensates. |
(3) | Includes internal streams. |
(4) | Reprocessing of pipeline dry gas at the Pajaritos cryogenic plant. |
(5) | Includes ethane reinjected into the natural gas stream. |
(6) | In thousands of barrels per day. |
(7) | Includes stabilized condensates, reprocessing streams from the Cangrejera petrochemical complex and other streams for fractionating. |
(8) | Includes production from GPC, refineries and transfers from Pemex Exploration and Production. |
(9) | In thousands of tons. |
(10) | Includes aromine 100, benzene, styrene, ethylbenzene, fluxoil, high octane hydrocarbon, toluene and xylenes. |
(11) | Production of gas processing GPCs and refineries. In 2019, our Poza Rica and Arenque facilities ceased producing sulfur due to operational difficulties of the condenser units. |
(12) | Includes butanes, petrochemical specialties, pentanes, hexane, hydrogen, BTX liquids, isopentanes and petroleum products, naphtha gas, petrol octane base and heavy naphtha. |
Source: Pemex BDI.
We process sour and sweet condensates from our exploration and production segment in order to obtain stabilized natural gas liquids and also recover liquid hydrocarbons obtained from the processing of sweet natural gas. In addition, we obtain liquids from internal streams and hydrocarbons condensed in sour wet gas pipelines. Our production of natural gas liquids, including stabilized condensates, reprocessing and other fractionating streams, decreased by 7.8% from 240 thousand barrels per day in 2018 to 221 thousand barrels per day in 2019.
We process sour condensates, which have a higher sulfur content, to produce stabilized sweet condensates. The volume of sour condensates we processed and internal streams of our gas and aromatic compoundsub-segment totaled 22.4 thousand barrels per day in 2019, a 18.2% decrease from the 27.0 thousand barrels per day processed in 2018. We also process sweet condensates at our Burgos facilities to produce light and heavy natural gasoline.
The production of sulfur totaled 377 thousand tons in 2019, a 14.9% decrease from 443 thousand tons in 2018. This decrease was due to the fact that our Poza Rica and Arenque facilities ceased producing sulfur, primarily due to operational difficulties of the condenser units.
The production of aromatic compounds and derivatives totaled 919.6 thousand tons in 2019, a 61.5% increase from 569.5 thousand tons in 2018. This increase was due to the fact that the aromatic production operated steadily throughout the year, whereas in 2018 our naptha reforming plant (CCR) operated only intermittently due to equipment failure and we experienced shortages in auxiliary services and raw materials from our Minatitlán refinery.
Over the five years ended December 31, 2019, the value of our domestic sales was distributed as follows:
Value of Gas and Aromatics’ Domestic Sales(1)
Year ended December 31, | 2019 vs. 2018 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||||||||||
Natural gas | Ps. | 53,037.3 | Ps. | 67,536.5 | Ps. | 74,287.7 | Ps. | 62,355.4 | Ps. | 41,735.5 | (33.1 | ) | ||||||||||||
Liquefied petroleum gas | 78,194.0 | 50,179.8 | 49,137.3 | 52,053.6 | 32,161.8 | (38.2 | ) | |||||||||||||||||
Ethane(3) | 310.7 | 1,284.7 | 2,989.7 | 3,203.4 | 2,365.0 | (26.2 | ) | |||||||||||||||||
Heptane | 1.0 | — | 0.9 | 9.5 | 26.8 | 181.9 | ||||||||||||||||||
Propane | 57.6 | 73.8 | 111.6 | 148.2 | 91.7 | (38.1 | ) | |||||||||||||||||
Light naphtha | 39.7 | 84.5 | 158.8 | 221.4 | 212.7 | (3.9 | ) | |||||||||||||||||
Heavy naphtha | 191.0 | 404.8 | 429.3 | 708.6 | 833.2 | 17.6 | ||||||||||||||||||
Sulfur | 926.1 | 585.7 | 540.2 | 766.0 | 534.3 | (30.2 | ) | |||||||||||||||||
Methanol | 748.4 | 625.1 | 806.9 | 1,089.9 | 818.7 | (24.9 | ) | |||||||||||||||||
Aromatic compounds and derivatives(4) | 3,479.4 | 2,122.1 | 1,673.1 | 1,759.8 | 1,802.0 | 2.4 | ||||||||||||||||||
Others(5) | 399.1 | 261.4 | 308.5 | 296.1 | 258.9 | (12.6 | ) | |||||||||||||||||
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Total | Ps. | 137,384.3 | Ps. | 123,158.4 | Ps. | 130,444.0 | Ps. | 122,611.9 | Ps. | 80,840.6 | (34.1 | ) | ||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
(3) | In January 2016, we began the supply of ethane to Braskem IDESA. |
(4) | Includes aromine 100, benzene, styrene, toluene, xylene. |
(5) | Includes petrochemical specialties, hydrogen, isopropanol, hexane, pentane and naphtha gas. |
Source: Pemex BDI.
The volume of our domestic sales of gas and aromatics for thefive-year period ended December 31, 2019 was distributed as follows:
Volume of Gas and Aromatics’ Domestic Sales
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in thousands of barrels per day, except where otherwise indicated) | (%) | |||||||||||||||||||||||
Natural gas(1) | 3,246.6 | 3,347.3 | 2,623.0 | 2,064.3 | 1,604.4 | (22.3 | ) | |||||||||||||||||
Liquefied petroleum gas(2) | 278.8 | 202.1 | 171.3 | 165.1 | 151.0 | (8.6 | ) | |||||||||||||||||
Ethane | 8.8 | 30.5 | 57.7 | 48.9 | 51.5 | 5.3 | ||||||||||||||||||
Heptane | 0.1 | — | 0.1 | 0.5 | 1.9 | 306.9 | ||||||||||||||||||
Propane | 10.1 | 11.3 | 11.3 | 11.8 | 11.5 | (3.1 | ) | |||||||||||||||||
Heavy naphtha(3) | 29.9 | 64.3 | 56.2 | 69.5 | 95.2 | 37.0 | ||||||||||||||||||
Light naphtha(3) | 6.2 | 13.3 | 19.9 | 21.3 | 27.4 | 28.7 | ||||||||||||||||||
Sulfur(3) | 572.7 | 580.5 | 529.9 | 450.5 | 382.5 | (15.1 | ) | |||||||||||||||||
Methanol(3) | 112.0 | 111.3 | 100.8 | 106.0 | 107.1 | 1.1 | ||||||||||||||||||
Aromatic compounds and derivatives(3)(4) | 240.0 | 155.1 | 111.3 | 101.6 | 120.0 | 18.1 | ||||||||||||||||||
Others(3)(5) | 40.5 | 29.6 | 28.2 | 22.8 | 26.7 | 17.2 |
Note: | Numbers may not total due to rounding. |
(1) | In millions of cubic feet per day. |
(2) | In thousands of barrels per day. |
(3) | In thousands of tons. |
(4) | Includes aromine 100, benzene, styrene, toluene, ethylbenzene, fluxoil and xylene. |
(5) | Includes petrochemical specialties, hydrogen, isopropanol, hexane, pentane and naphtha gas. |
Source: Pemex BDI.
In 2019, the value of our domestic sales in gas and aromatics decreased by 34.1% as compared to 2018, reaching Ps. 80,840.6 million. This decrease was mainly due to a reduction in domestic sales volume of natural gas and liquefied petroleum gas.
Domestic sales of natural gas decreased by 22.3%, as compared to 2018, from 2,064.3 million cubic feet per day in 2018 to 1,604.4 million cubic feet per day in 2019. This decrease was mainly due to increased competition from private companies importing foreign natural gas.
Domestic sales of gas LP decreased by 8.6%, as compared to 2018, from 165.1 thousand barrels per day in 2018 to 151.0 thousand barrels per day. This decrease was mainly due to continued increased competition from private companies importing foreign gas LP since 2016.
Internal sales of sulfur decreased by 15.1%, as compared to 2018, from 450.5 thousand tons in 2018 to 382.5 thousand tons in 2019. This decrease was mainly due to a lower supply of gas for our processing complexes, particularly the Cactus facility, as a result of maintenance.
Internal sales of aromatics increased by 18.1%, as compared to 2018, from 101.6 thousand tons in 2018 to 120.0 thousand tons in 2019. This increase was mainly due to a greater supply of these products.
Subsidiaries of Pemex Industrial Transformation
Pemex Industrial Transformation conducts certain management, real estate and distribution activities through its subsidiaries and through certain joint ventures. The following table lists its subsidiaries, their principal operating activities and Pemex Industrial Transformation’s ownership interest as of December 31, 2019.
Subsidiaries of Pemex Industrial Transformation(1)
Subsidiary | Principal Activity | Ownership Interest (%) | ||||
Mex Gas Internacional, S.L.(2) | Holding company | 100.00 | ||||
Terrenos para Industrias, S.A. | Real estate holding company | 100.00 | ||||
PTI Infraestructura de Desarrollo, S.A. de C.V. | Dos Bocas refinery project development company | 99.99 |
(1) | As of December 31, 2019. |
(2) | Mex Gas Internacional, S.L. is the only subsidiary of Pemex Industrial Transformation that is a consolidated subsidiary company. See Note 5 to our consolidated financial statements included herein. |
Source: Pemex Industrial Transformation Divestitures
On July 14, 2018, the Board of Directors of Petróleos Mexicanos authorized the divestiture of our 5% indirect participation in TAG Pipelines Sur, S. de R. L. de C. V. As of December 31, 2019, this operation was still in progress.
Pricing Decrees
As of December 31, 2017, fuel prices in Mexico are fully liberalized. However, the CRE reserves the right to intervene. Therefore, until the Federal Economic Competition Commission determines that there is effective competition in the wholesale market, our sales prices continue to be subject to potential future regulations by the CRE.
As of July 1, 2017, the CRE permitsthird-party participants to enter the gasoline and diesel market and has authorized the permanent regime offirst-hand sales of natural gas. This permanent regime allows us to sell natural gas under two separate pricing mechanisms: (1) the first hand sale price, wherein we may sell natural gas directly to customers without additional transportation or services and (2) the full marketing price, wherein we may charge a higher price that includes transportation and services costs associated with the commercialization of natural gas.
Since 2003, price control mechanisms for LPG have been implemented through governmental decrees. Since January 1, 2017, we have sold LPG in accordance with the methodology authorized by CRE for determining thefirst-hand sales price at the point of delivery, and all end user prices are freely determined by the market.
Since December 16, 2019, PEMEX determines the marketing list prices according to the pricing mechanism authorized by ourComité de Precios y Aspectos Económicos de la Política Comercial de Petróleos Mexicanos y Empresas Productivas Subsidiarias(Committee on Prices and Economic Aspects of the Commercial Policy of Petróleos Mexicanos and its Productive Subsidiary Entities). This change is in compliance with Resolution 1008/2019 of the CRE, which considers the participation of PEMEX in first-hand sales and the marketing of LPG within a free market. Additionally, on December 16, 2019, the CRE issued resolution RES/1755/2019, which approved the commercialization contract agreement model addendum to the contract agreement.
As of January 1, 2017 the IEPS Tax on Fossil Fuels was 13 Mexican cents per kilogram. As of January 1, 2018, this tax was 14 Mexican cents per kilogram, and, as of January 1, 2019, this tax was 15 Mexican cents per kilogram. We withhold IEPS tax. For more information, see “Item 4—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime for PEMEX.”
The Mexican Government could modify these price controls or impose additional price controls in the future. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government has historically imposed price controls in the domestic market on our products.”
Natural Gas Hedging Operations
We offer, as avalue-added service, hedging contracts to our domestic customers to protect them against fluctuations in the prices of natural gas. For information on hedging contracts offered to natural gas domestic customers, see “Item 11—Quantitative and Qualitative Disclosures about Market Risk.”
Gas and Aromatics Capital Expenditures
Our gas and aromatics business invested Ps. 489 million in capital expenditures in 2019 and has budgeted Ps. 2,000 million in capital expenditures for 2020.
The following table sets forth our gas and aromatics business’ capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2019, and the budget for 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.
Gas and Aromatics’ Capital Expenditures
Year ended December 31,(1) | Budget 2020(2) | |||||||||||||||
2017 | 2018 | 2019 | ||||||||||||||
(in millions of pesos)(3) | ||||||||||||||||
Gas and Aromatics | ||||||||||||||||
Adaptation of Fractionation Plants and Conversion of the Liquids Sweetener at Nuevo Pemex GPC | Ps. | 271 | Ps. | 136 | Ps. | 61 | Ps. | — | ||||||||
Cryogenic Maintenance III Nuevo Pemex GPC | 39 | 92 | 26 | 258 | ||||||||||||
Conservation of the Main Services | — | 49 | 22 | 199 | ||||||||||||
Modernization of Systems and Processing Equipment of GPC La Venta | 20 | 18 | 18 | 111 | ||||||||||||
Maintenance of the Fractionation Plant I of the GPC Nuevo Pemex | 2 | 9 | 14 | 131 | ||||||||||||
Maintenance of Plants and Auxiliary Services of GPC Burgos | 9 | 31 | 7 | 114 | ||||||||||||
Maintenance of the Gas and Petrochemical Process Center Coatzacoalcos | — | — | — | 128 | ||||||||||||
Modernization of the Product Movement Areas of the GPCs | 239 | 644 | — | — | ||||||||||||
Modernization and Rehabilitation of Facilities of the Supply and Water Treatment System at Nuevo Pemex GPC | 216 | 241 | — | — | ||||||||||||
Conditioning of the Venting Systems at Cactus GPC | 147 | 131 | — | — | ||||||||||||
Integral Maintenance of Gas Sweetening Plants 1, 2, 3 and 12 at Cactus GPC | 64 | 53 | — | — | ||||||||||||
Security Requirements for Improvement of Operational Reliability of the GPCs | 31 | 41 | — | — | ||||||||||||
Conservation and Modernization of the Storage Area at Coatzacoalcos Area GPC | 32 | 22 | — | — | ||||||||||||
Rehabilitation and Modernization of Natural Gas Turbochargers of Cryogenic Plants of GPC Nuevo Pemex | 41 | — | — | — | ||||||||||||
Rehabilitation of Cooling Towers of GPC Cactus | 29 | 12 | — | 107 | ||||||||||||
Integral Project of Electric Reliability at GPCs | 22 | — | — | — | ||||||||||||
Conservation of the Operational Reliability of the GPC Ciudad Pemex | 6 | — | — | — | ||||||||||||
Facilities Conditioning in the GPC Cactus for Ethane Supply | 5 | — | — | — | ||||||||||||
Integral maintenance of the Modular Cryogenic Plant 5 of the GPC Cactus | — | — | — | 155 | ||||||||||||
Others | 1,414 | 1,428 | 341 | 797 | ||||||||||||
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| |||||||||
Total | Ps. | 2,587 | Ps. | 2,907 | Ps. | 489 | Ps. | 2,000 | ||||||||
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|
Notes: | Numbers may not total due to rounding. |
GPC = Gas Processing Complex.
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the Official Gazette of the Federation on December 11, 2019. |
(3) | Figures are stated in nominal pesos. |
Source: Petróleos Mexicanos.
Ethane Supply Contract
On February 19, 2010, we entered into a contract to supply 66,000 barrels per day of ethane to the Etileno XXI project, a petrochemical complex in Nanchital, Veracruz that produces ethylene and polyethylene. The Etileno XXI project commenced operations on March 18, 2016. The Etileno XXI project is owned and operated by Braskem IDESA, S.A.P.I., or Baskem IDESA.
During 2019, we supplied 808.9 million cubic meters of ethane for a total of Ps. 2,365.0 million under this contract. We are currently in negotiations with Braskem IDESA regarding this contract.
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’ 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 the 1,830.3 thousand tons of petrochemical products produced in 2018. This decrease was mainly due to a decrease in the national supply of ethane, 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:
ethane derivatives, such as ethylene, polyethylene, ethylene oxide and glycols;
propylene and derivatives; and
others such as oxygen, nitrogen, hydrogen and butadiene, among other products.
The primary goal for our ethylene 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 storage capacity for imported ethane.
Capacity
• | Cangrejera Petrochemical Complex: This complex is located in the southern region of the country and has five plants and a line of aromatics. |
• | Morelos Petrochemical Complex: This complex is located in the southern region of the country and has six plants and auxiliary services. |
• | Pajaritos Petrochemical Complex: This complex is located in the Southern region of the country, has an ethylene plant and has not operated since 2016. |
In 2019, the Cangrejera and Morelos complexes together produced 1,104.9 thousand tons of ethane derivatives, 11.8 thousand tons of propylene and derivatives, and 494.2 thousand tons of other products.
• | Refrigerated Terminal for Ethylene and Shipping at Pajaritos: This terminal is currently used to import ethane due to a decrease in national ethane production. In 2019, we imported 164.5 thousand tons of ethane through this terminal. |
Total production capacity of our operating plants for the five years ended December 31, 2019 was distributed among our facilities as set forth below.
Ethylene and Derivatives’ Production Capacity
Year ended December 31, | ||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||
(in thousands of tons) | ||||||||||||||||||||
Petrochemical Facility | ||||||||||||||||||||
Cangrejera(1) | 1,321.3 | 1,321.3 | 1,321.3 | 1,321.3 | 1,321.3 | |||||||||||||||
Morelos | 2,277.2 | 2,277.2 | 2,277.2 | 2,277.2 | 2,277.2 | |||||||||||||||
Pajaritos | — | — | — | 207.0 | 207.0 | |||||||||||||||
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| |||||||||||
Total | 3,598.5 | 3,598.5 | 3,598.5 | 3,805.5 | 3,805.5 | |||||||||||||||
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Notes: Numbers may not total due to rounding.
(1) | Our ethylene line of business’s capacity in Cangrejera does not include the production capacity of aromatics and derivatives. |
(2) | At the end of 2018, the assets of the Pajaritos Petrochemical Complex were transferred to Pemex because the alliance with Petroquímica Mexicana de Vinilo (PMV) was dissolved. |
Source: Pemex Ethylene.
Production
The following table sets forth our ethylene production for the five years ended December 31, 2019.
Ethylene’s Production(1)
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in thousands of tons) | (%) | |||||||||||||||||||||||
Ethane derivatives | 1,992.8 | 1,690.7 | 1,274.1 | 1,304.8 | 1,104.9 | (15.3 | ) | |||||||||||||||||
Propylene and derivatives | 66.0 | 42.8 | 12.9 | 16.5 | 11.8 | (28.6 | ) | |||||||||||||||||
Others | 910.9 | 795.2 | 597.0 | 509.0 | 494.2 | (2.9 | ) | |||||||||||||||||
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| |||||||||||||
Total(1) | 2,969.7 | 2,528.7 | 1,884.0 | 1,830.3 | 1,610.8 | (12.0 | ) | |||||||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Figures include petrochemical products used as raw material to produce other petrochemicals. |
Source: Pemex BDI.
In 2019, our total production of our ethylene business decreased 12.0%, as compared to 2018, from 1,830.3 thousand tons in 2018 to 1,610.8 thousand tons in 2019. This decrease was primarily due to a decrease in the national supply of ethane, which impacted the production of ethylene and its derivatives, in particular ethylene oxide, glycols and high-density polyethylene.
During 2018, Pemex Ethylene reengineered its refrigerated terminal to provide ethane refrigeration rather than ethylene refrigeration, which allows us to import ethane, a raw material necessarily for our operations of which we have had a domestic shortage in recent years. We began to import ethane in January 2018. At the end of 2019, we installed a new vaporization system in our Pajaritos petrochemical complex, which allowed us to increase the vaporization of liquid ethane and the supply to our Cangrejera and Morelos complexes.
In addition, we are developing a vaporizer installation project for our ethane and ethylene refrigerated terminal. This project consists of the supply and installation of vaporizer, pumps, pipes and other accessories needed in order to increase our capacity to vaporize liquid ethane at this facility by 1,200 tons per day. We anticipate that this project will increase the capacity in our ethylene chain and is intended to offset the decrease in the domestic ethane supply.
Domestic Sales
The following table sets forth our ethylene domestic sales for the five years ended December 31, 2019.
Value of Ethylene’s Domestic Sales(1)
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||||||||||
Ethane derivatives | Ps. | 15,649.1 | Ps. | 14,539.4 | Ps. | 12,252.7 | Ps. | 12,472.8 | Ps. | 8,951.4 | (28.2 | ) | ||||||||||||
Propylene and derivatives | 1,156.5 | 788.3 | 340.7 | 314.4 | 114.8 | (63.5 | ) | |||||||||||||||||
Others | 104.0 | 64.8 | 28.3 | 45.9 | 56.5 | 23.1 | ||||||||||||||||||
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| |||||||||||||
Total | Ps. | 16,909.6 | Ps. | 15,392.5 | Ps. | 12,621.7 | Ps. | 12,833.2 | Ps. | 9,122.7 | (28.9 | ) | ||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
Source:Pemex BDI.
In 2019, the value of our domestic sales decreased by 28.9% as compared to 2018, from Ps. 12,833.2 million in 2018 to Ps. 9,122.7 million in 2019. This decrease was primarily due to a decrease in revenues from the sale of glycols,low-density polyethylene andlow-density linear polyethylene. This decrease was also due to the decline in ethylene prices around the world.
Sales to other Subsidiary Entities
The following table sets forth the intercompany sales of petrochemical products for the five years ended December 31, 2019.
Ethylene’s Intercompany Sales(1)
Year ended December 31, | 2019 | |||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | vs. 2018 | |||||||||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||||||||||
Ethane and derivatives | Ps. | 82.1 | Ps. | 109.8 | Ps. | 1.1 | Ps. | 2.5 | Ps. | 3.8 | 52.0 | |||||||||||||
Others(3) | 86.9 | 457.8 | 284.2 | 62.0 | 59.2 | (4.5 | ) | |||||||||||||||||
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| |||||||||||||
Total | Ps. | 169.0 | Ps. | 567.6 | Ps. | 285.3 | Ps. | 64.5 | Ps. | 63.0 | (2.3 | ) | ||||||||||||
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Note: Numbers may not total due to rounding.
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
(3) | Includes diethylene glycol, ethylene, hydrogen, ethylene pyrolysis liquids, monoethyleneglycol and nitrogen. |
Source: Pemex BDI.
In 2019, our intercompany sales decreased by 2.3% as compared to 2018, from Ps. 64.5 million in 2018 to Ps. 63.0 million in 2019. This decrease was mainly due to a reduction in the sales volume of ethylene hydrogen.
Ethylene Capital Expenditures
Our ethylene business invested Ps. 55 million in capital expenditures in 2019, and has budgeted Ps. 2,452 million for capital expenditures in 2020.
The following table sets forth our ethylene business’ capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2019, and the budget for 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.
Ethylene’s Capital Expenditures
Year ended December 31,(1) | Budget 2020(2) | |||||||||||||||
2017 | 2018 | 2019 | ||||||||||||||
(in millions of pesos)(3) | ||||||||||||||||
Ethylene(4) | ||||||||||||||||
Modernization of Fire Protection Network at Cangrejera PC | Ps. | 68 | Ps. | 171 | Ps. | 16 | Ps. | 43 | ||||||||
Modernization and Expansion of Production Capacity of Ethane Derivatives Chain I at Morelos PC | — | 168 | — | — | ||||||||||||
Maintaining the Production Capacity of the Swing Plant2015-2017 at Morelos PC | 16 | 78 | 22 | 40 | ||||||||||||
Sustainability of the Production Capacity of the Ethylene Plant at Morelos PC | 43 | 75 | 26 | 658 | ||||||||||||
Acquisition of Catalysts for Pemex Ethylene Plants | — | 72 | — | 7 | ||||||||||||
Maintaining the Production Capacity of Ethylene Oxide Plant2015-2017 at Morelos PC | 49 | 69 | 62 | 79 | ||||||||||||
Maintenance Program of the Capacity of the Low Density Polyethylene Plant at Cangrejera PC | 64 | 48 | 63 | 451 | ||||||||||||
Maintenance Program of the Ethylene Plant at Cangrejera PC | 39 | 48 | 4 | 455 | ||||||||||||
Rehabilitation of Maintenance Areas to Support Production at Cangrejera PC | 82 | 47 | — | — | ||||||||||||
Modernization and Optimization of Infrastructure and Auxiliary Services I at Cangrejera PC | 74 | 43 | — | 6 | ||||||||||||
Maintenance of the Production Capacity of the Asahi Plant2015-2017 at Morelos PC | 13 | 26 | 14 | 3 | ||||||||||||
Maintenance Program for the Production Capacity of the Ethylene Oxide Plant at Cangrejera PC | 2 | 20 | 2 | 300 | ||||||||||||
Maintaining the Production Capacity of Auxiliary Services at Morelos PC | 4 | 18 | — | 108 | ||||||||||||
Maintaining the Production Capacity of the Mitsui Plant2015-2017 at Morelos PC | 14 | 8 | 8 | 17 | ||||||||||||
Maintenance of the Production Capacity of the Ethylene Oxide Plant at Cangrejera PC | 38 | 3 | — | — | ||||||||||||
Safety and Environmental Protection Based on Observations and Regulations IV at Morelos PC | 1 | — | — | — | ||||||||||||
Maintaining Production Capacity of the Low Density Polyethylene Plant | 67 | — | — | — | ||||||||||||
Maintaining the Production Capacity of Ethane Derivatives Chain II at Morelos PC | 1 | — | — | — | ||||||||||||
Maintaining the Production Capacity of Auxiliary Services II | 16 | — | — | — | ||||||||||||
Maintaining the Production Capacity of Auxiliary Services III | 8 | — | — | — | ||||||||||||
Maintaining the Production Capacity of the Ethane Derivatives Chain III at Morelos PC | 1 | — | — | — | ||||||||||||
Steam Generation Plant Maintenance Program | — | — | — | 24 | ||||||||||||
Maintenance Program for the Electric Generation Plant | — | — | — | 253 | ||||||||||||
Maintenance and Sustaining Operations of the Refrigerated Terminal of Ethane Shipments at Pajaritos (TREEP) | — | — | — | 7 | ||||||||||||
Others | 18 | 81 | 1 | 1 | ||||||||||||
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| |||||||||
Total | Ps. | 618 | Ps. | 975 | Ps. | 219 | Ps. | 2,452 | ||||||||
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Notes: Numbers may not total due to rounding.
PC = Petrochemical Complex.
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the Official Gazette of the Federation on December 11, 2019. |
(3) | Figures are stated in nominal pesos. |
(4) | Capital expenditures were made for certain projects in years following the original term indicated in the project title. |
Source: Petróleos Mexicanos.
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 agricultural and industrial nitrates, phosphate fertilizers and acids (produced by Fertinal). We also expect that our subsidiaryPro-Agroindustria will begin producing urea in the second quarter of 2020.
In 2020, we intend to focus our strategy on: (1) increasing the national production of fertilizers at competitive prices; (2) contributing to the strengthening of the agricultural sector in Mexico through the supply of fertilizers; (3) ensuring a reliable supply of natural gas for the operation of our plants; and (4) continuing to make capital expenditure investments to improve the operational reliability of our four ammonia plants.
In addition, as part of our strategy we intend to integrate our Fertinal andPro-Agroindustria segments into the production chain of natural gas to ammonia to fertilizers. We expect that this integration will help us offer a wide range of fertilizers, nitrogen and phosphates at competitive prices. Furthermore, we expect that establishing new commercial channels will allow us to bring the supply of ammonia and fertilizers closer to industrial and agricultural producers throughout the country. Likewise, Pemex Fertilizers is in negotiations with theSecretaría de Agricultura y Desarrollo Rural(Ministry of Agriculture and Rural Development, or SADER), to fulfill the urea and diammonium phosphate demand of small agriculture producers through the Mexican Government programSembrando Vida.
Capacity
As of December 31, 2019, we owned four ammonia plants, one of which resumed operations in December 2019 after undergoing major maintenance. Two of our plants are scheduled to undergo major maintenance during 2020 and 2021. Finally, our remaining plant likewise requires further rehabilitation, and this rehabilitation will be scheduled based on the availability of budgetary resources.
The total ammonia production capacity of our operating plants for the last three years was distributed among our facilities as set forth below:
Fertilizers’ Total Capacity
Year ended December 31, | ||||||||||||
2017 | 2018 | 2019 | ||||||||||
(thousands of tons) | ||||||||||||
Petrochemical Complexes | ||||||||||||
Cosoleacaque (ammonia) | 1,440 | 1,440 | 1,440 |
Source: Pemex Fertilizers.
Production
The following table summarizes the annual production of our fertilizers segment for the three years ended December 31, 2019.
Fertilizers’ Production
Year ended December 31, | 2019 | |||||||||||||||
2017 | 2018 | 2019 | vs. 2018 | |||||||||||||
(thousands of tons) | (%) | |||||||||||||||
Methane Derivatives | ||||||||||||||||
Ammonia | 500 | 151 | — | (100.0 | ) | |||||||||||
Carbon dioxide | 844 | 372 | 7 | (98.1 | ) | |||||||||||
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Total | 1,343 | 523 | 7 | (98.7 | ) | |||||||||||
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Note: Numbers may not total due to rounding.
Source: Pemex BDI.
Total annual production of methane derivatives in 2019 decreased 98.7% from 523 thousand tons in 2018 to 7 thousand tons in 2019. This decrease was mainly due to shortages in the supply of raw material that have kept our Cosoleacaque plant out of operation sincemid-August of 2018.
Sales of Fertilizers
The following table sets forth the value of our domestic sales of our fertilizers segment for the three years ended December 31, 2019.
Value of Fertilizers’ Domestic Sales(1)
Year ended December 31, | 2019 | |||||||||||||||
2017 | 2018 | 2019 | vs. 2018 | |||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||
Methane Derivatives | ||||||||||||||||
Ammonia | Ps. | 4,676.5 | Ps. | 5,544.3 | Ps. | 3,642.8 | (34.3 | ) | ||||||||
Carbon dioxide | 109.1 | 56.8 | — | (100.0 | ) | |||||||||||
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Total | Ps. | 4,785.7 | Ps. | 5,601.1 | Ps. | 3,642.8 | (35.0 | ) | ||||||||
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Note: Numbers may not total due to rounding.
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
Source:Pemex BDI.
In 2019 the value of domestic sales in our fertilizers segment decreased by 35.0%, from Ps. 5,601.1 million in 2018 to Ps. 3,642.8 million in 2019, primarily due to production stoppages due to a shortage of natural gas for use as raw material and a decrease in the resale of ammonia imports.
Volume of sales
The following table sets forth the value of our domestic sales for the three years ended December 31, 2019.
Volume of Fertilizers’ Domestic Sales
Year ended December 31, | 2019 | |||||||||||||||
2017 | 2018 | 2019 | vs. 2018 | |||||||||||||
(thousands of tons) | (%) | |||||||||||||||
Methane Derivatives | ||||||||||||||||
Ammonia | 760.4 | 771.7 | 581.9 | (24.6 | ) | |||||||||||
Carbon dioxide | 207.6 | 151.3 | 0.1 | (99.9 | ) | |||||||||||
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Total | 968.0 | 923.0 | 582.0 | (36.9 | ) | |||||||||||
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Note: | Numbers may not total due to rounding. |
Source:Pemex BDI.
Fertilizers Capital Expenditures
Our fertilizers segment invested Ps. 203 million in capital expenditures in 2019 and has budgeted Ps. 1,069 million in capital expenditures for 2020. The following table sets forth our fertilizers segment’s capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2019, and the budget for 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.
Fertilizers’ Capital Expenditures
Year ended December 31,(1) | Budget | |||||||||||||||
2017 | 2018 | 2019 | 2020(2) | |||||||||||||
(in millions of pesos)(3) | ||||||||||||||||
Fertilizers | ||||||||||||||||
Rehabilitation of Primary Reformers and Auxiliary Ammonia Plant VI and VII at Cosoleacaque PC | Ps. | 75 | Ps. | 138 | Ps. | 23 | Ps. | — | ||||||||
Maintenance to Storage and Distribution Areas at Cosoleacaque PC | 38 | 72 | — | 71 | ||||||||||||
Rehabilitation of the ammonia plant No. V, at Cosoleacaque PC | — | 38 | 5 | — | ||||||||||||
Maintenance of refrigeration and ammonia storage plant No. 2 of the Pajaritos Refrigerated Terminal | — | 30 | 4 | 50 | ||||||||||||
Maintaining the Production Capacity of Ammonia Plant VII and its Auxiliary Services at Cosoleacaque PC | 5 | 22 | 5 | — | ||||||||||||
Maintaining the Production Capacity of Ammonia Plant VI at Cosoleacaque PC | — | 18 | — | — | ||||||||||||
Rehabilitation of Ammonia Plant IV and Integration and Auxiliary Services for Cosoleacaque PC | 102 | 11 | — | — | ||||||||||||
Maintenance to Cryogenic Ammonia Storage Plant No. 1 at Pajaritos Refrigerated Terminal | — | — | 1 | 90 | ||||||||||||
Maintenance to Transportation, Handling and Storage Areas at Cosoleacaque PC | — | — | 111 | 415 | ||||||||||||
Maintenance to Receipt, Storage and Distribution Areas at Salina Cruz Refrigerated Ammonia Terminal | — | — | 54 | 443 | ||||||||||||
Others | 45 | 2 | — | — | ||||||||||||
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Total | Ps. | 264 | Ps. | 331 | Ps. | 203 | Ps. | 1,069 | ||||||||
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Notes: Numbers may not total due to rounding.
PC = Petrochemical Complex.
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the Official Gazette of the Federation on December 11, 2019. |
(3) | Figures are stated in nominal pesos. |
Source: Petróleos Mexicanos.
Pajaritos Petrochemical Complex
In 2014, we acquired anon-operating nitrogen fertilizer production facility located in Pajaritos, Veracruz. After the acquisition, we initiated a major rehabilitation project that involved the restoration of our rotating, static and mechanical equipment and the rehabilitation of a carbon dioxide compression station and a pipeline. The Pajaritos complex rehabilitation was completed in the second quarter of 2018. While tests were started at that time, production could not be stabilized due to the discontinuous operation of our Cosoleacaque petrochemical complex due to a shortage of natural gas for use as raw material, which led to an insufficient supply of ammonia and carbon dioxide. We expect that we will be able to start operations at this facility during the second quarter of 2020, and, once the production stabilizes, we expect to have a production capacity of 36 thousand tons of urea per month (80% of its designed capacity).
Fertinal
Fertinal produces fertilizers, primarily phosphates, as well as acids and other agricultural and industrial nitrates, and operates an industrial complex located in Lázaro Cárdenas, Michoacán. Fertinal’s total production capacity for the three years ended December 31, 2019 is as set forth below.
Fertinal Segment’s Total Capacity
Year ended December 31, | ||||||||||||
2017 | 2018 | 2019 | ||||||||||
(thousands of tons) | ||||||||||||
Nitrate and phosphates | 1,420 | 1,225 | 1,178 |
Source: Fertinal Group
Fertinal’s total production for the three years ended December 31, 2019 is set forth below.
Fertinal Segment’s Production
Year ended December 31, | 2019 | |||||||||||||||
2017 | 2018 | 2019 | vs. 2018 | |||||||||||||
(thousands of tons) | % | |||||||||||||||
Phosphates | 763.9 | 880.7 | 783.9 | (11.0 | ) | |||||||||||
Nitrate | 220.8 | 225.1 | 200.7 | (10.8 | ) | |||||||||||
Others | 3.5 | 23.3 | 1.4 | (94.0 | ) | |||||||||||
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Total | 988.2 | 1,129.1 | 986.0 | (12.7 | ) | |||||||||||
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Source: Fertinal Group
The following table sets forth the value of Fertinal’s domestic sales for the three years ended December 31, 2019.
Value of Fertinal’s Domestic Sales(1)
Year ended December 31, | 2019 | |||||||||||||||
2017 | 2018 | 2019 | vs. 2018 | |||||||||||||
(in millions in pesos)(2) | % | |||||||||||||||
Phosphates | Ps. | 1,717.5 | Ps. | 1,576.1 | Ps. 2,177.2 | 38.1 | ||||||||||
Nitrates | 1,099.1 | 1,316.9 | 1,076.7 | (18.2 | ) | |||||||||||
Ammonia | 108.6 | 1,168.2 | 1,002.5 | (14.2 | ) | |||||||||||
Sulfur | 11.1 | 158.7 | 124.1 | (21.8 | ) | |||||||||||
Sulfuric Acid | 4.5 | 2.5 | 2.1 | (16.0 | ) | |||||||||||
Others | 24.7 | 32.6 | 27.8 | (14.7 | ) | |||||||||||
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| |||||||||
Total | Ps. | 2,965.5 | Ps. | 4,255.0 | Ps. 4,410.4 | 3.7 | ||||||||||
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Note: | Numbers may not total due to rounding. |
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
Source: Fertinal Group.
The increase in our sales in 2019 was mainly due to higher volume in domestic phosphates sales despite the significant drop in the international prices of phosphate fertilizers during 2019 (approximately 36%). This led to a significant decrease in financial margins, as well as a restriction in cash flow towards the end of the 2019.
In 2019, we operated at average of 83.7% of our total production capacity. Due to the cash flow restrictions, we were not able to make the capital expenditure required to meet our operational needs for our facilities located in Lazaro Cardenas, Michoacán and our mining unit located in San Juan de la Costa, Baja California Sur.
In 2019, together with SADER, Fertinal was a direct participant in the Mexican Government programSembrando Vida, to provide fertilizers to small agriculture producers. The pilot program was implemented in the state of Guerrero, and represents a change in Fertinal’s distribution and commercialization paradigm in the Mexican fertilizers market.
Logistics
Our logistics segment operates through the productivestate-owned subsidiary Pemex Logistics and provides land, maritime and pipeline transportation, storage and distribution services to some of our other subsidiary entities and to other companies, including CFE,Aeropuertos y Servicios Auxiliares,Tesoro, CENAGAS, local gas stations and distributors.
Transportation of Crude Oil and Refined Products
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 2,117approximately 1,581.5 thousand barrels per day, mainly due to a reduction in the volume of 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 thatpipelines transportation systems in accordance with our strategy to combat fuel theft.
During 2019, we transported in 2017, 77.1% was transported by pipeline, 7.8% by tanker and the remaining 15.1% by land transport.
During 2017, 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 transportedinjected 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 a decreasean increase in transportation services requested by Pemex Industrial Transformation, which is theimports of isobutane as a result of importationa higher gasoline production at the Minatitlán and Salina Cruz refineries.
In 2019, we transported a total of LPG2,069.3 thousand barrels per day of LPG: 1,436.4 thousand barrels per day (69.4%) by private companies, as well as decreased production of natural gaspipeline systems, 431.8 thousand barrels per day (20.9%) by Pemex Explorationland transport and Production.
the remaining 201.1 thousand barrels per day (9.7%) by 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 the volume of natural gas requested by the CFE and Pemex Industrial Transformation, as well as decreased production of natural gas by Pemex Exploration and Production.2018.
Treatment and Primary Logistic
We transportedIn 2019, we received an average of 1,4311,309.2 thousand barrels per day of crude oil in 2017for treatment, which consists of dehydration and desalination, representing a decrease of 0.5% as compared to 1,5511,315.2 thousand barrels per day in 2016, which represents a2018. This decrease of 7.7%,was mainly due to lower crude oil production. Anproduction by Pemex Exploration and Production. During 2019, we delivered an average of 756834.5 thousand barrels of crude oil per day were delivered to the National Refining System and 675478.5 thousand barrels of crude oil per day were delivered to the export terminals.
During 2017,2019, we transported an average of 3,4243,388.3 million cubic feet per day of natural gas through the Altamira, Misión, Santuario and Gas Marino Mesozoico transportation systems, as compared to the 3,7653,096.9 million cubic feet per day in 2016,2018, which represents a 9.1% decrease,9.4% increase, partially due to a decreasean increase in natural gas production by Pemex Exploration and Production. In addition, we transported an average of 2619.8 thousand barrels per day of condensate by the Misión and Condensado Terrestre Sur transportation systems compared to 3323.9 thousand barrels per day in 2016,2018, which represents a 21.2%17.2% decrease, partially due to a decreaseprocessing reduction in naturalthe gas production bysweetening plants of Pemex Exploration and Production.Industrial Transformation.
During 2017,2019, we had two18 leak and spill events, neithernone of which were significant.
Open Season
As a result of the energy reform, we may now offer pipeline transportation and storage services for refined petroleum products. During 2017, under the guidelines issued by the CRE, Pemex Logistics began participating in “Open Season” auctions, which are auctions intended to be transparent and competitive auctions for access to our pipelines and storage infrastructure, wherein any participant can compete to offer its services. Pemex Industrial Transformation has received rights from the CRE to transport up to 59.9 thousand barrels per day and to store up to 1.27 million barrels, a volume sufficient to ensure that national supply is not affected. The remaining capacity will be offered through an Open Season auction conducted by the Aklara, the results of which will be published by the CRE.
On May 2, 2017, we announced the results of the first Open Season auction for the Baja California and Sonora systems. A totalof twenty-two companies submitted bids and seven posted bonds. Andeavor (formerly Tesoro Corporation), a U.S. company, was awarded a three-year contract at the assigned capacity at rates above the minimums set by us. We believe that this auction set a foundation for open and free market access to our pipeline and storage infrastructure. We believe such Open Season auctions provide importers and sellers, as well as other actors in the logistical chain, with certainty in the petroleum market.
As a result of the successful first Open Season auction, on July 18,stages 1.1 and 3.1 assigned in 2017 we executed the contracts with Andeavor, allowing itand 2018 respectively, Pemex Logistics provides services to use the ductTesoro, using our pipeline transport systems and storage system owned by usterminals in the states of Sonora, Sinaloa and Baja California. These contracts includedinclude access to theRosarito-Mexicali,Rosarito-Ensenada,Guaymas-Hermosillo andGuaymas-Ciudad Obregón pipelines transportation systems, as well as the Rosarito, Mexicali, La Paz and Ensenada storage terminals in Baja California; the Guaymas, Ciudad Obregón, Hermosillo, Magdalena, Nogales and Navojoa storage terminals in Sonora. These contracts provide us with additional resources by maximizingSonora and the use of our existing infrastructure capacity.
Also, in continuation ofOn July 10, 2019, the CRE granted Pemex Logistics an extension to present the Open Season auctions, on December 18, 2017,proposal regarding the CRE approvedavailable capacity of the auction procedures forremaining storage and pipelines transportation systems.
On September 26, 2019, Pemex Logistics presented to the North Border Zone, Pacific Topolobampo Zone and North Zone Madero.
The execution ofCRE the Open Season auctions will be carried out sequentially. In March of 2018, we held an auctionproposal for the North Border Zone system, which consists of three terminals and two pipeline sections in the states of Coahuila and Tamaulipas. However, since no outside bids were received, the capacity for this sytem will be assigned to Pemex Industrial Information.
We are working with the CRE to review the Open Season auctions procedures in order to attract outside bids in subsequent transactions. We believe that the Open Season auctions provide the basis for fair and competitive bidding for access to ourall storage and pipeline transportation infrastructure.systems of petroleum products whose capacity has not been offered and, therefore, is not reserved under a capacity contract, or reserved by Pemex Logistics for its own use. This available capacity was grouped in five systems: the Veracruz, Centro, Salamanca, Madero and Progreso zones.
Transport and distributionDistribution
Our pipelines connect crude oil and natural gas production centers with refineries and petrochemical plants, and our storage terminals with Mexico’s major cities. At the end of 2017,2019, the pipeline network measured approximately 17,39715,909.1 kilometers in length, of which 17,13414,458.0 kilometers are currently in operation and 2631,451.1 kilometers are temporarily out of operation. These pipelines may be temporarily out of operation because of a decline in the production of a field where the pipeline is located or because the transportation service is irregular, which makes its operation unprofitable. Once production is restored in that field,such circumstances are more favorable, the pipelines may become operational again. As of the date of this annual report, we are analyzing the 2631,451.1 kilometers of pipelines that are temporarily out of operation to determine if and how they may be used in the future.
Approximately 5,216 kilometersAs of December 31, 2019, the pipelines currently in operation transport crude oil, 8,390 kilometerspipeline network of pipelines transport refined petroleum products, 1,395 kilometers of pipelines transport LPG, 2,122 kilometers of pipelines transport basic and secondary petrochemical products, and 274 kilometers transport other products, including fuel oil, jet fuel and water.Pemex Logistics was distributed as follows:
Transported Product | Length (km) | |||
Petroleum products | 8,427.9 | |||
Crude Oil | 5,216.5 | |||
LP Gas | 1,394.6 | |||
Chemicals | 392.2 | |||
Petrochemicals | 246.0 | |||
Fuel Oil | 142.6 | |||
Jet Fuel | 81.2 | |||
Water | 8.1 | |||
Total | 15,909.1 | |||
We have implemented a pipeline integrity management plan, which requires us to keep detailed documentation on the condition of our pipelines in order to optimize our maintenance investments. The pipeline integrity management plan is based onNOM-027, as well as API RP 1160 for liquid hydrocarbons and ASME B31.8S standards for gas, and includes the following stages:
collection of detailed records and the development of a pipeline database;
categorization and identification of threats that could affect pipeline integrity, safety and operation;
identification of critical points in the pipeline;
risk assessment of pipeline reliability and pipeline integrity;
maintenance and risk mitigation planning and programming; and
ongoing monitoring throughout all stages.
We have made considerable progress towards satisfying the requirements ofNOM-027 on risk assessment and pipeline integrity. Specifically, asAs of December 31, 2017,2019, we have analyzed 89%100% of our overall logistics pipeline network. In addition, we have implemented several measures related to our pipeline integrity management plan, including by collecting information in order to create pipeline databases.
The results of our risk evaluation are as follows:
High Risk: 0.0 kilometers
Medium Risk: 3,623.9 kilometers
Low Risk: 12,286.0 kilometers
Notwithstanding the implementation of our pipeline integrity management plan, we experienced 3225 leaks and spills in 2017.2019. The total number of incidents in 20172019 represented a decreasean increase of 8.5%47.1%, as compared to the 3517 incidents we experienced in 2016.2018. Of the 3225 incidents in our transportation pipelines, 2516 were due to a failure in the mechanical integrity of the pipelines, one wassix were due tothird-party incidents and sixfour were due to other factors.
The transportation of crude oil, natural gas and other products through the pipeline network is subject to several risks, including risk of leakage and spills, explosions and fuel theft. In 2017,2019, we spent a total of Ps. 707338.1 million in expenditures for the rehabilitation and maintenance of our pipeline network and we have budgeted an additional Ps. 2451,000.6 million for these expenditures in 2018.2020. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Operations—We are an integrated oil and gas company and are exposed to production, equipment and transportation risks, blockades to our facilities and criminal acts and deliberate acts of terror” above.
Fleet Developments
In July of 2013, as part of a plan to modernize the fleet, we signed an agreement with theSecretaría de Marina—Marina - Armada de México (Mexican Navy)Navy, or SEMAR), valued at approximately Ps. 3,212.1 million (U.S.$250.0 $250.0 million), for the construction of 22 marine vessels for our refining segment.business. This agreement initially included construction of 16 tugboats, three multipurpose vessels and three barges, but was modified in 2016 to remove the construction of the three barges and to extend the final delivery date to December 31, 2018.2021. This transaction is now valued at approximately Ps. 4,346.44,705.0 million. As of December 31, 2017,2019, the Mexican Navy has delivered seven11 tugboats. The remaining eight vessels are expected to be available during 2020.
As of December 31, 2017,2019, we owned 16 refined product tankers and leased one.tankers. We also own 2524 tugboats, 1,4851,444 tank trucks and 511 train tank cars, as well as 76 storage and distribution terminals, ten liquefied gas terminals, five maritime terminals and ten dock operation and maintenance facilities. These facilities, together with our pipeline network, constitute the hydrocarbons transportation and distribution infrastructure.
Our current fleet of refined product tankers includes 1716 vessels, all of which we own 16 and lease one, and altogether we haveare owned by Pemex Logistics, with a total transportation capacity of 4,6285,035.6 thousand barrels. 68%50% of our vessels are located on the Pacific coast and 32%the other 50% are in the Gulf of Mexico. Of the capacity of the vessels located on the Pacific coast, 83.4%82.4% is used to transport distillates and 16.6%17.6% is used to transport fuel oil and heavy diesel. Of the capacity of the vessels located in the Gulf of Mexico, 82.5%87.7% is used for distillates and 17.5%12.3% is used for fuel oil and heavy diesel.
Our plan for the renewal and modernization of our fleet was concluded in 2014, but we may resume renewal and modernization efforts pursuant to future demand for petroleum products or the retirement of a vessel in accordance with current international regulations.
Logistics Capital Expenditures
Our logistics segment invested Ps. 4,9172,118 million in capital expenditures in 20172019 and has budgeted Ps. 4,4493,135 million in capital expenditures for 2018.2020.
The following table sets forth our logistics segment’s capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2015, 2016 and 2017,2019, and the budget 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.
Logistics’ Capital Expenditures
Year ended December 31,(1) | Budget 2018(2) | Year ended December 31,(1) | Budget | |||||||||||||||||||||||||||||
2015 | 2016 | 2017 | 2017 | 2018 | 2019 | 2020(2) | ||||||||||||||||||||||||||
(in millions of pesos)(3) | (in millions of pesos)(3) | |||||||||||||||||||||||||||||||
Logistics | ||||||||||||||||||||||||||||||||
Larger Fleet Modernization | Ps. | 458 | Ps. | 583 | Ps. | 645 | Ps. | 429 | Ps. | 645 | Ps. | 604 | Ps. | — | Ps. | — | ||||||||||||||||
Acquisition of 5 Tankers Vessel by Cash and/or by Leasing | 431 | 435 | 437 | 452 | ||||||||||||||||||||||||||||
Replacement of Vessel Tanks Nuevo Pemex I, II, III and IV by Acquisition and/or Leasing | 332 | 334 | 336 | 350 | ||||||||||||||||||||||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Turbosine, Diesel, Gasoline and Fuel Oil Pipelines and Gas Pipelines in the Central Zone | 80 | 204 | 1 | — | ||||||||||||||||||||||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Pipelines in Northern and Pacific Zones | 316 | 105 | 2 | — | ||||||||||||||||||||||||||||
Maintenance of Safety, Measurement, Control and Automation Systems in Storage and Distribution Terminals | 235 | 91 | 10 | 98 | ||||||||||||||||||||||||||||
Renewal of Tugs, Chalanes and Multipurpose Vessels of the Smaller Fleet | 401 | 495 | 258 | 113 | 258 | 68 | 46 | 122 | ||||||||||||||||||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Pipelines NuevoTeapa-Madero-Cadereyta | 88 | 65 | — | — | ||||||||||||||||||||||||||||
Implementation of the SCADA System in 47 Pipeline Transportation Systems | 78 | 45 | 13 | — | ||||||||||||||||||||||||||||
Refurbishment, Modification and Modernization of Pumping and Compression Stations Nationwide | 221 | 476 | 95 | — | 95 | 7 | — | — | ||||||||||||||||||||||||
Maintenance of Safety, Measurement, Control and Auto-mation Systems in Storage and Distribution Terminals | 460 | 452 | 235 | 239 | ||||||||||||||||||||||||||||
Acquisition of 5 Tankers Vessel by Cash and/or by Leasing | 363 | 427 | 431 | 311 | ||||||||||||||||||||||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Pipeline’s Poza Rica-Salamanca and Nuevo Teapa- Tula-Salamanca | 461 | 347 | 6 | — | ||||||||||||||||||||||||||||
Replacement of Vessel Tanks Nuevo Pemex I, II, III and IV by Acquisition and/or Leasing | 278 | 326 | 332 | 240 | ||||||||||||||||||||||||||||
Implementation of the SCADA System in 47 Pipeline Transportation Systems | 520 | 270 | 78 | 15 | ||||||||||||||||||||||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Pipelines in Northern and Pacific Zones | 271 | 251 | 316 | 132 | ||||||||||||||||||||||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Pipelines Nuevo Teapa-Madero-Cadereyta | 574 | 193 | 88 | 1 | ||||||||||||||||||||||||||||
Modernization of the Instrumented Security and Basic Control Systems of the Pumping Stations and Product Receipt Northern Zone | 6 | 7 | — | — | ||||||||||||||||||||||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Pipeline’s PozaRica-Salamanca and NuevoTeapa-Tula-Salamanca | 6 | 6 | — | — | ||||||||||||||||||||||||||||
Integral Maintenance of Pipeline Systems for Natural Gas and LPG, Stage II | 293 | 172 | 205 | 1 | 205 | — | — | — | ||||||||||||||||||||||||
Modernization of the Instrumented Security and Basic Control Systems of the Pumping Stations and Product Receipt Northern Zone | 278 | 110 | 6 | 8 | ||||||||||||||||||||||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Turbosine, Diesel, Gasoline and Fuel Oil Pipelines and Gas Pipelines in the Central Zone | 464 | 109 | 80 | 204 | ||||||||||||||||||||||||||||
Natural Gas Transportation from Jáltipan to Salina Cruz Refinery | 403 | 31 | 12 | — | 12 | — | — | — | ||||||||||||||||||||||||
Maintenance of Marine Facilities | 316 | 28 | 11 | — | 11 | — | — | — | ||||||||||||||||||||||||
T. M. Dos Bocas- CCC Palomas Corridor | — | — | — | 255 | ||||||||||||||||||||||||||||
Integrity Diagnostics and Adequacy of the Instrumented Safety Systems and the Basic Control of the Southeast Pumping Stations | — | — | — | 207 | ||||||||||||||||||||||||||||
Gas Marino-Mesozoico Transportation Systems | — | — | — | 205 | ||||||||||||||||||||||||||||
Rehabilitations for the Maintenance of Vessels of the Major Fleet Attached to Pemex Logística | — | — | — | 204 | ||||||||||||||||||||||||||||
Maintenance of T.M Dos Bocas | — | — | — | 177 | ||||||||||||||||||||||||||||
Maintenance of Pipeline Transportation Systems Permission 7 Oleos | — | — | — | 160 | ||||||||||||||||||||||||||||
Altamira Integral System Maintenance Case | — | — | — | 140 | ||||||||||||||||||||||||||||
Maintenance of Pipelines Monitoring, Control Systems and Flow Measurement Systems of the National Distribution Network of Pemex Refineries | — | — | — | 138 | ||||||||||||||||||||||||||||
Maintenance of Pipelines Transportation Systems Permission 5 South, Gulf, Central and West Zones | — | — | — | 118 | ||||||||||||||||||||||||||||
Others | 4,066 | 2,745 | 2,120 | 2,758 | 2,120 | 3,072 | 1,273 | 509 | ||||||||||||||||||||||||
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Total | Ps. | 9,827 | Ps. | 7,015 | Ps. | 4,917 | Ps. | 4,449 | Ps. | 4,917 | Ps. | 5,042 | Ps. | 2,118 | Ps. | 3,135 | ||||||||||||||||
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Notes: Numbers may not total due to rounding.
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the |
(3) | Figures are stated in nominal pesos. |
Source: Petróleos Mexicanos.
CENAGAS
Pursuant to the Hydrocarbons Law, on August 11, 2014, CENAGAS was created as a decentralized public entity of the Mexican Government to act as the independent administrator of the Integrated Natural Gas System. This system interconnects the infrastructure for the storage and transportation of natural gas across the nation, with the aim of expanding coverage, strengthening security measures and improving the continuity, quality and
efficiency in transportation service. As an integrated system of transportation systems owned by CENAGAS or other participating companies, the Integrated Natural Gas System functions as a primary transportation service supplier in Mexico with standardized fares. Within this system, theSistema Nacional de Gasoductos (National Gas Pipelines System) acts as the commercial administrator for the total available capacity of the Integrated Natural Gas System. In order for a transportation system to become part of the Integrated Natural Gas System, its transport capacity must enhance the Integrated Natural Gas System’s flow capacity and improve the overall transportation service provided to users.
In accordance with the Energy Reform Decree,On October 29, 2015, we signed a transfer agreement with CENAGAS on October 29, 2015 for the transfer to CENAGAS of assets associated with the Integrated Natural Gas System and the distribution contract for theNaco-Hermosillo pipeline system. The National Gas Pipeline System has 87 pipelines with a total length of almost 9,000 kilometers and a transport capacity over 5,000 million cubic feet per day, while theNaco-Hermosillo system is a 300 kilometers long pipeline with a transport capacity of 90 million cubic feet per day. The approximate aggregate book value of these assets, which were transferred to CENAGAS on January 1, 2016, was Ps. 35.3 billion as of December 31, 2016.7,450.1 million.
On December 29, 2016, we entered into two agreements with CENAGAS pursuant to which we continued to provide operation and maintenance services and commercial operation services to CENAGAS during 2017. Both agreements, which have a total value of approximately Ps. 249 billion3,045.0 million and Ps. 13 billion,116.3 million, respectively, wereone-year agreements with automatic renewalsinitially had a term of one year and are automatically renewed for one year unless either party gives advance notice to the contrary. As of the date of this annual report, CENAGAS has given us notice of terminationThe agreements for nine of the 21 pipeline subsystems have been terminated as a result of a new services bidding strategy implemented by CENAGAS. However, Pemex Logistics subsequently won bids for three of these nine pipeline subsystems with an estimated contract value of Ps. 78.8 million and, as a result, continues to provide services to CENAGAS for 15 of the 21 pipeline subsystems.
During 20172019 we obtained Ps. 3,268.23,171.0 million from our services provided to CENAGAS.
Cogeneration and Services
For the past three years, our cogeneration and services segment has operated through the productive state-owned subsidiary Pemex Cogeneration and Services to use thermal heat and steam from our industrial processes to produce the electricity required by us, as well as surplus electricity to sell to third parties in Mexico. Our cogeneration and services segment has also provided technical and management services associated with supplying electricity.
Partly in response to prolonged periods of low hydrocarbon prices, and as part of our broader strategy to enter into strategic alliances, we have transferred certain assets and functions of Pemex Cogeneration and Services to Pemex Industrial Transformation. The primary goal of these transfers is to focus our efforts on our core activities and to enter into alliances for the operation and maintenance of our cogeneration plants and the commercialization of surplus energy. We believe that this focus on core activities and strategic alliances will allow us to reduce unscheduled stoppages, improving reliability throughout our supply chain and reducing costs, which we expect will improve Pemex Industrial Transformation’s financial results. We estimate that, as a result of these transfers to Pemex Industrial Transformation, we will be able to achieve significant cost savings of U.S. $103 million. Moreover, we expect that the development of cogeneration projects in cooperation with our allies in our Tula and Cadereyta refineries will result in additional cost savings of U.S. $466 million.
During 2017, Pemex Cogeneration and Services generated Ps. 334.8 million in services income and had a net loss of Ps. 92.1 million.
International Trading
PMI and its subsidiariesthe PMI Subsidiaries conduct international commercial activities for our crude oil, refined and petrochemical products, with the exception of natural gas, which is marketed directly by our industrial transformation segment. The PMI subsidiaries’Subsidiaries’ main objectives are to assist in maximizing our profitability and optimizing our operations through the use of international trade, facilitating our link with the international markets and pursuing new business opportunities in marketing our products.products internationally. PMI and its subsidiariesthe PMI Subsidiaries manage the international sales of our crude oil and petroleum products and acquire in the international markets those petroleum products that we import to satisfy domestic demand. Sales of our crude oil are carried out through PMI. Sales and purchasesTrading of petroleum products in the international markets are carried out through P.M.I. Trading Ltd.,DAC, which also performsthird-party trading, transportation and risk management activities.activities in alternative markets (customers and suppliers other than us).
Exports and Imports
PMI purchases crude oil from our exploration and production segment and then sells it to PMI’s customers. PMI sold an average of 1,174.01,103.7 thousand barrels of crude oil per day in 2017,2019, which represented 60.3%65.5% of our total crude oil production.
The following tables set forth the composition and average prices of our crude oil exports for the periods indicated.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Crude Oil Exports (by Volume) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Olmeca (API gravity of38°-39°) | 99 | 8 | 91 | 8 | 124 | 11 | 108 | 9 | 19 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Olmeca(1) (API gravity of38°-39°) | 124.2 | 10.6 | 108.3 | 9.0 | 18.9 | 1.6 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Isthmus (API gravity of32°-33°) | 103 | 9 | 134 | 12 | 194 | 17 | 153 | 13 | 86 | 7 | 194.0 | 16.5 | 153.1 | 12.8 | 85.8 | 7.3 | 30.7 | 2.6 | 4.1 | 0.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maya (API gravity of21°-22°) | 968 | 81 | 887 | 78 | 743 | 63 | 865 | 72 | 1,054 | 90 | 743.4 | 63.4 | 867.2 | 72.4 | 1,053.9 | 89.8 | 1,090.0 | 92.1 | 985.0 | 89.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Altamira (API gravity of15.0°-16.5°) | 20 | 2 | 27 | 2 | 28 | 2 | 24 | 2 | 15 | 1 | 27.7 | 2.4 | 23.7 | 2.0 | 15.3 | 1.3 | 19.9 | 1.7 | 20.7 | 1.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Talam (API gravity of-15.8º) | — | — | 3 | 0.3 | 83 | 7 | 45 | 4 | — | — | 83.1 | 7.1 | 45.3 | 3.8 | — | — | 43.5 | 3.7 | 93.9 | 8.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | 1,189 | 100 | 1,142 | 100 | 1,172 | 100 | 1,194 | 100 | 1,174 | 100 | 1,172.4 | 100.0 | 1,197.6 | 100.0 | 1,173.9 | 100.0 | 1,184.0 | 100.0 | 1,103.7 | 100.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Notes: Numbers may not total due to rounding. tbpd = thousand barrels per day. API gravity refers to the specific gravity or density of liquid petroleum products, measured in degrees on the American Petroleum Institute (API) scale. On the API scale, oil with the lowest specific gravity has the highest API gravity. In addition, holding all other factors constant, the higher the API gravity, the greater the value of the crude oil.
Source: PMI operating statistics as of January
Source: PMI operating statistics as of January Geographic Distribution of Export Sales As of December 31, The following table sets forth the geographic distribution of PMI’s sales of crude oil exports for the five years ended December 31, Composition and Geographic Distribution of Crude Oil Export Sales
Notes: Numbers may not total due to rounding. tbpd = thousand barrels per day. API gravity refers to the specific gravity or density of liquid petroleum products, measured in degrees on the API scale. On the API scale, oil with the lowest specific gravity has the highest API gravity. In addition, holding all other factors constant, the higher the API gravity, the greater the value of the crude oil.
Source: PMI operating statistics as of In total, we exported The following table sets forth the average volume of our exports and imports of crude oil, natural gas and petroleum products for the five years ended December 31, Volume of Exports and Imports
Note: Numbers subject to adjustment because crude oil exports may be adjusted to reflect the percentage of water in each shipment.
Source: PMI operating statistics as of January Crude oil exports decreased by
P.M.I. Trading The following table sets forth the value of exports and imports of crude oil, natural gas and petroleum products for the five years ended December 31, Value of Exports and Imports(1)
Note: Numbers may not total due to rounding.
Source: PMI operating statistics as of January
The following table describes the composition of our exports and imports of selected refined products Exports and Imports of Selected Petroleum Products
Notes: Numbers may not total due to rounding. tbpd = thousand barrels per day.
Source: Pemex BDI. In 2019, exports of petroleum products decreased by 12.7%, from 132.8 thousand barrels per day in 2018 to 116.0 thousand barrels per day in 2019, mainly due to decreases in the export volumes of fuel oil and natural gas of 22.8% and 10.9%, respectively. Imports of petroleum products decreased by 14.1% in 2019, from 985.9 thousand barrels per day in 2018 to 846.9 thousand barrels per day in 2019, primarily due to an increase in domestic production of petroleum products. Exports of petroleum products The Secretary of Energy has entered into certain agreements to reduce or increase crude oil Hedging Operations P.M.I. Trading
Gas Stations in the United States
PEMEX Corporate Matters In addition to the operating activities that we undertake through the activities of our subsidiary entities and subsidiary companies, we have certain centralized corporate operations that coordinate general labor, safety, insurance and legal matters. Industrial Safety and Environmental Protection Our Corporate Office of Planning, Coordination and Performance is responsible for planning, conducting and coordinating programs to:
foster a company culture of safety, environmental protection and
improve the safety of our workers and facilities;
reduce risks to residents of the areas surrounding our facilities; and
reduce greenhouse gas emissions and identify the risks associated with climate change in Mexico in order to develop strategies to minimize the impact of climate change on our operations. We intend to further develop industrial safety and environmental programs for each subsidiary entity. The environmental and safety division of each subsidiary entity coordinates closely with the Corporate Office of Planning, Coordination and Insurance We maintain a comprehensive property and general liability insurance program for onshore and offshore properties and liabilities. All onshore properties, such as refineries, processing plants, pipelines and storage facilities are covered, as are all of our offshore assets, such as drilling platforms, rigs, gas gathering systems, maritime terminals and production facilities. Our insurance covers risks of sudden and accidental physical damage to or destruction of our properties, as well as risk of sudden and accidental physical loss, including as a consequence of purposeful terrorist acts. This insurance also provides coverage for the contents of pipelines and storage facilities, and any of our liabilities arising from such acts. Our insurance also covers extraordinary costs related to the operation of offshore wells, such as control andre-drilling costs, evacuation expenses and liability costs associated with spills. We also maintain protection and indemnity insurance for our full marine fleet, in addition to life insurance, aircraft, automobile and heavy equipment insurance, cargo and marine hull insurance, as well as insurance for deep water drilling activities and onshore and offshore minor construction projects on operating facilities. In accordance with Mexican law, we have entered into all of our insurance contracts with Mexican insurance carriers. These policies have limits of U.S. $1.8 billion for onshore property, U.S. $1.9 billion for offshore property, U.S. $0.3 billion for extraordinary costs related to the operation of offshore wells, U.S. $1.0 billion for marine-related liabilities, U.S. $1.1 billion for onshore and offshore liabilities, U.S. $0.5 billion for offshore terrorist acts and U.S. $0.5 billion for onshore terrorist Since June 2003, we have not maintained business interruption insurance, which in the past compensated us for loss of revenues resulting from damages to our facilities. Instead, we purchase During All of our insurance policies are in turn reinsured through Kot Insurance Company, AG (which we refer to as Kot AG). Kot AG is a wholly owned subsidiary company that was originally formed in 1993 under the laws of Bermuda as Kot Insurance Company, Ltd. and was subsequently organized under the laws of Switzerland in 2004. Kot AG is used as a risk management tool to structure and distribute risks across the international reinsurance markets. The purpose of Kot AG is to reinsure policies held through our local insurance carriers and to maintain control over the cost and quality of the insurance covering our risks. Kot AG reinsures over
Our new corporate compliance programPemex Cumplewas authorized by the Board of Directors of Petróleos Mexicanos in
Ethics Committee Our Ethics Committee consists of members from our management team, with the head of the Institutional Internal Control Unit at Petróleos Mexicanos serving as its chairman. Our Ethics Committee is primarily responsible for:
promoting awareness and use of our code of ethics and code of conduct, including through online training available for our employees, in order to improve our culture of ethics;
establishing procedures that implement the principles found in our code of ethics in order to increase compliance and to detect behavior that adversely affects our activities;
analyzing and giving instructions to the appropriate areas on possible violations to our code of ethics and code of conduct that are reported through the
working with the Liabilities Unit at Petróleos Mexicanos and our Internal Auditing Area to exchange information regarding violations of our code of ethics and our code of conduct. See “Item 16B—Code of Ethics” for more information regarding our code of ethics. Collaboration and Other Agreements On
On February 5, 2015, Petróleos Mexicanos and theInstituto Politécnico Nacional (National Polytechnic Institute) of Mexico entered into a collaboration agreement for the development of human resources, technology and research, with the aim of promoting and supporting joint research programs and the development of knowledge related to the hydrocarbons industry. On February 18, 2015, Petróleos Mexicanos and the Organisation for EconomicCo-operation and Development (OECD) signed a memorandum of understanding with the aim of benefiting from the OECD’s knowledge of and experiences with international best practices relating to the procurement of goods and services. On February 19, 2015, Petróleos Mexicanos signed a memorandum of understanding with the Infraestructura Energética Nova, S.A.B. de C.V. and Sempra LNG units of the U.S. energy company Sempra Energy for the potential joint development of a natural gas liquefaction project at the site of the Energía Costa Azul facility located in Ensenada, Mexico. On April 7, 2015, Petróleos Mexicanos and First Reserve signed a memorandum of understanding and cooperation to explore new opportunities for joint energy projects, which would provide access to financing, as well as the exchange of technical and operational experience. This agreement contemplates up to U.S. $1.0 billion of investments in potential projects relating to infrastructure, maritime transport and power cogeneration, among others. On May 12, 2015, Petróleos Mexicanos and Global Water Development Partners, a company founded by private equity funds operated by Blackstone, signed a memorandum of understanding with the aim of creating a partnership to invest in water and wastewater infrastructure for Petróleos Mexicanos’ upstream and downstream facilities. This partnership is intended to finance and carry out environmentally sustainable projects for water treatment in Petróleos Mexicanos’ operations. On May
On July 20, 2015, Petróleos Mexicanos, through its Corporate Office of Procurement and Supply, signed an agreement with the OECD with the aim of adopting and promoting best practices in procurement and fostering efficient management strategies and transparency in Petróleos Mexicanos’ processes. The agreement also contemplates the training of our personnel by the OECD on issues of transparency and ethics, the design of procurement procedures and mitigating risks of collusion. On July 22, 2015, Petróleos Mexicanos and theSecretaría de Desarrollo Agrario, Territorial y Urbano (Ministry of Agriculture, Land and Urban Development) signed a collaboration agreement with the aim of establishing consulting and training mechanisms for the development of hydrocarbon exploration, extraction and distribution projects in strict observance of the applicable legal framework and with full respect for agricultural landowners. On July 23, 2015, Petróleos Mexicanos and the Instituto Tecnológico y de Estudios Superiores de Monterrey, A.C. signed a collaboration agreement with the purpose of (1) fostering competitive development within the Mexican oil and gas industry; (2) carrying out specialized research and consulting services, including lectures, seminars, conferences and other events of common interest to the institutions; and (3) providing postgraduate studies for our employees and internships for college students at Petróleos Mexicanos. On
On October
On January 19, 2016, Petróleos Mexicanos and Mubadala Petroleum signed a memorandum of understating agreeing to joint projects to explore the Mexican energy sector, including its upstream activities, primary midstream activities and infrastructure projects for a total investment of On January 19, 2016, Petróleos Mexicanos and the Abu Dhabi National Oil Company signed a memorandum of understanding with the aim to share each company’s best practices with respect to different upstream activities, including exploration, development and production in oil fields; improved recovery, handling and processing of liquefied natural gas; as well as human resources training, sustainability, internal controls, transparency, process development andcyber-security. On January 19, 2016, Petróleos Mexicanos and Saudi Aramco signed a memorandum of understanding renewing and strengthening the relationship between both companies and establishing an exchange of ideas surrounding operational excellence, sustainability and energy efficiency, and innovation and technological development. On April 1, 2018, Petróleos Mexicanos, the SENER, the CNH and Natural Resources Canada subscribed to a memorandum of understanding and collaboration in order for Mexico and Canada to share demonstrations of technology and practices for the conservation of hydrocarbons and the measurement and reduction of emissions. On March 6, 2019, Petróleos Mexicanos and the JBIC signed a memorandum of understanding with the purpose of exchanging experiences and promoting development in the energy sector. On November 15, 2019, Petróleos Mexicanos and China Export & Credit Insurance Corporation (Sinosure) signed a memorandum of understanding with the purpose of strengthening the cooperative relationship between these two entities. Through these agreements, we seek to increase our technical and scientific knowledge in areas that include exploration and drilling. These broad agreements of technological and scientific collaboration are strictlynon-commercial,i.e., there is no transfer of resources among the parties. Property, Plants and Equipment General Substantially all of our property, consisting of refineries, storage, production, manufacturing and transportation facilities and certain retail outlets, is located in Mexico, including Mexican waters in the Gulf of Mexico. The location, character, utilization and productive capacity of our exploration, drilling, refining, petrochemical production, transportation and storage facilities are described above. See “—Exploration and Production,” “—Drilling and Services,” “Industrial Transformation,” “—Ethylene,” “— Reserves Under Mexican law, all crude oil and other oil and gas reserves located in the subsoil of Mexico are owned by the Mexican nation and not by us. The Mexican Government has granted us the right to exploit the petroleum and other oil and gas reserves assigned to us in connection with the process that occurred in August 2014 and is commonly referred to as Round Zero, as well as the right to explore for and exploit petroleum and other oil and gas reserves in areas that have been granted to us in GENERAL REGULATORY FRAMEWORK Petróleos Mexicanos is regulated by the Mexican Constitution, the Petróleos Mexicanos Law and the Hydrocarbons Law, among other regulations. The purpose of the Petróleos Mexicanos Law is to regulate the organization, management, operation, monitoring, evaluation and accountability of Petróleos Mexicanos as aproductive-state owned company of the Mexican Government. On October 31, 2014, the Regulations to the Petróleos Mexicanos Law were published in the Official Gazette of the Federation. These regulations were modified on February 9, 2015. The purpose of these regulations is to regulate, among other things, the appointment and removal of the members of the Board of Directors of Petróleos Mexicanos, potential conflicts of interest for Board members, and the evaluation of Petróleos Mexicanos. The Mexican Government and its ministries regulate our operations in the oil and gas sector. The On December 2, 2014, the In accordance with the Petróleos Mexicanos Law, each year the Ministry of Finance and Public Credit provides us with estimated macroeconomic indicators for the following fiscal year, which we are to use to prepare the consolidated annual budget for Petróleos Mexicanos and the subsidiary entities, including our financing program. Upon approval by the Board of Directors of Petróleos Mexicanos, our consolidated budget and financing program is then submitted to the Ministry of Finance and Public Credit, which has the authority to adjust our financial balance goal and the ceiling on our wage and salary expenditures for the fiscal year. The consolidated annual budget and financing program of Petróleos Mexicanos and the subsidiary entities, including any adjustments made by the Ministry of Finance and Public Credit, is then incorporated into the federal budget for approval by the Chamber of Deputies. The Mexican Government is not, however, liable for the financial obligations that we incur. In approving the federal budget, the Chamber of Deputies authorizes our financial balance goal and the ceiling on our wage and salary expenditures for the fiscal year, which it may subsequently adjust at any time by modifying the applicable law. We are also subject to various domestic and international laws and regulations related toanti-corruption,anti-bribery andanti-money We also employ internal control procedures and guidelines designed to monitor the activities of our employees, including senior management, and to ensure compliance with applicableanti-corruption,anti-bribery andanti-money laundering laws and regulations. TheLineamientos que regulan el sistema de control interno en Petróleos Mexicanos, sus empresas productivas subsidiarias y empresas filiales (Guidelines governing the internal control system of Petróleos Mexicanos, its productive subsidiary entities and affiliates) set forth the principles underlying our internal controls system and the procedures necessary for its implementation and monitoring. In addition, theLineamientos para
On July 14, 2017, the Board of Directors of Petróleos Mexicanos approved our This compliance program was superseded by our new corporate compliance program,Pemex Cumple,which was authorized by the Board of Directors of Petróleos Mexicanos in November 2019. As part of this new program, we have implemented a compliance hub with different lines of attention: ethics and integrity, anticorruption and due diligence, legal compliance, and data protection and transparency. The program is aimed to strengthen our compliance culture, with respect to national anticorruption strategy and international laws, international treaties, specific regulations for the oil and gas sector, economic competition and internal policies. On Our newCódigo de Ética para Petróleos Mexicanos, sus empresas productivas subsidiarias y empresas filiales (Code of Ethics for Petróleos Mexicanos, its productive subsidiary entities and affiliates, or the Code of On September 11, 2017, thePolíticas y Lineamientos Anticorrupción para Petróleos Mexicanos, sus empresas productivas subsidiarias y, en su caso, Empresas Filiales As an issuer of debt securities that are registered under the Securities Act and in connection with certain representations and covenants included in our financing agreements, we must comply with the U.S. Foreign Corrupt Practices Act, or the FCPA. The FCPA generally prohibits companies and anyone acting on their behalf from offering or making improper payments or providing benefits to government officials for the purpose of obtaining or keeping business. In addition, we are subject to other international laws and regulations related toanti-corruption,anti-bribery andanti-money laundering, including the U.K. Bribery Act 2010, which prohibits the solicitation of, the agreement to receive and the acceptance of bribes. ENVIRONMENTAL REGULATION Legal Framework We are subject to In April 1997, the SEMARNAT issued regulations governing the procedures for obtaining an environmental license, under which new industrial facilities can comply with all applicable environmental requirements through a single administrative procedure. Each environmental license integrates all of the different permits, licenses and authorizations related to environmental matters for a particular facility. Since these regulations went into effect, we have been required to obtain an environmental license for any new facility. Before we carry out any activity that may have an adverse impact on the environment, we are required to obtain certain authorizations from ASEA, the SEMARNAT, the ASEA is an administrative body of the SEMARNAT that operates with technical and administrative autonomy and has the authority to regulate and supervise companies participating in the hydrocarbon sector through its issuance of rules establishing safety standards
We are also subject to theNOM-001-SEMARNAT-1996 issued by CONAGUA in conjunction with theProcuraduría Federal de Protección al Ambiente (PROFEPA), which sets forth the maximum permissible levels of pollutants in wastewater that can be discharged into national bodies of water. In addition, we are subject to theNOM-052-SEMARNAT-2006 and theNOM-001-ASEA-2019,which Federal and state authorities are authorized to inspect any facility to determine its compliance with the Environmental Law, The Mexican Government regularly participates in multilateral negotiations on climate change to promote a sustainable andlow-carbon economy. In September 2016, the Mexican Government ratified the Paris Agreement and endorsed its Nationally Determined Contribution (NDC) by unconditionally committing Mexico to the reduction of 22% of its greenhouse gas emissions and 51% of its black carbon emissions by 2030. This commitment adopts 2013 metrics as a baseline. This commitment may also be increased by an additional reduction of up to 36% of Mexico’s greenhouse gas emissions and 70% of its black carbon emissions, on a conditional basis and subject to the adoption of a global market agreement, which would promote international carbon pricing, as well as financial and technical cooperation. In order to satisfy this comment, the Mexican Government has indicated that it intends to strengthen the adaptation capacities of at least 50% of the most vulnerable municipalities in the national territory, to establish early warning systems and risk management at all levels of its government, and to promote ecosystem-based adaptation intended to achieve a deforestation rate of zero by 2030. Mexico’s NDC commitment envisions participation of all social and economic segments of the country, especially the energy and industrial sectors. As a result, in July 2018, the second transitory article of the General Law on Climate Change was amended to include the commitments made by the government. Pursuant to the General Law on Climate Change, greenhouse gas emissions from the oil and gas sector are required to decrease by 14% by the year 2030, as compared to the sector’s baseline. Additionally, Article 94 of the General Law on Climate Change was supplemented to indicate that the SEMARNAT must gradually and progressively establish a national emissions trading system, designed to promote emission reduction actions at the lowest possible cost. Pursuant to this law, emissions reductions must be measurable, reportable and verifiable. In order to ease the transition for the system participants, thePrograma de Prueba del Sistema de Comercio de Emisiones (Pilot Program for the Emissions Trading System) is to operate from 2020 to 2022. Between 2020 and 2022, we are required to participate actively and increase the evaluation of initiatives and projects that could reduce our emissions, taking into consideration the additional cost that such initiatives will have once emissions caps are defined for each participant. Mexico generally reviews and updates its environmental regulatory framework every five years,
Climate Change
In 2019, given Pemex’s commitment to mitigating climate change, we carried out the following actions and investments, many of which are still ongoing. We expect these actions and investments to have an impact on our emissions inventories beginning in 2020, once installation is concluded and the operation of these initiatives begin: We continue with the execution of our integral strategic gas exploitation plan in shallow waters. This plan has led to a higher gas usage index and reduced our methane emissions. In 2019, our main investment under this plan was theCa-Ku-Al compression platform, which is expected to increase operational flexibility and to increase usage of natural gas with either high or low nitrogen content. We continue with the refurbishment of failing compressors in our gas processing centers in order to achieve a higher productive usage of natural gas. We continue to monitor the implementation of the actions outlined in our 2019-2023 Business Plan every quarter in order to ensure the fulfillment of objectives related to the use of associated gas in the extraction of hydrocarbons, our methane emission reduction program for vents and other escapeways and the update of our emissions inventory and vulnerability map regarding the effects of climate change. We concluded the third phase of the verification inventory of greenhouse gas emission levels for all the sites that recorded emissions between 25,000 and 100,000 tons of carbon dioxide equivalent per year. We carried out the external cogeneration project between CFE and our Salamanca refinery, which is operating on a stable basis. Our personnel have been participating in the Leak Detection and Repair protocol, which is based on general administrative provisions that establish the guidelines for the prevention and comprehensive control of methane emissions from We participated in workshops on the Pilot Program for the Emissions Trading System. The implementation of this Pilot Program is mandatory due to
Biodiversity During 2019, we continued operating the Jaguaroundi Ecological Park, located in Coatzacoalcos, Veracruz. This park is certified as an Área Destinada Voluntariamente a la Conservación (Voluntary Area for Conversation). This park is the first Voluntary Area for Conservation and has an extension of 960 hectares of rain forest, natural grassland, tropical oak and 57 hectares of water bodies that was registered before theComisión Nacional de Áreas Naturales Protegidas (National Commission for Protected Natural Areas). The park is open to We also
HEALTH, SAFETY AND ENVIRONMENTAL PERFORMANCE We believe that we are in substantial compliance with current federal and state environmental laws and that we maintain an organizational structure designed to identify and solve environmental risks. In addition, our subsidiary entities have specialized departments that implement their own internal environmental programs, audits and facilities inspections. When these internal audits reveal problems or deficiencies, the subsidiary entities take the necessary measures to eliminate them.
Since 1993, we have participated in the National Environmental Audit Program (NEAP), a voluntary alternative to the traditional system of inspections and penalties, with PROFEPA and now with In general terms, voluntary environmental auditing consists of three stages: (i) an audit and compliance diagnosis; (ii) development of an action plan to correct irregularities; and (iii) the implementation of the action plan. If a company satisfactorily completes these three stages, ASEA or PROFEPA grants the audited company a clean industry certificate, which means that it complies with the applicable environmental legislation of their industry. As of December 31,
As part of our accident prevention strategy, we conduct root cause investigations of all incidents that occur during our operations. These investigations allow us to identify the causes and establish corrective measures to avoid the recurrence of such type of incident. During 2019, we did not experience any major incident that had significant environmental consequences. We did, however, experience the following ten material blasts or hazardous events at our facilities, none of which had significant environmental consequences: On January 5, 2019, an employee lost his life due to inhaling hydrogen sulfide without respiratory protection equipment while opening a drain from theTH-903 exhaust tank in the burner area at the Tula refinery. On January 22, 2019, a contractor lost his life due to a fire that began when operators reignited an extinguished candle burner at the Ayocote 7 oil well. On March 1, 2019, a contractor lost his life due to an accident that occurred while transportingPM-5550 equipment cargo at the Furbero 1190 oil well. On May 24, 2019, a contractor lost his life due to an accident that occurred while interconnecting electric cables of a welding machine at the Fénix crane ship. On August 15, 2019, a contractor lost his life due to a fall into the sea while working on repairs at theChac-A platform. On August 25, 2019, a contractor lost his life and two others were injured due to an accident during the installation of guardrails for drilling equipment when a helical screw fell at theIxachi-2 oil well. On August 29, 2019, an employee lost his life due to impact from a water jet while manipulating a fire truck intake quick opening valve at the Minatitlan refinery. On October 4, 2019, a contractor lost his life due to the explosion of a pressurized hopper at the Dos Bocas Maritime Terminal. On October 9, 2019, an employee lost his life due to inhaling hydrogen sulfide without respiratory protection equipment while taking measurements within theTV-56 dome at the Salina Cruz refinery. On October 31, 2019, an employee lost his life due to being crushed by the mechanisms of a fan at the machine tools workshop in Catalina, Puebla. In In
Designed a program focused on the critical elements of process safety as to
Designed a program to implement critical standards related to personal safety and health in the workplace; Implemented a roadmap for attention to type A1 critical risks; Communicated best practices standards through safety alerts; Implemented a risk management campaign for our employees and contractors, with emphasis on our strategic projects; Monitored compliance with the Zero Tolerance Guidelines and New Mandate Guidelines for our
Monitored the
Continued our emphasis on accountability for EH&S leadership
Environmental Liabilities As of December 31, The following tables detail our environmental liabilities by productive subsidiary entity and operating region at December 31,
Note: Numbers may not total due to rounding. Source: Pemex Exploration and
Note: Numbers may not total due to rounding. Source: Pemex Exploration and Production.
Note: Numbers may not total due to rounding Source: Pemex Industrial
Source: Pemex
Our estimates of environmental liabilities include cost estimates Unasserted or additional claims are not reflected in our identified liabilities. Pemex Exploration and Production remains responsible for handling existing environmental liabilities—these responsibilities are not part of the Integrated E&P Contracts. Nevertheless, the Integrated E&P Contracts include environmental clauses related to contractors’ and Pemex Exploration and Production’s responsibility to ensure an adequate environmental performance, and also establish the terms for compensation and repair of any new environmental impacts. The timing of remediation or cleanup of the sites to which these environmental liabilities relate is dependent upon the annual budget approved by the Mexican Congress. On August 1, 2017, we were granted a favorable judgment by the Supreme Court of Justice of the Nation, which determined that we are not liable for material and environmental damages caused by hydrocarbons spills related to illegal tapping of pipelines, since the environmental damage was caused by third party criminal behavior. As of the date of this annual report, there has been no definitive resolution with respect to our liability for such damages. Environmental Projects and Expenditures In We do not believe that the cost of complying with environmental laws or environmental requirements related to the NAFTA and the USMCA among the governments of Mexico, the United States and Canada, the Vienna Convention for the Protection of the Ozone Layer, the Agreement on Environmental Cooperation between the Governments of Mexico and Canada or Mexico’s membership in the Organization for Economic Cooperation and Development, has caused or will cause a significant increase in our environmental expenditures. Social Responsibility
Our corporate and social responsibility goals are carried out through the following mechanisms:
product donations of fuels and asphalt;
mutually beneficial public works or projects, which
the PACMA, which supports and implements and supports social programs, actions and public works designed to promote the economic and social development of the communities in which we operate and to protect their environment; and
other instruments that provide a positive impact on communities In Approximately Luis Potosí, Tabasco, Tamaulipas and Veracruz) Notably, we took the following specific actions in
contributed contributed a total of Ps. 6.9 million via our mutual benefit projects, Ps. 3.3 million of which was directed towards the state of Tabasco and
carried out 29 projects related to Integrated E&P Contracts in the states of Tamaulipas we contributed In addition, in 2019 we made In sum, we contributed Ps. 1,189.8 million to public safety and TRADE REGULATION, EXPORT AGREEMENTS AND Though Mexico is not a member of On April 12, 2020, Mexico entered into an agreement with OPEC andnon-OPEC countries to reduce world crude oil production. Pursuant to this agreement, the OPEC+ countries agreed to reduce their overall crude oil production by NAFTA has not affected Mexico’s rights, through us or other companies, to explore and exploit crude oil and natural gas in Mexico, to refine and process crude oil and natural gas and to produce petrochemicals in Mexico. Since 2003, petrochemical products have enjoyed a zero tariff under NAFTA and, subject to limited exceptions, exports of crude oil and petroleum products from Mexico to the United States and Canada have been free or exempt from tariffs. Similarly, since 2003, Mexico’s imports of petroleum products from the United States and Canada have also been exempt from tariffs. In addition, in 2004, NAFTA approved lower tariffs on certain materials and equipment imported by Mexico. The zero tariff on Mexico’s imports of petrochemicals from the United States and Canada could have increased competition in the petrochemicals industry in Mexico. To the extent that domestic and international prices for our products remain constant, lower tariffs on products, materials and equipment that we import from and export to the United States and Canada, reduce our expenses and increase our revenue. On November 30, 2018, the presidents of Mexico, the United States and Canada signed the USMCA. As of March 13, 2020, the USMCA has been ratified by the legislatures of the three countries. Therefore, pending notification by all three countries that all internal procedures have been completed and a three month waiting period, the USMCA is expected to effectively replace NAFTA. See “Item 3—Key Information—Risk Factors—Risk Factors Related to Mexico—Economic and political developments in Mexico and the United States may adversely affect Mexican economic policy and, in turn, PEMEX’s operations.” TAXES, DUTIES AND OTHER PAYMENTS TO THE MEXICAN GOVERNMENT General Taxes and duties applicable to us are a significant source of revenues to the Mexican Government. We contributed approximately Fiscal Regime for PEMEX Fiscal Regime The Hydrocarbons Revenue Law
In
Under the
The Hydrocarbons Revenue Law also establishes the fiscal terms to be applied to the contracts for exploration and production granted by the Mexican Government to us or to other companies in connection with potential future competitive bidding rounds. Specifically, these fiscal terms contemplate the following taxes, duties, royalties and other payments to the Mexican Government (in addition to any taxes owed pursuant to theLey de Ingresos de la Federación (Federal Revenue Law) for the applicable year and other applicable tax laws):
Under the Hydrocarbons Revenue Law, exploration and production activities associated with contracts for exploration and production are not subject to a value added tax. Fluctuating crude oil price levels directly affect the level of certain taxes and duties that we pay. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—We pay significant taxes and duties to the Mexican Government, and, if certain conditions are met, to pay a state dividend, which may limit our capacity to expand our investment program or negatively impact our financial condition generally.” Other Payments to the Mexican Government Pursuant to the Petróleos Mexicanos Law, as of January 1, 2016, Petróleos Mexicanos and the subsidiary entities are required to pay a state dividend to the Mexican Government on an annual basis. In July of each year, Petróleos Mexicanos and the subsidiary entities are required to provide the Ministry of Finance and Public Credit a report disclosing their financial results for the previous fiscal year and their investment and financing plans for the following five years, together with an analysis of the profitability of these investments and the relevant projections of their financial positions. The Ministry of Finance and Public Credit will rely on this report and a favorable opinion issued by a technical committee of the Mexican Petroleum Fund for Stabilization and Development to determine the amount of the state dividend to be paid by Petróleos Mexicanos and each of the subsidiary entities. The Petróleos Mexicanos Law provides that the aggregate amount of the state dividend to be paid in 2016 The following table sets forth the taxes and duties that we recorded for each of the past three years.
Note: For a description of these taxes and duties, see “Item 4—Information on the Company—Taxes, Duties and Other Payments to the Mexican Government.” Numbers may not total due to rounding.
Other Taxes Since 1994, our interest payments on our external debt have been subject to Mexican Government withholding taxes. Nevertheless, withholding taxes do not represent a substantial portion of our total tax liability. We are subject to municipal and state taxes, such as real property and payroll taxes. However, because most of our facilities are located on federal property, which is not subject to municipal taxation, real property taxes are not a significant part of our overall taxes. Similarly, payroll taxes do not represent a substantial portion of our total tax liability. In addition, we have a number ofnon-Mexican subsidiary companies that may be subject to taxation in the jurisdiction of their incorporation or operations. The aggregate taxes paid by the subsidiary companies were Ps. No assurance can be given that our tax regime will not change in the future. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—We pay significant taxes and duties to the Mexican Government, and, if certain conditions are met, to pay a state dividend, which may limit our capacity to expand our investment program or negatively impact our financial condition generally.” UNITED MEXICAN STATES The information in this section with regard to Mexico has been derived from publicly available information published by, or on the websites of, the Form of Government Mexico is a nation consistingof thirty-two states, including Mexico City. The Mexican Constitution, effective May 1, 1917, establishes Mexico’s current form of government as a federal republic, consisting of both the Mexican Government and state governments. The President of Mexico (or the President) is the chief of the executive branch of the Mexican Government. The President is elected by the popular vote of Mexican citizens who are General elections were last held in Mexico on July 1, On December 20, 2019, the Mexican Government established a regulatory framework that will allow the
Mexico’s federal judicial branch (the Federal Judiciary) consists of the Federal Judiciary). The Supreme Court iscomposed of eleven justices who serve fifteen-year staggered terms. Each Supreme Court justice is appointed byatwo-thirds majority vote of Legislative authority is vested in the Mexican Congress, which is composed of the Members of the Mexican Congress are elected either directly The Senate is composed of 128 members, of whomninety-six are
The following table provides the distribution, as of
Note: Numbers may not total due to rounding.
On July 12, 2019, the Mexican Government published the Plan Nacional de Desarrollo 2019-2024 (National Development Plan, or Plan) in the
The Economy
Gross Domestic Product The following Real GDP Growth by Sector (
Note: Numbers may not total due to rounding.
Source: INEGI. According to preliminary figures, Mexico’s GDP Projections for Mexico’s economic growth in 2020 and beyond will likely be further adjusted downwards to account for the Employment and Labor According to preliminaryTasa de Desocupación Abierta
On January 6, 2020, in compliance with the February 24, 2017 constitutional reform relating to labor matters, the TheCOVID-19 pandemic will likely have adverse effects on Principal Sectors of the Economy Beginning in March 2020, the economic slowdown attributable to theCOVID-19 outbreak has affected various sectors and the overall performance of Mexico’s economy. The economic impact will likely be felt across all sectors, but it is too early to determine the magnitude of its impact. Manufacturing The following table Industrial Manufacturing Output Differential by Sector
Petroleum and Petrochemicals In March 2020, the price of crude oil experienced its deepest monthly drop since the global financial crisis in 2008. The Organization of the Petroleum Exporting Countries (OPEC) Reference Basket (ORB) dropped by U.S. $22, or 38.9% month-over-month, to U.S. $34 per barrel, its lowest monthly value since September 2003. The spread ofCOVID-19 infections worldwide led numerous governments to isolate cities affected by the epidemic and implement travel restrictions. The cancellation of commercial flights, the full or partial closing of many borders for travel and the constraints on the supply of goods and services resulted in a sharp reduction in the consumption of oil products. The ramifications of theCOVID-19 pandemic resulted in unprecedented worldwide oil demand shock and massive sell-offs in the global markets, amid a significant crude surplus. OPEC published a report on April 16, 2020 in which it downwardly revised its outlook for global oil demand growth to 6.8 million barrels per day in 2020, a reduction of 6.9 million barrels per day from the previous month’s estimate, reflecting both the negative impact on transportation and fossil fuels and slow global economic growth associated with the wider spread ofCOVID-19 beyond China. In addition,non-OPEC oil supply is forecast to decline by 1.5 million barrels per day, a downward revision of 3.3 million barrels per day from the previous projection. Tourism On April 2, 2020, theSecretaría de Salud (Ministry of Health) officials instructed hotels to stop making new reservations, reschedule existing ones and close fornon-essential business. Financial System Monetary Policy, Inflation and Interest Rates
The following table shows Mexico’s M1 and M4 money supply aggregates at each of the dates indicated. The data in this table was calculated in accordance with the methodology for calculating money supply aggregates adopted on January 31, 2018 to reflect the Monetary and Financial Statistics Manual and Compilation Guide published by the International Monetary Fund (IMF) in 2016 and applied to all historical figures from December 31, 2000. Money Supply
Note: Numbers may not total due to rounding.
Inflation During 2019, consumer inflation The following table shows, in percentage terms, the changes in price indices
Sources: INEGI; Ministry of Labor. Interest Rates During On On February 13, 2020, the Mexican Central Bank held its first monetary policy meeting of 2020 and reduced theTasa de Fondeo Bancario (overnight interbank funding rate) by twenty-five basis points, bringing the rate to 7.00%. This decision considered external risks, such asCOVID-19, that could affect the performance of Mexico’s financial and energy markets and the generally stagnant economic activity in Mexico over the past few quarters, with the goal of strengthening Mexico’s future long-term growth. On March 20, 2020, the Mexican Central Bankadvanced its monetary policy decision scheduled for March 26, 2020 and reduced the overnight interbank funding rate by fifty basis points to 6.50%. It also reduced the monetary regulation deposit required for private banks by U.S. $2.1 billion and lowered the rate on its additional ordinary liquidity facility. These decisions took into account the complex global economic situation and the rapid spread ofCOVID-19, which has severely affected the growth prospects of the world economy and has led to a significant deterioration in global financial conditions. The Mexican Central Bankalso pointed to a marked decrease in the prices of raw materials, especially crude oil. Exchange Controls and Foreign Exchange Rates On The peso appreciated against the dollar during 2019. Factors contributing to this appreciation included: (i) the greater risk appetite among investors as a result of a more accommodative monetary policy stance in the United States in October 2019; (ii) the signing of “Phase 1” of the trade agreement between the United States and China; and (iii) the ratification of the United States-Mexico-Canada Agreement (USMCA) by the United States. On April 20, 2020, the peso/dollar exchange rate closed at Ps. Securities Markets The bursátil de capital variable On August 29, 2017, as part of its program to develop the
Foreign Trade and Balance of Payments Foreign Trade The following table provides information about the value of Mexico’s merchandise exports and imports (excluding tourism) for the periods indicated. Exports and Imports
Note: Numbers may not total due to rounding.
Foreign Trade Relations and Agreements On December 10, 2019, representatives of On January 16, 2020, the U.S. As of March 20, 2020, the U.S. and Balance of Payments and International Reserves
The following table sets forth International Reserves and Net International Assets
Source: Banco de México. Public Finance
The
2019 United Mexican States Budget On December 15, 2018, the Ministry of Finance and Public Credit submitted to Congress (i) the The following table
Note: Numbers may not total due to rounding.
Source: Ministry of Finance and Public Credit.
On On December 9, 2019, certain amendments were made to the Hydrocarbons Revenue Law to introduce an incremental reduction of the Public Debt Internal Public Debt The Mexican Government’s net internal debt represents the internal debt directly incurred by the Mexican Government, including the Mexican Central Bank’s General Account Balance and the assets of theFondo del Sistema de Ahorro Para el Retiro(Retirement Savings System Fund). It does not include the debt of budget-controlled and administratively-controlled agencies or any debt guaranteed by the Mexican Government. In addition, “net internal debt” is comprised of Cetes and other securities sold to the public in auctions for new issuances (primary auctions), but does not include any debt allocated to the Mexican Central Bank for its use in the Regulación Monetaria(Monetary Regulation). This is because the Mexican Central Bank’s sales of debt pursuant to the Monetary Regulation do not increase the Mexican Government’s overall level of internal debt. The Mexican Central Bank must reimburse the Mexican Government for any allocated debt that the Mexican Central Bank sells in the secondary market and that is presented to the Mexican Government for payment. However, if the Mexican Central Bank carries out a high volume of sales of allocated debt in the secondary market, this can result in the Mexican Government’s outstanding internal debt being higher than its outstanding net internal debt. As of April 21, 2020, no debt issued by states and municipalities has been guaranteed by the Mexican Government. The following table summarizes the gross and net internal debt of the Mexican Government at each of the dates indicated. Gross and Net Internal Debt of the Mexican Government(1)
Note: Numbers may not total due to rounding.
Source: Ministry of Finance and Public Credit. External Public Debt Mexico’s external public debt goals are intended to provide the Mexican Government with flexibility to finance its stated needs, while also accounting for market volatility and unforeseen developments. The policy also seeks to maintain costs and keep risks at stable levels. Mexico primarily seeks debt financing through local markets, supplemented by external financing from the U.S., Europe and Japan. Mexico’s principal objectives in connection with its external financing include improving the terms and conditions of Mexico’s external liabilities, as well as strengthening and diversifying Mexico’s investor base, with specific consideration to Mexico’s continued presence in the most influential international markets. Objectives also include strengthening Mexico’s benchmark bonds and maintaining a constant relationship with international investors in order to ensure transparency and to promote investment in Mexico.
According to preliminary figures, The following tables set forth a summary of Mexico’s external public sector debt, including a breakdown of such debt by type, a breakdown of such debt by currency and net external public sector debt at the Summary of External Public Sector Debt by Type(1)
Summary of External Public Sector Debt
Net External Debt of the Public Sector
The following tables set forth a summary of Mexico’s external Mexican Government debt, including the gross external Mexican Government debt, net external Mexican Government debt and net Mexican Government debt at the dates indicated. Gross External Debt of the Mexican Government by Currency
Net External Debt of the Mexican Government
Net Debt of the Mexican Government
Note: Numbers may not total due to rounding.
Source: Ministry of Finance and Public Credit. IMF Credit Lines On November 22, 2019 the IMF completed its review of Mexico’s qualification for its contingent credit line program, the Flexible Credit Line (FCL). The IMF reaffirmed Mexico’s continued eligibility to access FCL resources in the amount of U.S. $61 billion, a reduction from the approximately U.S. $74 billion FCL access granted in 2018. Consistent with the reduction in FCL access in 2018, this reduced amount was granted by the IMF upon Mexico’s request, due to improved outlook with respect to some of the risks facing Mexico, improved stability in Mexico’s trade relations and strong buffers against external shocks to Mexico’s economy. In the future, if the external risks affecting Mexico’s economy continue to decline, Mexico intends to continue to request further reductions, including at itsmid-term review, and gradually decrease Mexico’s use of this resource. External Securities Offerings and Liability Management Transactions During 2019 and 2020 Mexico offers additional debt securities from time to time and, in order to manage the composition of its outstanding liabilities, Mexico engages from time to time in a variety of transactions, including tender offers, open market purchases and early redemptions. For the past twenty years, Mexico has conducted periodic ordinary course liability management transactions for the reduction of its total outstanding debt. On On April 8, 2019, Mexico issued €1,500,000,000 of its 1.625% Global Notes due 2026 and €1,000,000,000 of its 2.875% Global Notes due 2039. On July 31, 2019, Mexico issued U.S. $1,455,664,000 of its 4.500% Global Notes due 2029 and U.S. $2,103,527,000 of its 4.500% Global Notes due 2050. Concurrently, the Mexican Government conducted a tender offer pursuant to which Mexico offered to purchase for cash its outstanding notes of the series set forth in the offer to purchase dated July 23, 2019. On January 16, 2020, Mexico issued U.S. $3,069,068,000 of its 3.250% Global Notes due 2030 and U.S. $800,000,000 of its 4.500% Global Notes due 2050. Concurrently, the Mexican Government conducted a tender offer pursuant to which Mexico offered to purchase for cash its outstanding notes of the series set forth in the offer to purchase dated January 6, 2020, pursuant to which Mexico purchased the notes listed in the table below. A summary of the tender offer results follows:
On January 17, 2020, Mexico issued €1,250,000,000 of its 1.125% Global Notes due 2030 and €500,000,000 of its 2.875% Global Notes due 2039. Mexico used a portion of the proceeds from this offering to redeem in full €1,000,000,000 of its outstanding
Legal and Political Reforms
On Judicial Review In its first ever general declaration of unconstitutionality, on February 14, 2019, theSuprema Corte de Justicia de la Nación (Supreme Court) struck down as excessive a provision of theLey Federal de Telecomunicaciones y Radiodifusión (Federal Telecommunications and Broadcasting Law) that provided for a minimum fine of 1% of a radio and television concessionaires’ and licensees’ taxable income for any violation of the regulatory framework not specifically provided for in the law. On November 6, 2018, the Ley Federal de Remuneraciones de los Servidores Públicos (Federal Public Servants Salary Law) was enacted with the purpose of regulating the salaries, defined broadly, of federal public officials, which subject to certain limitations shall not exceed (i) the salary received by the President of Mexico, or (ii) the salary received by such public official’s hierarchical superior. After its enactment, several constitutional claims were filed before the Supreme Court challenging the Federal Public Servants Salary Law, including on the basis that it created uncertainty about how the salaries of public officials of certain autonomous constitutional agencies should be regulated. On May 20, 2019, the Supreme Court invalidated certain provisions of the Federal Public Servants Salary Law and two related articles of the Federal Criminal Code and ordered Congress to revisit the invalidated provisions during the next ordinary legislative period. Anti-Money Laundering On March 1, 2019, the Unidad de Inteligencia Financiera (Financial Intelligence Unit, or FIU) of the Ministry of Finance and Public Credit and the mayor of Mexico City signed an agreement to exchange information to combat money laundering and the financing of terrorism. This agreement will allow for greater coordination to prevent and detect assistance of any kind given to aid crime with resources of illegal origin. Anti-Corruption The reform to Articles 22 and 73 of the Mexican Constitution and theLey Nacional de Extinción de Dominio(National Seizure of Ownership Law), published in the Official Gazette on March 14, 2019 and August 9, 2019, respectively, are intended, among other things, toextend the scope of Mexican Governmentextinciones de dominio(seizures), which will now be permittedover assets related to a broader list of offenses now including acts of corruption, crimes committed by publicofficials, organized crime, kidnapping, extortion, human trafficking and crimes related to hydrocarbons, amongothers, and for which there is no proof that they were obtained legally. On April 26, 2019, the Ministry of Public Administration banned for three years Constructora Norberto Odebrecht, S.A. and Odebrecht Ingeniería y Construcción Internacional de México, S.A. de C.V., subsidiaries of Odebrecht S.A., from participating in any procurement process or entering into any contract with agencies and entities of theAdministración Pública Federal (Federal Public Administration) and theFiscalía General de la República (Office of the Federal Attorney General), as well as any agencies or entities of the states where federal resources are used. The April 26, 2019 action on Constructora Norberto Odebrecht, S.A. was in addition to previous actions taken by the Ministry of Public Administration in 2018 banning it from participating in any procurement process or entering into any contract with agencies and entities of the Federal Public Administration and the Office of the Federal Attorney General, as well as any agencies or entities of the states where federal resources are used. On August 30, 2019, thePrograma Nacional de Combate a la Corrupción y a la Impunidad, y de Mejora de la Gestión Pública 2019-2024 (National Program to Combat Corruption and Impunity, and Improvement of Public Management 2019-2024, or the Program) was published in the Official Gazette. The Program sets out five priority objectives, specific actions for compliance and goals and measurement parameters. The Program is mandatory for all government agencies, units and entities of the Federal Public Administration. On November 14, 2019, the INEGI approved the creation of aComité Técnico Especializado de Información Sobre la Corrupción (Specialized Technical Committee on Information About Corruption). This committee is intended to generate accurate and reliable information regarding Mexico’s institutional capacities to: (i) understand and combat corruption; (ii) make decisions based on effective, concrete and verifiable evidence; (iii) promote the use and knowledge of information produced by INEGI; and (iv) coordinate the generation, integration and dissemination of indicators to monitor and evaluate public policies. On December 9, 2019, the Mexican Government announced Mexico’s intended adherence to thePrincipios de Transparencia para la Divulgación del Beneficiario Final (Principles of Transparency for the Disclosure of Final Beneficiaries). Mexico will become one of seven countries that comprise theGrupo de Liderazgo Sobre Transparencia de Beneficiario Final(Beneficial Ownership Leadership Group, or BOLG). By adhering to these principles, the members of BOLG are committed to promoting the publication of data on final beneficiaries, which will (i) help prevent the use of companies or certain legal and financial instruments to further acts of corruption; (ii) expedite investigations of corruption; and (iii) prevent and combat money laundering and terrorist financing. The Mexican Government announced that Mexico intends to have a public registry of final beneficiaries by no later than 2023. On January 29, 2020, the Coordinating Committee of theSistema Nacional Anticorrupción (National Anti-Corruption System, or Foreign Affairs, International Organizations and
Representatives of In connection with
On On January 16, 2020, Mexico, represented by the Environment In connection with the international commitments undertaken with respect to the Paris Agreement, the Mexican Government published the preliminary bases of the Programa de Prueba del Sistema de Comercio de Emisiones On February 7, 2020, the Mexican Government updated theEstrategia de Transición para Promover el Uso de Tecnologías y Combustibles más Limpios (Transition Strategy to Promote the Use of
Geography and Population COVID-19 Crisis Since December 2019, a novel strain of coronavirus (SARS-CoV2, commonly referred to asCOVID-19) has spread rapidly around the As of March 20, 2020, Mexico and the U.S. agreed to temporarily close the border tonon-essential travel to curb the spread of the coronavirus. The WHO declared on March 23, 2020 that Mexico had entered phase two, referred to as community contagion, of the pandemic. Also on March 24, 2020, the Mexican Government imposed restrictions onnon-essential activities in the public, private, and social sectors, which
On April
The Mexican Government is monitoring the
Not applicable.
General We earn income from:
export sales, which consist of sales of crude oil and condensates, petroleum products and petrochemical products;
domestic sales, which consist of sales of natural gas, petroleum products (such as gasoline, diesel fuel and LPG) and petrochemical products; and
other sources, including financial and investment income and insurance revenue. Our operating expenses include:
cost of sales, including the cost of purchases of imported petroleum and other products, depreciation and amortization, salaries, wages and benefits, a portion of the net cost of employee benefits for the period, the variation of inventories, maintenance, and exploration and unsuccessful drilling expenses;
transportation and distribution expenses (including a portion of the net cost of employee benefits for the period); and
administrative expenses (including a portion of the net cost of employee benefits for the period). Our income is affected by a number of factors, including:
changes in international prices of crude oil, petroleum products and petrochemical products, which are denominated in U.S. dollars, and domestic prices of petroleum products, which are denominated in pesos;
the type and volume of crude oil produced and exported;
the type and volume of natural gas produced, processed and sold domestically and internationally;
the results of development and exploration activities;
the amount of taxes, duties and other payments that we are required to make to the Mexican Government;
fluctuations in thepeso-U.S. dollar exchange rate; and
Mexican and global economic conditions, including the levels of international interest rates. Overview In However, beginning in early 2020, we experienced a rapid decline in oil prices. This decline occurred as a result of the substantial decline in demand for oil due to the economic impacts of theCOVID-19 pandemic, as well as a disagreement between Russia and OPEC, particularly Saudi Arabia, regarding production cuts in response to theCOVID-19 pandemic. This reduced demand lead to an oversupply and in turn insufficient global storage capacity. The decreased demand for oil that began in the first quarter of 2020 is expected to continue. As a result of these factors, the weighted average Mexican crude oil export price averaged U.S. $40.91 per barrel for the three month period ended March 31, 2020 and reached negative U.S. $7.33 per barrel on April 28, 2020. As of May 6, 2020, the weighted average Mexican crude oil export price was U.S. $21.10 per barrel. In addition, the Mexican peso has depreciated in relation to the U.S. dollar from Ps. 18.8452 per dollar as of December 31, 2019 to Ps. 24.3812 per dollar as of May 6, 2020. Our business, results of operation and financial condition have already been negatively affected by this drop in oil prices, and we anticipate that these negative effects will continue. In response to this situation, the Mexican Government announced that it would reduce our 2020 tax burden by Ps. 65.0 billion in order to provide us with additional resources to support our operations. See Note 28 to our consolidated financial statements included herein. Additionally, on April 12, 2020, the OPEC+ countries, which include Mexico, reached an agreement to reduce their overall crude oil production in an attempt to stabilize oil prices. Pursuant to this agreement, Mexico has agreed to reduce its, and in turn our, crude oil production by 100,000 barrels per day for a period of two months beginning on May 1, 2020. For more information regarding this OPEC+ production agreement, see “Item 4—Trade Regulation, Export Agreements and Production Agreements.” As a result of this agreement, we are revising our crude oil production goal for 2020 of 1,866.5 thousand barrels per day taking into consideration our ongoing budget revision. Going Concern Our consolidated financial statements as of December 31,
We also have significant debt. This debt was incurred mainly to finance necessary operational investments. Due to our heavy fiscal burden resulting from the payment of hydrocarbons extraction duties and other taxes that we are required to pay to the Mexican Government, in recent years the cash flow derived from our operations has not been sufficient to fund our operating and investment costs and other expenses. In turn, our indebtedness has increased significantly. Our working capital has also decreased in part as a In addition, in 2019 and in the beginning of 2020, certain rating agencies downgraded our credit rating, which could have an impact on the cost and terms of our new debt, as well as our contract renegotiations during 2020. See “Item 5—Liquidity and Capital Resources—Overview” below. We believe we have the capacity to comply with our payment obligations and our operating continuity, however, our future cash flows are For more information on the circumstances that have caused these negative trends and the concrete actions we are taking to 2019-2023 Business Plan and Related Initiatives On July 16, 2019, our Board of Directors unanimously approved our Business Plan for the The 2019-2023 Business Plan sets forth certain objectives we hope to achieve with respect to our operations. We intend to accelerate and increase the development of oil and gas reserves and to increase hydrocarbons production both in newly discovered reservoirs and fields currently in operation. For newly discovered reservoirs, we plan to increase production by focusing oneasy-to-access shallow waters and terrestrial areas, as well as working to reduce the The 2019-2023 Business Plan also sets forth certain objectives relating to our
The Mexican Government has announced it plans to support the objectives set forth in the 2019-2023 Business Plan by reducing our tax burden and providing capital contributions. In order to help relieve our tax burden, the Mexican Government modified the Hydrocarbons Revenue Law to gradually reduce the Profit-Sharing Duty from 65% to 58% by 2020. We anticipate that our savings from this reduction in the rate of the The following sets forth a summary of some of our key objectives based on our 2019-2023 Business
Since December 2019, a novel strain ofCOVID-19 has spread throughout the world. The resulting pandemic has had an adverse effect on our business, results of operations and financial condition. Decline in international crude oil prices: Governments across the world have instituted measures to address theCOVID-19 outbreak—which the World Health Organization declared a pandemic on March 11, 2020—including mandatory quarantines, social distancing guidelines, travel restrictions and declaration of health emergencies. The effects of theCOVID-19 virus have led to a worldwide economic slowdown, and as a result there has been a decrease in global demand for crude oil and derivatives. On March 6, 2020, OPEC, led by Saudi Arabia, and another group of petroleum producing nations, led by Russia, did not reach an agreement to reduce crude oil production in order to support crude oil prices, which resulted in a On April 12, 2020, the OPEC+ countries, including Mexico, reached an agreement to reduce their overall crude oil production. This agreement is expected to help mitigate the decrease in oil prices and On April 20, 2020, Mexican crude oil experienced an unprecedented drop below U.S. $0.00 to Decrease in the demand for petroleum products: As a result of theCOVID-19 pandemic, on March 24, 2020 the Mexican Government, through the As a result of the worldwide economic slowdown and, in The impact on our sales of our petroleum products (gasoline, diesel, jet fuel and others) was a 34% reduction in the Mexican Government support: On April 21, 2020, the Mexican Government, through a Presidential decree, granted us a reduction in our tax burden equal to Ps. 65.0 million for 2020, which consists of a fiscal credit applicable to the profit sharing duty up to such amount. This decrease in the profit sharing duty is incremental to the one resulting from the decrease of the rate from 65% to 58% in 2020 in accordance with amendments to the 2020 Revenue Law. Reduction in our budget:As a result of the decrease in crude oil prices and PEMEX’s response: Our operations are generally considered strategic within the meaning of Articles 27 and 28 of the Mexican Constitution. Certain of our We prepared our budget for 2020 based on a Mexican crude oil basket price of U.S. $49.00 per barrel and contracted derivative financial instruments to hedge our risk exposure to declines in the price of Mexican crude oil price. Such derivative financial instruments are intended to partially hedge the price of Mexican crude oil when it falls below the average price of U.S. $49.00 per barrel, up to a floor of U.S. $44.00 per barrel. Taking into consideration conditions described above, our budget deficit for the year 2020 may increase by Ps. 30.0 billion. We are taking certain actions to face this deficit, such as reducing our capital expenditures by Ps. 40.5 billion, decreasing operating expenses that do not hazard our operating capabilities by Ps. 5.0 billion, decreasingnon-strategic projects and focusing instead on more profitable ones, as well as the implementation and development of alternative financing mechanisms that do not constitute public debt. Results of operations and financial condition in For the year ended December 31,
a Ps. a Ps. 118.5 billion increase in impairment of wells, pipelines, properties, plant and equipment;
a Ps.
a Ps.
a Ps.
a Ps.
a Ps.
a Ps. a Ps. 117.7 billion decrease in For more information on our results of operations, see “—Results of Operations of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—For the Year Ended December 31, In
an increase in
As of December 31, Operating Challenges
In 2019, we processed a total of 592 thousand barrels of crude oil per day, a 3.2% decrease as compared to 2018, mainly as a result of Critical Accounting Policies Some of our accounting policies require the application of estimates, judgments and assumptions by management which affect the reported amounts of assets and liabilities as of the date of our financial statements, as well as the reported amounts of revenues and expenses during the periods presented in this report. By their nature, these estimates, judgments and assumptions are subject to a degree of uncertainty and are based on: our historical experience; terms of existing contracts; management’s view of trends in the oil and gas industry, both internationally and within Mexico; economic factors in Mexico; and information from outside sources. We believe that the following critical accounting policies, among others, affect management’s judgments and estimates used in the preparation of our consolidated financial statements according to IFRS, and could potentially impact our financial results and future financial performance. There can be no assurance that actual results do not differ from these estimates. These policies are more fully described in Note 3 to our consolidated financial statements included herein. Successful Efforts Method of Oil and Gas Accounting We apply the successful efforts method for the exploration and production of crude oil and gas activities, considering the criteria mentioned in IFRS 6, “Exploration for and Evaluation of Mineral Resources,” in relation to the recognition of exploration and drilling assets. Costs of development wells and related plant, property and equipment involved in the exploitation of oil and gas are recorded as part of the cost of assets. The costs of exploratory wells in areas that have not yet been designated as containing proved reserves are recorded as intangible assets until it is determined whether such reserves are commercially viable. Otherwise, the costs of drilling an exploratory well are charged to exploration expense. Other expenditures on exploration are charged to exploration expense, as incurred. Depreciation and amortization of capitalized costs associated with wells are based on the estimated commercial life of the field to which the well corresponds, taking into account the relationship between the field’s production levels for the period and proved developed reserves, as of the beginning of the year and as updated on a quarterly basis for new development investments. Reserves estimates are determined in accordance with earth science and petroleum engineering principles and practices pursuant to Rule4-10(a) and, where necessary, in accordance with the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the SPE as of February 19, Downward revision of reserves estimates can result in: higher depreciation and depletion expense per barrel in future periods; an immediatewrite-down of an asset’s book value in accordance with accounting rules for the impairment of properties; or changes in our accrual of the asset retirement obligation. An impairment of oil and gas producing fixed assets will result if the downward revisions are so significant that the estimated future cash flows from the remaining reserves in the field are insufficient to recover the unamortized capitalized costs. Conversely, if the oil and gas reserves quantities are revised upward, our per barrel depreciation and depletion expense will be lower. The application of successful efforts accounting can also cause material fluctuations between periods in exploration expenses if drilling results are different than expected or if we change our exploration and development plans. The determination that exploratory drilling was unsuccessful in finding economically producible reserves requires the immediate expensing of previously capitalized drilling costs. We make periodic assessments of the amounts included within intangible assets to determine whether capitalization is initially appropriate and should continue. Exploration wells capitalized beyond 12 months are subject to additional evaluation as to whether the facts and circumstances have changed, and therefore whether the conditions described below no longer apply. Exploration wells more than 12 months old are expensed unless: they are in an area requiring major capital expenditures before production can begin, commercially productive quantities of reserves have been found, and they are subject to further exploration or appraisal activity, in that either drilling of additional exploratory wells is underway or firmly planned for the near future; or proved reserves are identified within 12 months following the completion of exploratory drilling. Environmental Remediation and Asset Retirement Obligations We are required to make judgments and estimates in recording liabilities for environmental cleanup and asset retirement obligations. In accordance with applicable legal requirements and accounting practices, we recognize an environmental liability when the cash outflows are probable and the amount is reasonably estimable. We account for disbursements related to the conservation of the environment that are linked to revenue from current or future operations as costs or assets, depending on the circumstances of each disbursement. Moreover, we account for disbursements related to past operations, which no longer contribute to current or future revenues, as current period costs. We accrue a liability for a future disbursement when an obligation related to environmental remediation is identified and the amount thereof can be reasonably estimated. Estimated liabilities for environmental remediation and asset retirement obligations are subject to change as a result of: changes in laws, regulations and their interpretation; the review of additional information on the extent and nature of site contamination; the determination of additional works that need to be undertaken; improvements in technology; the nature and timing of expenditure; foreign currency exchange rates to the extent that some of these costs are incurred in U.S. dollars; and changes in discount rates. We do not recognize the obligations related to the costs of future retirement of assets associated with the principal refining processes for gas and petrochemicals. These assets are considered to have an indefinite useful life due to the potential for maintenance and repairs, and, accordingly, we lack sufficient information to reasonably determine the date on which they will be decommissioned. Financial Instruments We face market risk caused by the volatility of hydrocarbon prices, exchange rates and interest rates. In order to monitor and manage this risk, Petróleos Mexicanos and the subsidiary entities have developed policies and guidelines that promote an integrated scheme for market risk management, regulate the use of DFIs, guide the development of hedging strategies and provide strategies for the formulation of risk limits. We enter into derivatives transactions with the sole purpose of hedging financial risks related to our operations. Nonetheless, some of these transactions do not qualify for hedge accounting treatment because they do not meet the strict requirements of IAS 39, “Financial Instruments Recognition and Measurement” for designation as hedges. They are therefore recorded in the financial statements asnon-hedge instruments or as instruments entered into for trading purposes, despite the fact that their cash flows are offset by the cash flows of the positions to which they relate. As a result, the changes in their fair value are recognized in the financing cost. See Note Impairment ofNon-Financial Assets At each reporting date, we evaluate whether there is objective evidence thatnon-financial assets, other than inventory or deferred taxes, are impaired. Significant judgment is required to appropriately assess the recoverable amount, represented by the higher of the value in use and the fair value, less costs to sell or otherwise dispose of our reporting units. Our future net cash flow projections are based on the best available estimates of thecash-generating unit income and expenses using forecasts, prior results and the outlook for the business’s performance and the market’s development. Our annual budget and business plan set macroeconomic forecasts for each of thecash-generating units, which are calculated based on different assumptions regarding projected commodity sales prices, volume of production and overhead costs, foreign currency exchange rates and inflation, among other items, that are used to quantify income and expense estimates. Any change in the assumptions upon which the forecasts for eachcash-generating unit are based can materially affect the anticipated cash flows to be generated bynon-financial assets. These estimated future net cash flows are discounted at present value usingcash-generating unit specific discount rates determined as a function of the currency in which their respective cash flows are denominated and the risks associated with these cash flows. The discount rates are intended to reflect current market assessments of the time value of money and the risks specific to the asset. Accordingly, the various discount rates used take into consideration country risk. To ensure that the calculations are consistent and avoid double counting, the cash flow projections do not factor in risks that have already been built into the discount rates used. The discount rates used reflect current market conditions and specific risks related to those fixed assets. SeeNote As of December 31,
Income Taxes As described under “Item 4—Information on the Company—Taxes, Duties and Other Payments to the Mexican Government” above and in Note As of December 31, Management judgment is required in determining our provision for income taxes. In the event that actual results differ from our estimates, any adjustments recorded will affect our net income during the corresponding period. Exploration and Production Taxes and Duties The fiscal regime applicable to the exploration and production assignments granted to us by the Mexican Government includes the following taxes and duties:
Profit-Sharing Duty. TheProfit-Sharing Duty is calculated based on the value of hydrocarbons produced in the relevant area minus certain permitted deductions. As of January 1, 2019, the applicable rate of this duty was 65.0%. Pursuant to the Hydrocarbons Revenue Law, theProfit-Sharing Duty decreases on an annual basis. As of January 1, 2020, this duty was set at 58.0%.
Hydrocarbons Extraction Duty. The Hydrocarbons Extraction Duty is calculated based on a rate that varies according to (i) the type of hydrocarbon (e.g., crude oil, associated natural gas,non-associated natural gas or condensates), (ii) the volume of production and (iii) the relevant market price.
Exploration Hydrocarbons Duty. The Exploration Hydrocarbons Duty is calculated by applying a quote per square kilometer for each assigned phase of production and extraction phase. Pemex Exploration and Production must make monthly payments of this duty. For 2019, the Mexican Government was entitled to collect a monthly payment of 1,355.82 pesos per square kilometer ofnon-producing areas. After 60 months, this tax increases to 3,242.17 pesos per square kilometer for each additional month that the area is not producing. These amounts will be updated on an annual basis in accordance with the NCPI. During 2019, we paid Ps. 1,050 million under this duty, a 2.2% increase from Ps. 1,027 million in 2018. For more information on the taxes and duties applicable to and paid by Pemex Exploration and Production, see Note Contingencies In the ordinary course of business, we are named in a number of lawsuits of various types. We evaluate the merit of each claim and assess the likely outcome. Liabilities for loss contingencies are recorded when it is probable that a liability has been incurred and the amount thereof can be reasonably estimated. We do not recognize contingent revenues, earnings or assets until their realization is assured. We have not recorded provisions related to ongoing legal proceedings whenever we do not expect an unfavorable resolution in such proceedings, except as disclosed in “Item 8—Financial Information—Legal Proceedings—Civil Actions” and Notes Employee Benefits As described under “Item 6—Directors, Senior Management and Employees—Employees” below and in Note Contribution Plan Under the defined contribution plan, both we and our employees contribute to each employee’s individual account, in contrast to the existing defined benefit plan, pursuant to which only we contribute. We account for our contributions as costs, expenses or assets. Contributions to the defined contribution plan that are not expected to be fully settled within 12 months after the end of the annual reporting period in which the employee rendered related services will be discounted using the defined benefits plan discount rate. Benefit Pension Plan Under the defined benefit pension plan, we are the only contributor to a trust, which is managed separately. We recognize the cost for the defined benefit pension plan based on independent actuarial computations applying the projected unit credit method. Actuarial gains and losses are recognized within other comprehensive results for the period in which they occur. The costs of prior services are recognized within profit or loss for the period in which they are incurred. Our net obligation with respect to the defined benefit pension plan equals the present value of the defined benefit obligation less the fair value of plan assets for which obligations have yet to be settled. The value of any asset is limited to the present value of the economic benefit represented by the plan reimbursements and reductions in future contributions to the plan. In addition, otherlong-term employee benefits include seniority premiums payable for disability, death and survivors’ benefits, medical services, gas and basic food baskets for beneficiaries. Termination benefits are recognized in profit or loss for the year in which they are incurred. Benefits to employees were
On January 1, Recently Issued Accounting Standards Some of the new accounting standards went into effect for annual periods beginning January 1, 2019 and earlier application is permitted. However, we have not early adopted the new or amended standards in preparing these consolidated financial statements (see Note 29 to our consolidated financial statements included herein). The following amended standards and interpretations are not expected to have a significant impact on our consolidated financial statements. Amendments to References to Conceptual Framework in IFRS Standards. Definition of a Business (Amendments to IFRS 3). Definition of Material (Amendments to IAS 1 and IAS 8). Sales Volumes and Prices The profitability of our operations in any particular accounting period is directly related to the sales volume of, and average realized prices for, the crude oil and natural gas that we sell. These average realized prices for crude oil and natural gas fluctuate from one period to another due to world market conditions and other factors. Export Volumes and Prices Pemex Exploration and Production sells crude oil to PMI, which then sells it to international clients. The volume of crude oil that we export is the volume delivered to international clients as adjusted for water content according to the bill of lading and standard market practice. PMI bases crude oil export price formulas on a basket of international reference prices and a constant set according to specific market conditions. We determine export prices of refined products, petrochemicals and natural gas by reference to market conditions and direct negotiations with our clients. Significant changes in international crude oil prices directly affect our financial results. The impact of changes in crude oil prices on our refining activities and petrochemicals business depends on:
the magnitude of the change in crude oil prices;
how quickly petroleum and petrochemical product prices in international markets adjust to reflect changes in crude oil prices; and
the extent to which prices in Mexico, where we sell most of our petroleum products and petrochemicals, reflect international prices for those products. The following table sets forth the weighted average market price per barrel of crude oil that PMI received from exports and the average price of
Domestic Prices
The following table compares the average prices in nominal terms of selected petroleum and petrochemical products in Mexico for the years indicated:
Source: Petróleos Mexicanos. IEPS Tax, Hydrocarbon Duties and Other Taxes The following table sets forth the taxes and duties that we recorded for each of the past three years.
Relation to the Mexican Government Petróleos Mexicanos and the subsidiary entities are public entities of the Mexican Government, rather than Mexican corporations. Therefore, we do not have the power to issue shares of equity securities evidencing ownership interests and are not required, unlike Mexican corporations, to have multiple shareholders. However, our financing obligations do not constitute obligations of and are not guaranteed by the Mexican Government. The President of Mexico appoints five of the ten members of the Board of Directors of Petróleos Mexicanos as representatives of the Mexican Government, including the Secretary of Energy, who serves as the Chairperson of the Board of Directors of Petróleos Mexicanos, and the Secretary of Finance and Public Credit. The President of Mexico also appoints five independent members to the Board of Directors of Petróleos Mexicanos, whose appointments are ratified by the Senate. Pursuant to the Petróleos Mexicanos Law, the consolidated annual budget of Petróleos Mexicanos and the subsidiary entities, including our financing program, must be submitted to the Ministry of Finance and Public Credit, which has the authority to adjust our financial balance goal and the ceiling on our wage and salary expenditures for the fiscal year. The Mexican Government incorporates our consolidated annual budget and financing program into its budget, which the Chamber of Deputies must approve each year. The Mexican Congress has the authority to adjust our annual financial balance goal at any time by amending the applicable law. In addition, any adjustment proposed by the Board of Directors of Petróleos Mexicanos to change our annual financial balance goal or increase the limit on our wage and salary expenditures or our financing program must be approved by the Chamber of Deputies. Inflation Mexico experienced high inflation during the 1980s. The annual rate of inflation (as measured by the change in the NCPI) decreased from a high of 159.2% in 1987 to 11.9% in 1992, 8.0% in 1993 and 7.1% in 1994. However, the economic events that followed the devaluation of the peso against the U.S. dollar in late 1994 and 1995, along with turbulence in international financial markets, caused inflation to increase to 52.0% in 1995. After 1995, inflation decreased to 27.7% in 1996 and 15.7% in 1997. The annual inflation rate was We do not use inflation accounting, unless the economic environment in which we operate qualifies as “hyperinflationary,” as defined by IFRS. In accordance with IFRS, the threshold for considering an economy hyperinflationary, and consequently, adjusting certain line items in the financial statements for inflation, is reached when the cumulativethree-year inflation rate is 100% or more. Because the economic environment in thethree-year periods ended December 31, Consolidation Our financial statements consolidate the results of Petróleos Mexicanos, the subsidiary entities and the subsidiary companies. Certainnon-material subsidiary companies are not consolidated and are accounted for under either the cost method or the equity method. For a list of the consolidated subsidiary companies, seeNote Export Agreements and Production Agreements Though Mexico is not a member of OPEC, it has periodically announced increases and decreases in our crude oil exports reflecting production revisions made by other oil producing countries and entered into agreements with OPEC andnon-OPEC members to reduce its oil exports, in order to contribute to crude oil prices stabilization. On April 12, 2020, the OPEC+ countries, including Mexico, agreed to reduce their overall crude oil production by Results of Operations of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—For the Year Ended December 31, Total Sales Total sales Domestic Sales Domestic sales decreased by 17.7% in 2019, from Ps. 980.6 billion in 2018 to Ps. 807.0 billion in 2019, mainly due to decreases in the sales prices of gasoline, diesel, fuel oil and LPG. Domestic sales of petroleum products decreased by 15.2% in 2019, from Ps. 847.5 billion in 2018 to Ps. 718.7 billion in 2019, mainly due to a 7.1% decrease in the average price of gasoline, a 6.9% decrease in the average price of diesel and 10.8% decrease in the average price of fuel oil. The sales volume of gasoline, diesel and fuel oil decreased 5.8%, 11.5% and 26.3%, respectively, in 2019 as compared to 2018, as a result of decreased demand, which in turn was primarily the result of market share loss due to the entry of new competitors. Domestic sales of natural gas decreased by 44.1% in 2019, from Ps. 50.9 billion in 2018 to Ps. 28.5 billion in 2019, primarily due to a 10.0% decrease in the average sales price and 37.9% decrease in the volume of sales of natural gas, mainly due to market competition. Domestic sales of LPG decreased by 38.2% in 2019, from Ps. 52.1 billion in 2018 to Ps. 32.2 billion in 2019, mainly as a result of a 52.6% decrease in its average sales price. Export Sales Export sales decreased by 15.3% in peso terms in 2019 (with U.S. dollar-denominated export revenues translated to pesos at the exchange rate on the date of the corresponding export sale) from Ps. 691.9 billion in 2018 to Ps. 585.8 billion in 2019. This decrease was mainly due to a 10.7% decrease in the weighted average Mexican crude oil export price in 2019, from U.S. $62.29 per barrel in 2018 to U.S. $55.60 per barrel in 2019. Excluding the trading activities of the Trading Companies (in order to show only the amount of export sales related to the subsidiary entities), export sales by the subsidiary entities to third parties decreased by 17.1% in peso terms, from Ps. 571.8 billion in 2018 to Ps. 474.0 billion in 2019. In U.S. dollar terms, excluding the trading activities of the Trading Companies, total export sales (which are U.S. dollar denominated) decreased by 17.2% in 2019, from U.S. $29.7 billion in 2018 to U.S. $24.6 billion in 2019. This was primarily due to the 10.7% decrease in the weighted average Mexican crude oil export price. The trading and export activities of the Trading Companies generated additional marginal revenues of Ps. 111.8 billion in 2019, 6.8% lower in peso terms than the Ps. 120.0 billion of additional revenues generated in 2018, mainly due to a decrease in the average prices of diesel and gasoline. Export sales ofPMI-NASA, one of our principal Trading Companies, decreased by 16.7% in 2019, from Ps. 89.2 billion in 2018 to Ps. 74.3 billion in 2019. Crude oil and condensate export sales accounted for 90.8% of total export sales (excluding the Export sales of petroleum products, including natural gas and natural gas liquids, by our industrial transformation segment decreased from 9.2% of total export sales (excluding the trading activities of the Trading Companies) in 2018 to 8.2% of those export sales in 2019. Export sales of petroleum products, including products derived from natural gas and natural gas liquids, decreased by 15.2%, from Ps. 53.0 billion in 2018 to Ps. 38.9 billion in 2019, primarily due to a decrease in the average sales price of fuel oil and naphthas. Export sales of petrochemical products (including certain byproducts of the petrochemical process) decreased by Ps. 963.4 million in 2019, from Ps. 5,668.7 million in 2018 to Ps. 4,705.3 million in 2019, primarily due to a decrease in export sales by Fertinal in 2019. Services Income Services income increased by 5.0% in 2019, from Ps. 8.7 billion in 2018 to Ps. 9.1 billion in 2019, primarily as a result of an increase in transportation services provided by Pemex Industrial Transformation in 2019 and Pemex Logistics in 2018 to third parties. Cost of Sales Cost of sales decreased by 6.4%, from Ps. 1,199.5 billion in 2018 to Ps. 1,122.9 billion in 2019. This decrease was mainly due to: (1) a decrease of Ps. 146.2 billion in purchases of import products, primarily those related to Magna gasoline, Premium gasoline diesel and natural gas, mainly due to a decrease in the price of imports, (2) a Ps. 21.0 billion decrease in hydrocarbon exploration and extraction duties and taxes due to lower average sales prices in 2019, (3) a Ps. 34.7 billion decrease in fuels subtraction resulting from our actions against the illicit market in fuels and (4) a Ps. 18.7 decrease in amortization of other assets. This decrease was partially offset by (1) a Ps. 65.3 billion increase in the cost of unsuccessful wells and exploration expenses, (2) a Ps. 16.8 increase in maintenance and (3) a Ps. 63.2 increase resulting from a decrease in the cost valuation of the inventory. Impairment of Wells, Pipelines, Properties, Plant and Equipment Impairment of wells, pipelines, properties, plant and equipment decreased by Ps. 118.5 billion in 2019, from a net reversal of impairment of Ps. 21.4 billion in 2018 to a net impairment of Ps. (97.1) billion in 2019. This net impairment was primarily due to an impairment of Ps. (169.8) billion in the cash generating units of Pemex Exploration and Production mainly, due to a decrease in volumes of production of crude oil, offset by a (1) net reversal of impairment of Ps. 42.2 in the cash generating unit of Pemex Industrial Transformation, mainly due to an increase in the process of crude oil in the refineries and (2) net reversal of impairment of Ps. 34.1 in the cash generating unit of Pemex Logistics mainly due to a decrease in fuel subtraction. General Expenses General expenses decreased by Ps. 6.0 billion in 2019, from Ps. 158.7 billion in 2018 to Ps. 152.7 billion in 2019, mainly due to a decrease in operating expenses related to personnel services. Other Revenues / Expenses, Net Other revenues, net, decreased by Ps. 15.3 billion in 2019, from net revenues of Ps. 23.0 billion in 2018 to net revenues of Ps. 7.7 billion in 2019. This decrease was mainly due to the recognition in 2018 of income from contracts for participation rights in the Cárdenas-Mora, Misión, Santuario and Ogarrio blocks that was not present in the same period in 2019. Financing Income Financing income decreased by Ps. 7.1 billion in 2019, from Ps. 31.6 billion in 2018 to Ps. 24.5 billion in 2019. This decrease was mainly due to: (1) the recognition of the premium from notes exchanged in February 2018 and (2) lower interest income on the promissory notes issued by the Mexican Government in relation to our pension liabilities in 2019. Financing Costs Financing costs increased by Ps. 12.1 billion in 2019, from Ps. 120.7 billion in 2018 to Ps. 132.9 billion in 2019, mainly due to an increase in interest expenses, premium paid and amortized cost in 2019 as a result of the effects from the liability management transactions conducted in September 2019 and the recognition of interest on leases in 2019. Derivative Financial Instruments (Cost), Net Derivative financial instruments (cost), net, decreased by Ps. 3.8 billion, from a derivative financial instruments cost of Ps. 22.3 billion in 2018 to a derivative financial instruments cost of Ps. 18.5 billion in 2019, mainly as a result of the lower appreciation of the U.S. dollar relative to other foreign currencies we hedge, such as euros, Japanese yen and pounds sterling. Exchange Gain, Net A substantial portion of our indebtedness, 86.8% as of December 31, 2019, is denominated in foreign currencies. Our exchange gain, net, increased by Ps. 63.2 billion in 2019, from an exchange gain of Ps. 23.7 billion in 2018 to an exchange gain of Ps. 86.9 billion in 2019, primarily as a result of a 4.3% appreciation of the peso relative to the U.S. dollar in 2019. Due to the fact that 100.0% of our revenues from exports and domestic sales are referenced to prices denominated in U.S. dollars, and only 71% of our expenses, including financing costs, are linked to U.S. dollar prices, the appreciation of the peso relative to the U.S. dollar had a favorable effect on our ability to meet peso-denominated obligations. The value of the peso in U.S. dollar terms appreciated by 4.3% in 2019, from Ps. 19.6829 per U.S. $1.00 on December 31, 2018 to Ps. 18.8452 per U.S. $1.00 on December 31, 2019, as compared to a 0.5% appreciation of the peso in U.S. dollar terms in 2018. Taxes, Duties and Other The Profit-Sharing Duty and other duties and taxes paid decreased by 25.5% in 2019, from Ps. 461.6 billion in 2018 to Ps. 343.8 billion in 2019, mainly due to the 10.7% decrease in the weighted average export price of Mexican crude oil, from U.S. $ 62.29 per barrel in 2018 to U.S. $55.60 per barrel in 2019. Duties and taxes represented 24.5% and 27.5% of total sales in 2019 and 2018, respectively. Net Income/Loss In 2019, we had a net loss of Ps. 347.9 billion from Ps. 1,402.0 billion in total sales revenues, as compared to a net loss of Ps. 180.4 billion from Ps. 1,681.1 billion in total sales revenues in 2018. This increase in net loss relative to 2018 was primarily explained by: a Ps. 279.2 billion decrease in a Ps. 118.5 billion increase in impairment of wells, pipelines, properties, plant and equipment; a Ps. 15.3 billion decrease in other revenues, net; a Ps. 12.1 billion increase in financing cost; a Ps. 7.1 billion decrease in financing income; and a Ps. 2.7 billion decrease in profit sharing in joint ventures, associates and other. These effects were partially offset by: a Ps. 76.6 billion decrease in cost of sales, mainly due to a decrease in purchases of import products; a Ps. 6.0 billion decrease in general expenses; a Ps. 3.7 billion decrease in derivative financial instruments cost, net; a Ps. 63.2 billion increase in exchange gain, net; and a Ps. 117.8 billion decrease in taxes and other duties. Other Comprehensive Results In 2019, we had a net loss of Ps. 312.0 billion in other comprehensive results, as compared to a net gain of Ps. 223.4 billion in 2018, primarily due to an increase in the reserve for employee benefits that resulted from the decrease in the discount rate and expected rate of return on plan assets used in the actuarial computation method from 9.3% in 2018 to 7.5% in 2019. Changes in Statement of Financial Position of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—from December 31, 2018 to December 31, 2019 Assets Cash and cash equivalents decreased by Ps. 21.3 billion, or 26.0%, in 2019, from Ps. 81.9 billion as of December 31, 2018 to Ps. 60.6 billion as of December 31, 2019. This decrease was mainly due to an increase in payments to suppliers and contractors and payments on our debt instruments and taxes. Accounts receivable, net, increased by Ps. 13.4 billion, or 8.0%, in 2019, from Ps. 167.1 billion as of December 31, 2018 to Ps. 180.5 billion as of December 31, 2019, mainly due to a Ps. 13.4 billion increase in others receivables from taxes to be recovered at the end of the year. The current portion of our promissory notes decreased by Ps. 33.3 billion, or 87.4% in 2019, from, Ps. 38.2 billion as of December 31, 2018 to Ps. 4.9 billion as of December 31, 2019, mainly due to payment of the current portion of seven promissory notes (one maturing in 2019 and six in advance) with original maturities ranging from 2037 to 2042. Derivative financial instruments decreased by Ps. 10.9 billion, or 48.7% in 2019, from Ps. 22.4 billion as of December 31, 2018 to Ps. 11.5 billion as of December 31, 2019, mainly due to the decrease in the value of favorable cross-currency swaps by the appreciation of the U.S. dollar against most of the currencies for which we are covered, as well as a decrease in the value of crude oil options and currency options. Wells, pipelines, properties, plant and equipment, net, decreased by Ps. 190.8 billion, or 13.6%, in 2019, from Ps. 1,402.5 billion as of December 31, 2018 to Ps. 1,211.7 billion as of December 31, 2019. This decrease was mainly due to (1) Ps. 137.2 billion in depreciation and amortization, (2) Ps. 2.5 billion of disposals of wells, pipelines, properties, plant and equipment, (3) the recognition of impairment of Ps. 97.1 billion and (4) the recognition ofright-of-use assets in the amount of Ps. 6.1 billion pursuant to the implementation of the new accounting standard IFRS 16 and (5) the recognition of unsuccessful wells of Ps. 77.2 billion. This decrease was partially offset by Ps. 129.3 billion of acquisitions of wells, pipelines, properties, plant and equipment. See Note 13 to our consolidated financial statements included herein. As of January 1, 2019, we applied IFRS 16. As a result of the initial adoption of this standard, we recognized Ps. 70.8 billion ofright-of-use assets as of December 31, 2019. See Note 17 to our consolidated financial statements included herein. Deferred taxes increased by Ps. 13.4 billion, or 10.9%, in 2019, from Ps. 122.8 billion as of December 31, 2018 to Ps. 136.2 billion as of December 31, 2019, mainly due to an increase in the employee benefits provision and tax loss carry-forwards. Liabilities Total debt, including accrued interest, decreased by Ps. 99.1 billion, or 4.8%, from Ps. 2,082.3 billion as of December 31, 2018 to Ps. 1,983.2 billion as of December 31, 2019, mainly due to the impact of the 4.3% appreciation of the peso against the U.S. dollar in 2019 and the effects from the liability management transactions. Liabilities to suppliers and contractors increased by Ps. 58.2 billion, or 38.8%, in 2019, from Ps. 149.8 billion as of December 31, 2018 to Ps. 208.0 billion as of December 31, 2019, mainly due to an increase in our operations towards the end of 2019. Taxes and duties payable decreased by Ps. 14.6 billion, or 22.4%, in 2019, from Ps. 65.3 billion as of December 31, 2018 to Ps. 50.7 billion as of December 31, 2019, mainly due to a Ps. 10.2 billion decrease in the hydrocarbon exploration and extraction duties and taxes and a Ps. 6.1 billion decrease in theImpuesto Especial sobre Producción y Servicios (Special Tax on Production and Services, or IEPS Tax) on the sale of automotive fuels due to a decrease in automotive fuel sales. Derivative financial instruments liabilities increased by Ps. 0.7 billion, or 4.7%, in 2019, from Ps. 15.9 billion as of December 31, 2018 to Ps. 16.6 billion as of December 31, 2019. This increase was mainly due to the negative fair value of crude oil options. Employee benefits liabilities increased by Ps. 376.3 billion, or 34.8%, in 2019, from Ps. 1,080.5 billion as of December 31, 2018 to Ps. 1,456.8 billion as of December 31, 2019. This increase was mainly due to the decrease in the discount rate and expected rate of return on plan assets used in the actuarial computation method from 9.3% in 2018 to 7.5% in 2019. As of January 1, 2019, we applied IFRS 16 and recognized leases in the amount of Ps. 68.1 billion as of December 31, 2019. See Notes 4 and 17 to our consolidated financial statements included herein. Equity (Deficit), Net Our equity (deficit), net, increased by Ps. 537.8 billion, or 36.9%, in 2019, from a deficit of Ps. 1,459.4 billion as of December 31, 2018 to a deficit of Ps. 1,997.2 billion as of December 31, 2019. This increase in deficit was mainly due to our net loss of Ps. 347.9 billion and Ps. 312.0 billion in other comprehensive loss, including employee benefits actuarial losses of Ps. 309.3 billion and currency translation effect loss of Ps. 2.7 billion, partially offset by a Ps. 122.1 billion increase in Certificates of Contribution “A” from the Mexican Government as of December 31, 2019. Results of Operations of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—For the Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017 Total Sales Total sales increased by 20.3%, or Ps. 284.1 billion, in 2018, from Ps. 1,397.0 billion in 2017 to Ps. 1,681.1 billion in 2018, primarily due to increases in the average sales prices of our petroleum products and the weighted average price of Mexican crude oil. Domestic Sales Domestic sales increased by Export Sales Export sales increased by Excluding the trading activities of the Trading Companies (in order to show only the amount of export sales related to the subsidiary entities), export sales by the subsidiary entities to the Trading Companies and third parties increased by Crude oil and condensate export sales Export sales of petroleum products, including natural gas and natural gas liquids, by our industrial transformation segment
Services Income Services income Cost of Sales Cost of sales increased by Impairment of Wells, Pipelines, Properties, Plant and Equipment Impairment of wells, pipelines, properties, plant and equipment General Expenses General expenses increased by Ps. Other Revenues/Expenses, Net Other revenues, net, Financing Income Financing income increased by Ps. Financing Cost Financing cost increased by Derivative Financial Instruments Income (Cost) Derivative financial instruments income, Exchange Gain, Net A substantial portion of our indebtedness, Taxes, Duties and Other Hydrocarbon extraction duties and other duties and taxes paid increased by Net Income/Loss In
a Ps.
a Ps. a Ps. 17.9 billion increase in other revenues, net; a Ps. 1.2 billion increase in profit sharing in joint ventures, associates and other; and a Ps. 0.5 billion increase in exchange gain, These effects were partially offset by:
a Ps. a Ps. 128.6 billion increase in taxes and other duties; a Ps. 35.3 billion increase in financing cost, net; and a Ps. 16.8 billion increase in general expenses. Other Comprehensive Results In
Changes in Statement of Financial Position of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—from December 31, Assets Cash and cash equivalents decreased by Ps. Accounts receivable, net, The current portion of our promissory notes increased by Ps. 35.7 billion in 2018, mainly due to Inventories increased by Ps. Derivative financial instruments Wells, pipelines, properties, plant and equipment decreased by Ps.
Deferred taxes decreased by Ps. 23.4 billion, or 16.0%, in 2018, from Ps. 146.2 billion as of December 31, 2017 to Ps. 122.8 billion as of December 31, 2018, mainly due to an increase in the
Liabilities Total debt, including accrued interest, increased by Ps. Line items related to suppliers and contractors Taxes and duties payable increased by Ps. Derivative financial instruments liabilities decreased by Ps. Employee benefits liabilities Total Equity (Deficit)
Liquidity and Capital Resources Overview During Our principal For Our 2019-2023 Business Plan.On July 16, 2019, we announced our 2019-2023 Business Plan, which is intended to increase our competitiveness and improve our financial position. See Note22-f to our consolidated financial statements included herein for more information about our 2019-2023 Business Plan.
The Federal We have a substantial amount of As of December 31, Certain rating agencies have expressed concerns regarding: (1) our heavy tax burden; (2) the total amount of our Ratings address our creditworthiness and the likelihood of timely payment of our Ratings actions related to On On June 6, 2019, Fitch Ratings lowered our credit rating fromBBB- to BB+ in both global local and On On March 26, 2020, Standard & Poor’s lowered our credit ratings for foreign currency long term issues and for local currency long term issues from BBB+ andA- to BBB and BBB+, respectively, maintaining a negative credit outlook on a global scale. On April 1, 2020, HR Ratings affirmed our local credit rating at HR AAA with a stable outlook and lowered our global credit ratings to HR BBB+(G) with a negative outlook. On April 3, 2020, Fitch Ratings lowered our credit rating from BB+ to BB in both global local and global foreign currency with a negative outlook. On April 17, 2020, Fitch Ratings lowered our international foreign and local currency long-term ratings from BB toBB-. Fitch Ratings also revised the outlook from negative to stable.
On April 17, 2020, Moody’s lowered our credit ratings from Baa3 to Ba2, maintaining a negative credit outlook. On April 21, 2020, Moody’s lowered our credit ratings of our outstanding notes, as well as credit ratings based on our guarantee to A2.mx/Ba2 from Aa3.mx/Baa3. Moody’s also downgraded our short-term local scale rating toMX-2 fromMX-1. These downgrades of our credit ratings, particularly those below investment grade, may have material adverse consequences on our ability to access the financial markets and/or our cost of financing. If such constraints occur at a time when our cash flow from operations is less than the resources Going Concern Our consolidated financial statements have been prepared Equity Structure and Mexican Government Contributions Our total equity (deficit) as of December 31, On September 11, 2019, Petróleos Mexicanos received Ps. 122.1 billion from the Mexican Government to help improve our financial position. In On As of December 31, On January 31, 2019, the Mexican Government notified the Board of Directors of Petróleos Mexicanos that the Mexican Government would make payments to us through the SENER in a total amount of Ps. 25.0 billion. On March 8, 2019, we received a payment for Ps. 10.0 billion and on April 11, 2019, we received a payment for Ps. 5.0 billion. These payments are part of the Mexican Government’s Strengthening Program for Petróleos Mexicanos. Cash Flows from Operating, Financing and Investing Activities During
At December 31, Liquidity Position We define liquidity as funds available under our lines of credit as well as cash and cash equivalents. The following table summarizes our liquidity position as of December 31,
The following table summarizes our sources and uses of cash for the years ended December 31,
Note: Numbers may not total due to rounding. Investment Policies Our Finance and Treasury Department maintains financial resources sufficient to meet our payment commitments and those of the subsidiary entities, as well as a comprehensive, consolidated cash position and related projections in anticipation of such commitments. Our investment policies attempt to take advantage of favorable market conditions by accessing the most favorable terms offered to us by financial institutions. Investments of financial resources by our Finance and Treasury Department are made in accordance with the following policies: Investments of Mexican Pesos
In addition to the above limits, demand deposit accounts must be traded with financial institutions that maintain, at a minimum, the following credit ratings as issued by the applicable rating agency:
Investments of Financial Resources in Dollars Investments of financial resources in dollars must meet our operational and strategic requirements and must be previously approved byBanco de México on acase-by-case basis. Currently, our investments in dollars are limited to operational accounts,short-term money market funds and time deposits. Our dollar investments are managed byBanco de México. Operational Currencies The main currencies for investing cash and cash equivalents are pesos and dollars. Similarly, we generate revenues from the domestic and international sales of our products in those two currencies and our expenses, including those relating to our debt service, are payable in these two currencies. Commitments for Capital Expenditures and Sources of Funding Our The following table sets forth our total capital expenditures, excludingnon-capitalizable maintenance, by segment for the year ended December 31,
Note: Numbers may not total due to rounding.
Source: Petróleos Mexicanos. Our current commitments for capital expenditures have fluctuated in recent years as compared to previous years. Based on past experience, we expect to generate sufficient funds for our working capital, capital expenditures and investments through:
cash flow generated by operations;
the issuance of debt securities in the international capital markets;
the renewal of existing lines of credit and the entering into of new lines of credit from international and local commercial banks; and
other financing activities. The securities that we issue may vary in tenor, amount, currency and type of interest rate. We may issue debt securities in U.S. dollars, Japanese yen, euros, pounds sterling, pesos or Swiss francs, among others; these securities may be issued with fixed or floating rates and with maturities of one or more years, including perpetual debt securities, depending on market conditions and funding requirements. We may issue securities in the international capital markets or in the Mexican domestic market, or in both markets. Commercial bank syndicated loans may be established with single or multiple tranches with varying maturities. Bilateral loans may vary in tenor and range, which may be of one year or more. See also “—Financing Activities” below. Financing Activities
On January 21, 2020 Petróleos Mexicanos increased its Medium-Term Notes Program, Series C, from U.S. $102,000,000,000 to U.S. $112,000,000,000. On January 28, 2020, Petróleos Mexicanos issued U.S. $5,000,000,000 of debt securities under its U.S. $112,000,000,000 Medium-Term Notes Program, Series C, in two tranches: (1) U.S. $2,500,000,000 5.95% Notes due 2031 and (2) U.S. $2,500,000,000 6.95% Notes due 2060. All debt securities under this program are guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation, and Pemex Logistics and their respective successors and assignees. On January 30, 2020, Petróleos Mexicanos consummated a tender offer pursuant to which it purchased (1) U.S. $17,065,000 aggregate principal amount of its outstanding 6.000% Notes due 2020 and (2) U.S. $44,927,000 aggregate principal amount of its outstanding 3.500% Notes due 2020. On February 6, 2020, Petróleos Mexicanos consummated an exchange offer pursuant to which it exchanged (1) U.S. $264,752,000 aggregate principal amount of its outstanding 5.500% Notes due 2021 for U.S. $273,335,000 aggregate principal amount of its new 5.950% Notes due 2031, (2) U.S. $171,662,000 aggregate principal amount of its outstanding 6.375% Notes due 2021 for U.S. $178,908,000 aggregate principal amount of its new 5.950% Notes due 2031, (3) U.S. $148,535,000 aggregate principal amount of its outstanding 4.875% Notes due 2022 for U.S. $155,125,000 aggregate principal amount of its new 5.950% Notes due 2031, (4) U.S. $63,854,000 aggregate principal amount of its floating rate Notes due 2022 for U.S. $67,012,000 aggregate principal amount of its new 5.950% Notes due 2031, (5) U.S. $157,487,000 aggregate principal amount of its outstanding 5.375% Notes due 2022 for U.S. $166,335,000 aggregate principal amount of its new 5.950% Notes due 2031, (6) U.S. $216,727,000 aggregate principal amount of its outstanding 3.500% Notes due 2023 for U.S. $220,999,000 aggregate principal amount of its new 5.950% Notes due 2031, (7) U.S. $117,333,000 aggregate principal amount of its outstanding 4.625% Notes due 2023 for U.S. $124,116,000 aggregate principal amount of its new 5.950% Notes due 2031 and (8) U.S. $111,953,000 aggregate principal amount of its outstanding 4.500% Notes due 2026 for U.S. $114,170,000 aggregate principal amount of its new 5.950% Notes due 2031. The 5.950% Notes due 2031 are jointly and severally guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics and their respective successors and assignees and represent a reopening of the 5.950% Notes due 2031 originally issued on January 28, 2020. On February 6, 2020, Petróleos Mexicanos consummated an exchange offer pursuant to which it exchanged (1) U.S. $179,332,000 aggregate principal amount of its outstanding 5.500% Notes due 2044 for U.S. $165,830,000 aggregate principal amount of its new 6.950% Bonds due 2060, (2) U.S. $750,969,000 aggregated principal amount of its outstanding 5.625% Notes due 2046 for U.S. $695,799,000 aggregate principal amount of its new 6.950% Bonds due 2060 and (3) U.S. $444,125,000 aggregated principal amount of its outstanding 6.350% Notes due 2048 for U.S. $438,371,000 aggregate principal amount of its new 6.950% Bonds due 2060. The 6.950% Bonds due 2060 are jointly and severally guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics and their respective successors and assignees and represent a reopening of the 6.950% Bonds due 2060 originally issued on January 28, 2020. As of May 6, 2020, Petróleos Mexicanos had U.S. $7,450 million and Ps. 37,000 million in available revolving credit lines in order to ensure liquidity, with U.S. $5,800 million and Ps. 0 remaining available. 2019 Financing Activities.During 2019, we participated in the following activities: On June 28, 2019, Petróleos Mexicanos entered into a U.S. $5,500,000,000 revolving credit facility due 2024 and a U.S. $2,500,000,000 term loan facility due 2024. On July 29, 2019, Petróleos Mexicanos entered into a credit line in the amount of U.S. $206,900,910 due 2028. On September 23, 2019, Petróleos Mexicanos consummated a tender offer pursuant to which it purchased (1) U.S. $491,803,000 aggregate principal amount of its outstanding 6.000% Bonds due 2020, (2) U.S. $242,511,000 aggregate principal amount of its outstanding 3.500% Notes due 2020, (3) U.S. $1,897,615,000 aggregate principal amount of its outstanding 5.500% Notes due 2021, (4) U.S. $883,977,000 aggregate principal amount of its outstanding 6.375% Notes due 2021, (5) U.S. $17,316,000 aggregate principal amount of its outstanding 8.625% Bonds due 2022, (6) U.S. $96,970,000 aggregate principal amount of its outstanding Floating Rate Notes due 2022, (7) U.S. $235,177,000 aggregate principal amount of its outstanding 5.375% Notes due 2022, (8) U.S. $361,601,000 aggregate principal amount of its outstanding 4.875% Notes due 2022, (9) U.S. $344,853,000 aggregate principal amount of its outstanding 3.500% Notes due 2023, and (10) U.S. $433,946,000 aggregate principal amount of its outstanding 4.625% Notes due 2023. On September 23, 2019, Petróleos Mexicanos issued $7,500,000,000 of debt securities under its U.S. $102,000,000,000 Medium-Term Notes Program, Series C, in three tranches: (1) U.S. $1,250,000,000 6.490% Notes due 2027, (2) U.S. $3,250,000,000 6.840% Notes due 2030 and (3) U.S. $3,000,000,000 7.690% Bonds due 2050. All debt securities under this program are jointly and severally guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics and their respective successors and assignees. On September 27, 2019, Petróleos Mexicanos consummated an exchange offer pursuant to which it exchanged (1) U.S. $429,159,000 aggregate principal amount of its outstanding 4.875% Notes due 2022 for U.S. $445,153,000 aggregate principal amount of its new 6.490% Notes due 2027, (2) U.S. $40,380,000 aggregate principal amount of its outstanding 8.625% Bonds due 2022 for U.S. $44,819,000 aggregate principal amount of its new 6.490% Notes due 2027, (3) U.S. $142,303,000 aggregate principal amount of its floating rate Notes due 2022 for U.S. $147,436,000 aggregate principal amount of its new 6.490% Notes due 2027 and (4) U.S. $443,288,000 aggregate principal amount of its outstanding 5.375% Notes due 2022 for U.S. $464,824,000 aggregate principal amount of the new 6.490% Notes due 2027. The 6.490% Notes due 2027 are jointly and severally guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics and their respective successors and assignees and represent a reopening of the 6.490% Notes due 2027 originally issued on September 23, 2019. On September 27, 2019, Petróleos Mexicanos consummated an exchange offer pursuant to which it exchanged (1) U.S. $255,577,000 aggregate principal amount of its outstanding 3.500% Notes due 2023 for U.S. $254,527,000 aggregate principal amount of its new 6.840% Notes due 2030, (2) U.S. $373,662,000 aggregate principal amount of its outstanding 4.625% Notes due 2023 for U.S. $383,416,000 aggregate principal amount of its new 6.840% Notes due 2030, (3) U.S. $35,385,000 aggregate principal amount of its outstanding 8.625% Guaranteed Bonds due 2023 for U.S. $39,359,000 aggregate principal amount of its new 6.840% Notes due 2030, (4) U.S. $373,509,000 aggregate principal amount of its outstanding 4.875% Notes due 2024 for U.S. $382,245,000 aggregate principal amount of its new 6.840% Notes due 2030 and (5) U.S. $106,913,000 aggregate principal amount of its outstanding 4.250% Notes due 2025 for U.S. $104,039,000 aggregate principal amount of its new 6.840% Notes due 2030. The 6.840% Notes due 2030 are jointly and severally guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics and their respective successors and assignees and represent a reopening of the 6.840% Notes due 2030 originally issued on September 23, 2019. On September 27, 2019, Petróleos Mexicanos consummated an exchange offer pursuant to which it exchanged (1) U.S. $511,459,000 aggregate principal amount of its outstanding 4.875% Notes due 2022 for U.S. $530,604,000 aggregate principal amount of its new 7.690% Bonds due 2050, (2) U.S. $12,930,000 aggregate principal amount of its outstanding 8.625% Guaranteed Bonds due 2022 for U.S. $14,351,000 aggregate principal amount of its new 7.690% Bonds due 2050, (3) U.S. $192,139,000 aggregate principal amount of its floating rate Notes due 2022 for U.S. $199,089,000 aggregated principal amount of its new 7.690% Bonds due 2050, (4) U.S. $211,380,000 aggregate principal amount of its outstanding 5.375% Notes due 2022 for U.S. $221,661,000 aggregate principal amount of its new 7.690% Bonds due 2050, (5) U.S. $134,408,000 aggregated principal amount of its outstanding 3.500% Notes due 2023 for U.S. $133,881,000 aggregate principal amount of its new 7.690% Bonds due 2050, (6) U.S. $239,073,000 aggregate principal amount of its outstanding 4.625% Notes due 2023 for U.S. $245,321,000 aggregate principal amount of its new 7.690% Bonds due 2050, (7) U.S. $23,597,000 aggregate principal amount of its outstanding 8.625% Guaranteed Bonds due 2023 for U.S. $26,246,000 aggregate principal amount of its new 7.690% Bonds due 2050, (8) U.S. $93,278,000 aggregate principal amount of its outstanding 4.875% Notes due 2024 for U.S. $95,472,000 aggregate principal amount of its new 7.690% Bonds due 2050, (9) U.S. $101,856,000 aggregate principal amount of its outstanding 4.250% Notes due 2025 for U.S. $99,163,000 aggregate principal amount of its new 7.690% Bonds due 2050, (10) U.S. $1,439,479,000 aggregate principal amount of its outstanding 6.500% Bonds due 2041 for U.S. $1,338,540,000 aggregate principal amount of its new 7.690% Bonds due 2050, (11) U.S. $730,486,000 aggregate principal amount of its outstanding 5.500% Bonds due 2044 for U.S. $618,908,000 aggregate principal amount of its new 7.690% Bonds due 2050, (12) U.S. $1,439,519,000 aggregate principal amount of its outstanding 6.375% Bonds due 2045 for U.S. $1,307,786,000 aggregate principal amount of its new 7.690% Bonds due 2050 and (13) U.S. $277,215,000 aggregate principal amount of its outstanding 5.625% Notes due 2046 for U.S. $234,766,000 aggregate principal amount of the new 7.690% Bonds due 2050. The 7.690% Bonds due 2050 are jointly and severally guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics and their respective successors and assignees and represent a reopening of the 7.690% Bonds due 2050 originally issued on September 23, 2019. On October 11, 2019, Petróleos Mexicanos consummated an exchange offer pursuant to which it exchanged (1) U.S. $7,674,000 aggregate principal amount of its outstanding 4.875% Notes due 2022 for U.S. $7,574,000 aggregate principal amount of its new 6.490% Notes due 2027, (2) U.S. $10,000 aggregate principal amount of its outstanding 8.625% Bonds due 2022 for U.S. $10,000 aggregate principal amount of its new 6.490% Notes due 2027, (3) U.S. $120,000 aggregate principal amount of its floating rate Notes due 2022 for U.S. $118,000 aggregate principal amount of its new 6.490% Notes due 2027 and (4) U.S. $500,000 aggregate principal amount of its outstanding 5.375% Notes due 2022 for U.S. $496,000 aggregate principal amount of its new 6.490% Notes due 2027. The 6.490% Notes due 2027 are jointly and severally guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics and their respective successors and assignees and represent a reopening of the 6.490% Notes due 2027 originally issued on September 23, 2019. On October 11, 2019, Petróleos Mexicanos consummated an exchange offer pursuant to which it exchanged (1) U.S. $4,247,000 aggregate principal amount of its outstanding 3.500% Notes due 2023 for U.S. $4,015,000 aggregate principal amount of its new 6.840% Notes due 2030, (2) U.S. $3,030,000 aggregate principal amount of its outstanding 4.625% Notes due 2023 for U.S. $2,957,000 aggregate principal amount of its new 6.840% Notes due 2030, (3) U.S. $25,000 aggregate principal amount of its outstanding 4.875% Notes due 2024 for U.S. $24,000 aggregate principal amount of its new 6.840% Notes due 2030 and (4) U.S. $273,000 aggregate principal amount of its outstanding 4.250% Notes due 2025 for U.S. $249,000 aggregated principal amount of its new 6.840% Notes due 2030. The 6.840% Notes due 2030 are jointly and severally guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics and their respective successors and assignees and represent a reopening of the 6.840% Notes due 2030 originally issued on September 23, 2019. On October 11, 2019, Petróleos Mexicanos consummated an exchange offer pursuant to which it exchanged (1) U.S. $24,000 aggregate principal amount of its outstanding 4.875% Notes due 2022 for U.S. $23,000 aggregate principal amount of its new 7.690% Bonds due 2050, (2) U.S. $20,000 aggregate principal amount of its outstanding 4.625% Notes due 2023 for U.S. $19,000 aggregate principal amount of its new 7.690% Bonds due 2050, (3) U.S. $20,000 aggregate principal amount of its outstanding 8.625% Bonds due 2023 for U.S. $21,000 aggregate principal amount of its new 7.690% Bonds due 2050 and (4) U.S. $570,000 aggregate principal amount of its outstanding 4.875% Notes due 2024 for U.S. $554,000 aggregate principal amount of its new 7.690% Bonds due 2050. The 7.690% Bonds due 2050 are jointly and severally guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics and their respective successors and assignees and represent a reopening of the 7.690% Bonds due 2050 originally issued on September 23, 2019. On November 14, 2019, Petróleos Mexicanos entered into a revolving credit facility for the amount of Ps. 28,000,000,000 due in 2022.
As of December 31, 2019, Petróleos Mexicanos had U.S. $7,450,000,000 and Ps. 37,000,000,000 in available revolving credit lines in order to ensure liquidity, with U.S. $6,780,000,000 and Ps. 16,000,000,000 remaining available. 2018 Financing Activities.During 2018, we participated in the following
On February 12, 2018, Petróleos Mexicanos issued U.S. $4,000,000,000 of debt securities under its U.S. $92,000,000,000Medium-Term Notes Program, Series C, in two tranches: (1) U.S. $2,500,000,000 5.35% Notes due 2028 and (2) U.S. $1,500,000,000 6.35% Bonds due 2048. All debt securities under this program are guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services and Pemex Logistics and On February 12, 2018, Petróleos Mexicanos consummated an exchange offer pursuant to which it exchanged (1) U.S. $952,454,000 aggregate principal amount of its outstanding 5.500% Bonds due 2044 for U.S. $881,899,000 aggregate principal amount of its new 6.350% Bonds due 2048 and (2) U.S. $1,021,065,000 aggregate principal amount of its outstanding
On February 12, 2018, Petróleos Mexicanos consummated a tender offer pursuant to which it purchased U.S. $2,052,000 aggregate principal amount of its outstanding 5.500% Bonds due 2044 and U.S. $2,488,000 aggregate principal amount of its outstanding 5.625% Bonds due 2046. On March 5, 2018, Petróleos Mexicanos consummated a tender offer pursuant to which it purchased U.S. $138,598,000 aggregate principal amount of its outstanding 3.125% Notes due 2019, U.S. $558,644,000 aggregate principal amount of its outstanding 5.500% Notes due 2019, U.S. $91,843,000 aggregate principal amount of its outstanding 8.000% Notes due 2019, U.S. $183,017,000 aggregate principal amount of its outstanding 6.000% Notes due 2020 and U.S. $817,303,000 aggregate principal amount of its outstanding 3.500% Notes due 2020.
On March 27, 2018, Petróleos Mexicanos entered into a loan agreement
On April
On
On June
On June 26, 2018, one of our subsidiary companies,Pro-Agroindustria, refinanced a credit line for U.S. $250,000,000 by entering into a new credit line for the
On On October 23, 2018, Petróleos Mexicanos issued
On
On 2028. As of December 31, Indebtedness During As of December 31, The following table sets forth the analysis of our total indebtedness (not including accrued interest) as of December 31,
The table below sets forth our total indebtedness as of December 31 for each of the three years from Total Indebtedness of PEMEX
Note: Numbers may not total due to rounding.
Source: PEMEX’s consolidated financial statements, prepared in accordance with IFRS.
As of December 31,
Contractual Obligations Information about ourlong-term contractual obligations Contractual Obligations as of December 31,
Note: Numbers may not total due to rounding.
Source: PEMEX’s consolidated financial statements, prepared in accordance with IFRS.
Results of Operations by Business Segment This section presents the results of our operations by business segment, including our central corporate operations and the operations of the consolidated subsidiary companies.
Revenue by Business Segment The following table sets forth our trade and intersegment net sales revenues by business segment for the fiscal years ended December 31,
Note: Numbers may not total due to rounding.
Source: PEMEX’s consolidated financial statements, prepared in accordance with IFRS. Income by Business Segment The following table sets forth our net income (loss) by business segment for each year in thethree-year period ended December 31,
Note: Numbers may not total due to rounding.
Source: PEMEX’s consolidated financial statements, prepared in accordance with IFRS.
We present below the results of our operations by business segment. For more information on our operating segments, see “Item 4— Information on the Company—History and Development— Exploration and Production In
Industrial Transformation In Drilling and Services In Logistics In Fertilizers In Ethylene In 2019, total sales related to our ethylene business decreased by 58.6%, from Ps. 14,457 million resulting from 12 months of operations in 2018 to Ps. 5,981 million resulting from six months of operations in 2019, primarily due to the merger of this segment at the end of the second quarter of 2019 into our industrial transformation segment. In 2019, our net loss related to our ethylene activities decreased by Ps. 3,595 million, from a net loss of Ps.
Trading Companies In Corporate and Other Subsidiary Companies In 2018 compared to 2017 We present below the results of our operations by business segment. For more information on our operating segments, see “Item 4— Information on the Company—History and Development—Corporate Structure” and Note 1 to our consolidated financial statements included herein. For a detailed description of the financial results of each segment, see Note 1 and Note 6 to our consolidated financial statements included herein. Exploration and Production In 2018, total sales increased by 15.3%, primarily due to the increase in crude oil export prices. In 2017, sales of crude oil to the Trading Companies were presented as intersegment sales but, as a result of our implementation of accounting standard IFRS 15 in 2018 and the determination that PMI is considered an agent of Pemex Exploration and Production, all of Pemex Exploration and Production’s crude oil export sales are recognized as sales to third parties in 2018. The weighted average price of crude oil sold by our exploration and production segment for export was U.S. $62.29 in 2018, as compared to U.S. $47.26 in 2017. Net loss related to exploration and production activities decreased by Ps. 142,890 million, from a Ps. 151,037 million loss in 2017 to a Ps. 8,147 million loss in 2018, primarily due to net reversal of impairment of our fixed assets in this segment. Industrial Transformation In 2018, trade sales related to industrial transformation activities increased by 11.3%, from Ps. Drilling and Services In 2018, total sales related to the drilling and services segment increased by 5.0%, from Ps. 3,442 million in 2017 to Ps. 3,613 million in 2018. This increase was primarily due to an increase in services provided to Pemex Exploration and Production. Net income related to drilling and services decreased by Ps. 1,048 million, from a net income of Ps. 1,266 million in 2017 to net income of Ps. 217 million in 2018, primarily due to an increase in operating expenses. Logistics In 2018, total sales related to the logistics segment decreased by 8.1%, from Ps. 74,387 million in 2017 to Ps. 68,381 million in 2018, primarily due to a decrease in the services provided to Pemex Industrial Transformation. In 2018, our net loss related to logistics activities was Ps. 62,576 million, which was Ps. 61,742 million more than our net loss of Ps. 834 million in 2017. The increase in net loss was primarily due to net impairment of our fixed assets in this segment. Cogeneration and Services In 2018 our cogeneration and services segment did not have operations, as all of the assets, liabilities, rights and obligations of Pemex Cogeneration and Services were assumed by, and transferred to, Pemex Industrial Transformation and Pemex Cogeneration and Services was subsequently dissolved. For further information on the dissolution of Pemex Cogeneration and Services, see “Item 4— Information on the Company—History and Development—Corporate Structure” and Notes 1 and 6 to our consolidated financial statements included herein. Fertilizers In 2018, total sales related to the fertilizers segment decreased by 37.0%, from Ps. 4,768 million in 2017 to Ps. 3,004 million in 2018. This decrease was primarily due to a decrease in the trade sales of ammonia. In 2018, our net loss related to our fertilizers activities increased by 24.8%, from a net loss of Ps. 4,270 million in 2017 to a net loss of Ps. 5,330 million in 2018, primarily due to a decrease in profit sharing in joint ventures and associates. Ethylene In 2018, total sales related to our ethylene business increased by 1.7%, from Ps. 14,214 million in 2017 to Ps. 14,457 million in 2018, primarily due to an increase in sales of monoethylenglecol. In 2018, our net loss related to our ethylene activities increased by Ps. 3,544 million, from a net loss of Ps. 1,442 million in 2017 to a net loss of Ps. 4,986 million in 2018. This increase in loss was primarily due an increase in cost of sales and taxes. Trading Companies In 2018, total sales relating to the Trading Companies’ exports of crude oil and petroleum products to third parties (including services income) decreased in peso terms, from Ps. 508,606 million in 2017 to Ps. 204,168 million in 2018, primarily as a result of the derecognition of revenue from sales by Pemex Exploration and Production to the Trading Companies as a result of our implementation of IFRS 15 in 2018. In 2018, net income related to the Trading Companies decreased by 60.3%, from Ps. 12,045 million in 2017 to Ps. 4,778 million in 2018, primarily as a result of our implementation of IFRS 15. Corporate and Other Subsidiary Companies In 2018, the total sales relating to corporate and other subsidiary companies afterinter-company eliminations decreased from Ps. 1,524,600 million in 2017 to Ps. 1,235,474 million in 2018, primarily due to a decrease in total intercompany sales as a result of an increase in the import of products. Net loss related to corporate and other subsidiary companies afterinter-company eliminations Research and Development Our research and development activities are focused on developing the Mexican energy sector through advancing products and solutions that are intended to be high quality, high performance and technologically efficient. The Mexican Petroleum Institute is a public research organization under the SENER. The objective of the IMP is to develop the Mexican petroleum, petrochemical and chemical industries and assist us in For example, we collaborate with the IMP through theirCentro de Tecnología para AguasProfundas (Deep-Water Technology Center or CTAP). The CTAP is equipped with various laboratories to research drilling of wells, characterization of natural and operational risks and qualification and design of production tools, equipment and systems for use by the petroleum sector in We also coordinate with other entities outside of Mexico. On March 6, 2019, we signed a memorandum of understanding with the JBIC with the purpose of exchanging experiences and promoting development in the energy sector.
Under the Petróleos Mexicanos Law, Petróleos Mexicanos is governed by aten-member Board of Directors composed as follows:
the Secretary of Energy, who serves as the Chairperson and has the right to cast atie-breaking vote;
the Secretary of Finance and Public Credit;
three Mexican Government representatives, who are appointed by the President of Mexico; and
five independent members, who are appointed by the President of Mexico, subject to ratification by the Senate. Independent members perform their duties on apart-time basis, are not public officials (i.e., individuals holding federal, state or municipal government positions in Mexico) and have not been employed by Petróleos Mexicanos or any of the subsidiary entities during the two years prior to their appointment. The Petróleos Mexicanos Law authorizes only the Secretary of Energy and the Secretary of Finance and Public Credit to designate an alternate to serve in his or her place, provided that the alternate is a public official at the undersecretary level, at minimum. This alternate may attend meetings of the Board of Directors of Petróleos Mexicanos and otherwise assume the duties of the director, except that the Chairperson’s designated alternate may not cast atie-breaking vote. In addition, anyministry-level secretary serving as a member of the Board of Directors of Petróleos Mexicanos may designate an alternate to attend meetings on his or her behalf, provided that such alternate is a public official at the undersecretary level, at minimum. Under the Petróleos Mexicanos Law, all public officials serving as members of the Board of Directors of Petróleos Mexicanos are required to act impartially and for the benefit and in the best interests of Petróleos Mexicanos, separating at all times the interests of the ministry or governmental entity for which they work from their duties as members of the Board of Directors.
Under the Petróleos Mexicanos Law, each of the boards of directors of the subsidiary entities will consist of not less than five and no more than seven members. The majority of the members of each of the board of directors shall be appointed by and represent the Board of Directors of Petróleos Mexicanos. The Ministry of Energy and the Ministry of Finance and Public Credit may also appoint members to each board of directors of the subsidiary entities, subject to approval by the Board of Directors of Petróleos Mexicanos.
The following tables set forth certain information with respect to directors and executive officers of Petróleos Mexicanos and each of the subsidiary entities as of
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