Oil & Gas Sector Mexico · For more than 75 years the oil & gas industry in Mexico has been...

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Oil & Gas Sector Mexico

July 2015

MX_211_0001_Jul'2015_HA_SM



Table of Contents

I. Sector Overview

1. Sector Highlights

2. Economic Importance

3. Sector Forecast

4. Oil & Gas Reserves

5. Oil & Gas Reserves (cont’d)

6. Oil & Gas Production

7. Oil & Gas Consumption

8. Oil & Gas Infrastructure

9. Employment

10.Pension Liabilities

11.Government Policy

12.Government Policy: Energy Reform

13.Government Policy: Energy Reform (cont´d)

14.Government Policy: Energy Reform (cont´d)

15.Government Policy: Bidding Rounds Timetable

16.SWOT Analysis

II. Oil

1. Mexico in Global Oil Market

2. Drilling Activity

3. Drilling Activity (cont´d)

4. Oil Production

5. Oil Production (cont’d)

6. Oil Production (cont’d)

7. Production Costs

8. Oil Export

9. Oil Export Price

10.Oil Refining

11.Petrochemicals Production

12.Petrochemicals External Trade

13.Petrochemicals Price

III. Natural Gas

1. Mexico in Global Natural Gas Market

2. Natural Gas Reserves

3. Natural Gas Production

4. Natural Gas Production (cont’d)

5. Natural Gas Sales

6. Natural Gas Apparent Consumption

7. Natural Gas External Trade

8. Shale Oil & Gas



Table of Contents

IV. Main Players

1. Top M&A Deals

2. M&A Activity, 2013-2014

3. Petróleos Mexicanos – PEMEX

4. Petróleos Mexicanos – PEMEX (cont´d)

5. Pemex Exploración y Producción

6. Pemex Refinación

7. Pemex Gas y Petroquímica Básica

8. Pemex Petroquímica

9. PMI – Comercio Internacional



I. Sector Overview



Sector Highlights

For more than 75 years the oil & gas industry in Mexico has been dominated by one single state-owned company – Petroleos Mexicanos (Pemex),

which controlled the entire value chain from exploration, drilling and refining to transportation, sales and export. As a result, foreign company activity

in the sector was practically non-existent. Over the years, the participation of private companies was limited and aimed at compensating for the

immediate limitations of Pemex: the latter partnered with Anglo-Dutch peer Royal Dutch Shell to refine oil in 1993 and created a joint venture (JV)

with domestic gas transportation company Gasoductos de Chihuahua in 1997 to build pipelines.

Monopolistic Structure

Energy Reform

Petrochemicals Deficit

Forecast

In an effort to promote the development of the domestic energy sector, the government launched a far-reaching Energy Reform at the end of 2013 to

allow the participation of foreign companies in all activities in the oil & gas chain, hitherto performed exclusively by Pemex. However, the results of

the first auction held in July 2015, out of five aimed to open the oil & gas industry to private and foreign investment, fell below expectations, with only

two out of 14 blocks receiving qualifying bids, as several oil majors decided not to participate, while the bulk of price bids remained below the

established minimum in line with the global scenario of low oil prices and the stagnation in Mexican oil output in the recent years.

Although Mexico is one of the world’s largest oil producers (ranked 10th in 2014), the country has a serious deficit in terms of refining capacity and

manufacture of petrochemicals. The country has only six refineries, which cannot meet domestic demand. As a result, imports of refined products –

such as petrol (gasoline), jet fuel, liquefied petroleum gas and diesel – vastly surpass exports, by a ratio of 3 to 1. In June 2015, Refinerias Unidas

de Mexico, a U.S.-Mexican JV, unveiled plans to invest USD 6bn in the construction of six new refineries, with a combined production capacity of

360,000 bpd (barrels per day), once the Energy Reform allows foreign direct investment (FDI) in the sector.

The sizeable proved oil reserves of the country (the 18th largest in the world as of December 2014), coupled with recent discoveries of vast oil fields

and the entry of FDI into the sector as a consequence of the Energy Reform, are expected to boost the development of the oil & gas industry in the

short term. Oxford Economics has estimated that oil & gas output will increase by nearly 20% over the years 2015-2019. One notable development

is the Pemex announcement, in June 2015, of the discovery of a new oil field with estimated reserves of 350mn barrels and an expected production

rate of 200,000 bpd.



Source:

Comments

Economic Importance

Mexico’s oil & gas industry has a paramount importance in the domestic economy. In 2014, the industry accounted for 7.2% of Mexico’s GDP,

more than any other industry in the country. This figure has been stable at slightly over 7% during the past five years despite the poor

performance of the economy, which registered a large decline during the financial crisis of 2009. The oil & gas industry is also a large

contributor to the Mexican treasury, providing roughly one third of all government revenues, proportionately far more than other industries. It is

important to note that, since the oil & gas sector is a state-controlled monopoly, there has been no FDI in the sector, despite the significant

increase of foreign investor interest in Mexico during the last few years.

Oil and Gas Sector Key Indicators

National Institute of Statistics and Geography (INEGI), Petroleos Mexicanos (Pemex)

2009 2010 2011 2012 2013 2014

GDP Value (MXN bn) 11,375 11,965 12,425 12,913 13,938 14,307

GDP (yoy change, %) -4.7 5.1 4.0 4.0 1.4 2.1

GDP Oil & Gas Sector (MXN bn) 718 810 1,126 925 848 635

GDP Oil & Gas Sector (yoy change, %) -4.4 -0.7 -2.0 0.3 -0.9 -4.7

Oil & Gas Sector (share in total GDP, %) 7.2 7.4 7.6 7.6 7.4 7.2

Oil & Gas Sector (share in government revenues, %) 31.0 32.9 34.5 33.8 33.2 30.4

Total Foreign Direct Investment (USD mn) 17,679 26,083 23,376 18,951 44,627 22,795



Comments

Source:

Sector Forecast

Oil & gas extraction is expected to witness a robust growth in the coming years, boosted by the exploration and discovery of new oil fields and

by the entry of large foreign multinational companies into the sector. According to Oxford Economics, Mexico is expected to increase its oil &

gas output by nearly 20% over the period 2015-2019. Further, the sector is forecast to see investments of USD 30bn per year, both by Pemex

and by private companies. It is important to note that, of this estimated investment total, up to 85% is expected to be in exploration, drilling

and production activities and just 11% in refining activities – figures that are in line with the historical distribution by sub-sector of investments

made by Pemex.

Oil & Gas Extraction, Value Added Output Index (2005=100) Estimated Investments in Oil & Gas Extraction, USD bn

Oxford Economics, Petroleos Mexicanos (Pemex)

29.0

29.9

31.0

31.3

2015F 2016F 2017F 2018F

94.46 95.78

101.68

108.95

113.13

2015F 2016F 2017F 2018F 2019F



Source:

Comments

Oil & Gas Reserves

Mexico ranks among the 20 countries with the largest proved oil & gas reserves. The proved reserves of the country (those with a probability

of extraction of 90%) stood at nearly 12.4bn barrels of oil equivalent (boe) at the end of 2014, mostly located in the offshore area of the

southern state of Tabasco. In addition, the country had estimated prospective resources of nearly 26bn boe, of which 80% were from

conventional sources, much easier to extract than the non-conventional ones. The largest portion of the prospective reserves (48.2%) was

located in the southern area of the country, mainly offshore.

Oil & Gas Reserves, December 2014 (bn barrels of oil equivalent)

Petroleos Mexicanos (Pemex)

Geographic Area

Reserves – Probability of Extraction Prospective Resources

1P - 90% certainty 2P - 50% certainty 3P - 10% certainty Conventional Non Conventional

Southeastern 10.8 14.2 18.2 12.5 0

Tampico-Misantla 1 5.9 10.6 2.4 3.3

Burgos 0.3 0.4 0.6 0.6 1.5

Veracruz 0.2 0.2 0.2 0 0

Sabinas 0 0 0.1 0 0.4

Deepwater 0.1 0.4 1.8 5.2 0

TOTAL 12.4 21.1 31.5 20.7 5.2



Source:

Oil & Gas Reserves (cont’d)

Oil & Gas Reserves by Geographic Area, December 2014




Source:

Oil & Gas Production

Oil & Gas Production Index (yoy change, %)

Capacity Utilisation Rate (%)

CEIC

-15

-10

-5

0

5

Jan 2012 Jan 2013 Jan 2014 Jan 2015 Apr 2015

Mining Oil & Gas Extraction

50

55

60

65

70

75

80

85

90

Jan 2012 Jan 2013 Jan 2014 Jan 2015 Apr 2015

Manufacturing Petroleum Products and Coal Manufacturing



Source:

Oil & Gas Consumption

Oil Consumption Breakdown by Sector, 2014

Oil Products Domestic Sales* (thou bpd)

Natural Gas Consumption Breakdown by Sector, 2014

Natural Gas Domestic Sales* (mn cu ft/d)

INEGI, Economist Intelligence Unit, Petroleos Mexicanos (Pemex), - * Sales to domestic market by Petroleos Mexicanos (Pemex)

3,255

3,383 3,388

3,464 3,451

2010 2011 2012 2013 2014

1,763 1,788

1,841

1,786

1,709

2010 2011 2012 2013 2014

Transport 51.9%

Industry 10.2%

Electricity 10.2%

Residential 8.4%

Commercial & Public

Services 1.9%

Other 17.3%

Electricity 45.4%

Industry 23.2% Residential

1.4% Commercial &

Public Services 0.4%

Other 29.6%



Source:

Oil & Gas Infrastructure

Breakdown of Pipeline Network, December 2014

Comments

Maintenance Budget for Pipeline Natural Gas & LPG (MXN mn)

Expansion Plans: Los Ramones Gas Pipeline


At end-2014, Mexico had a pipeline network of 50,679 km, of

which some 22% (11,162 km) was used for transportation of

natural gas and another 1,728 km for transportation of liquefied

petroleum gas (LPG).

The country’s Northern region was home to some 62% of the

existing pipelines, while the Southern region accounted for 21%.

Only 5% of the pipeline network was located in offshore areas as

of December 2014. The remaining 13% were attributable to

distribution and commercial pipelines.

Los Ramones is currently the most important gas infrastructure

project in the country, as it envisages the construction of a 859 km

pipeline to supply natural gas from the United States (Agua Dulce,

Texas) to Mexico. In December 2014, the projects’ first phase was

completed: this involved construction of a 116.4-km pipeline between

Texas and Los Ramones, Nuevo Leon state. The pipeline is 48

inches in diameter and has the capacity to transport 1bn cubic

feet/day (1bcfd). The second phase includes a 743-km pipeline, 42

inches in diameter, starting at Nuevo Leon and going through the

states of San Luis Potosi, Queretaro and Guanajuato. The project,

valued at USD 2.75bn, is forecast to begin operations in 2016.

254

346

246

205

2015F 2016F 2017F 2018F

Production lines 37.2%

Natural gas 22.0%

Oil & Petrochemical

products 17.5% Crude oil

14.2%

Liquefied petroleum gas

3.4% Other 2.9%

Basic petrochemicals

2.7%



Source:

Employment

Number of Employed People in the Oil & Gas Sector (year-end) Comments

• Petroleos Mexicanos (Pemex), the only company

active in the oil & gas sector in Mexico in 2014, had a

workforce of 153,398 people at end-year. About 34%

of them were employed in the exploration and

production divisions, which accounted for the bulk of

the company’s capital expenditures (nearly 80%).

• As of December 2014, the Petroleum Workers’ Union

of Mexico represented approximately 79.4% of those

employed in Pemex. Since the Union was officially

established in 1938, the company has not

experienced labour strikes. The industrial

organisation successfully pressed back in 1942 for

the adoption of a generous legislation, according to

which workers could retire at age 55, or after only 25

years of service, with a pension equivalent to 80% of

their last salary. These retirement conditions are still

in force as of mid-2015 and have resulted in a

increasingly large burden of pension liabilities on

Pemex.


51,998 53,404 52,403

13,487 13,758 13,476

12,191 12,905 12,669

26,785 26,727 26,961

325 332 313

46,236 47,980 47,576

151,022 155,106 153,398

2012 2013 2014

Refining

PMI Int.Commerce

PemexCorporate

Gas & BasicPetrochemicals

Petrochemicals

Exploration &Production

Total



Source:

Comments

Pension Liabilities

Addressing its mounting pension liabilities has become an urgent problem for Pemex. When Pemex was created in 1938, the life expectancy

of the average worker was 38 years. In 1942, generous legislation was put in place: employees could retire at age 55, or after only 25 years of

service, with a pension equivalent to up to 80% of their last wage. These retirement conditions, which are still in force, combined with the

growing life expectancy of the population, have led to a surge in the pension liabilities of Pemex – which stood at MXN 1,494bn as of

December 2014. Reducing these liabilities by 42% is one of the objectives of the Energy Reform: to achieve this, new employees will enter

into a new accountability regime and the age of retirement will gradually increase to meet the new demographic conditions.

Life Expectancy in Mexico


34 39

47

58 61

66 71

74 74 75

1930 1940 1950 1960 1970 1980 1990 2000 2010 2013



Source:

Government Policy

Historical

Background

The oil & gas industry in Mexico has been controlled by a state-owned monopoly since 1938, when all assets of foreign oil companies operating in the country were nationalised. At the same time, the government created Petroleos Mexicanos (Pemex), which until 2013 was the only company authorised to operate in the extraction, exploration, refining, storage, transport, logistics and sale of oil & gas related products. The few private companies that actually had some minor role in the industry were under contract to – and control of – Pemex. These included a 50/50 partnership with Anglo-Dutch oil company Royal Dutch Shell formed in 1993 to refine oil and increase the supply of petrol (gasoline) to the domestic market; a 50/50 JV with Mexican gas transportation company Gasoductos de Chihuahua, formed in 1997 to build pipelines; and a JV with Mexican petrochemical company Mexichem, formed in 2012 to manufacture vinyl chloride (Pemex had a 44% stake).

Key Bodies

The Secretariat of Energy (SENER) – effectively the country’s energy ministry – is the main body that regulates the energy

sector in Mexico, with a mission to conduct the energy policy of the country and secure the continuous supply of energy.

SENER regulates two state-owned entities: Pemex, which produces oil, gas and petrochemicals, and the Federal

Electricity Commission (Comisión Federal de Electricidad, CFE), the national power utility. Other government bodies

include the Energy Regulatory Commission (Comisión Reguladora de Energía, CRE), which regulates the transportation

and storage of oil & gas products and protects the interests of Mexican consumers in regard to energy consumption. The

National Hydrocarbons Commission (Comisión Nacional de Hidrocarburos, CNH) regulates and supervises oil & gas

exploration and extraction, conducting bidding processes and granting concession contracts to private companies.

Fiscal Policy

Under the current fiscal regime, Pemex is governed by the Federal Fiscal Revenue Law, which imposes excessive taxes on the company: in 2014 some 47% of Pemex revenues were taken by the government by means of taxes and duties. In fact, Pemex contributes an estimated 33% of the Federal budget, a figure unparallelled by any other company, public or private. This situation significantly limits the investment capacity of the company. Apart from the excessive tax burden, mounting pension liabilities and frequent allegations of corruption among high-ranking executives and members of the Petroleum Workers’ Union have adversely affected the company financially. In an effort to alleviate these constraints, the country’s Secretariat of Finance and Public Credit announced in May 2015 a new fiscal policy that envisages an income tax rate of 30% for Pemex and other companies in the oil & gas sector – the same rate as is applicable to other industries in the country.

SENER, Petroleos Mexicanos (Pemex)



Source:

Government Policy: Energy Reform

Regulatory

Changes

Pemex was created in 1938 under the Decree “Decreto que crea la Institución Petróleos Mexicanos”, which was

incorporated in the Constitution under Regulatory Law to Article 27 of the Mexican Constitution Concerning Petroleum

Affairs, commonly referred as “the Regulatory Law”.

In July 1992, Pemex was restructured with the adoption of the Organic Law of Petroleos Mexicanos and Subsidiary

Entities, which created the five subsidiaries that now constitute the company – Pemex Exploracion y Produccion, Pemex

Refinacion, Pemex Gas y Petroquimica Basica, Pemex Petroquimica and PMI Comercio International – as decentralised

public entities of the Mexican government with the legal authority to own property and conduct business under their own

names.

In December 2013, a new law was adopted that envisaged the restructuring of the entire oil & gas industry with

unprecedented amendments to Articles 25, 27 and 28 of the Mexican Constitution. The latter, also known as “the Energy

Reform”, is highly controversial as it opens the oil & gas sector to foreign companies for the first time in 75 years.

Energy

Reform

In December 2013, the Mexican Congress sanctioned the reform of the country’s energy sector proposed by President

Peña Nieto. The reform removed Article 27 of the Constitution, which regulated the monopoly of Pemex over the

development of activities related to the oil & gas sector in Mexico. The new legal provisions enabled the granting of

concessions to domestic and foreign companies for oil & gas exploration, drilling, and extraction, and refining and

transportation of oil and gas products. Under the new regulation, the concessions would be granted via a bidding process,

in which Pemex would not only be allowed to participate, but would have a preferential right to choose fields and zones for

exploration and exploitation. Moreover, Pemex would have the right to enter into alliances with other companies to exploit

oil & gas resources. The Energy Reform encountered strong opposition from left-wing political parties, which described it

as privatisation of Pemex and of the oil & gas reserves of Mexico. The right-wing parties controlling the Congress defended

the legal amendments by stating that all solid, liquid and gaseous hydrocarbons located in the subsoil and deep waters of

Mexico would remain the property of the Mexican nation, since private companies would not have property rights, but only

the rights to exploit and transform these resources.

SENER, Petroleos Mexicanos (Pemex)



Source:

Government Policy: Energy Reform (cont´d)

Round Zero

Mar-Aug 2014

The opening of Mexico’s oil & gas industry to foreign companies is being implemented in two main steps. Under the first

step, known as “Round Zero”, the Mexican government, via SENER and the National Hydrocarbons Commission (CNH),

awarded Pemex the rights to operate a number of fields in order to assure adequate and sustainable investments in

exploration, development and extraction of oil & gas.

Pemex received fields with estimated reserves of 20.6bn boe, accounting for 87% of the country’s “2P” proved reserves

and for 21% of its prospective resources, including fields in the main offshore producing areas of the Gulf of Mexico. The

latter were equivalent to 95.9% of the reserves initially requested by Pemex and represent approximately 15.5 years of

production at the production rate of 2014.

The remaining areas will be subject to a process of competitive bidding among domestic and foreign companies under

“Round One”.

Round One

Nov 2014 –

Dec 2015

Under Round One, the oil & gas areas that were not assigned in the previous round will be granted to private domestic and

foreign companies through a bidding process. Round One is expected to include a total of 169 blocks – 109 exploration

blocks and 60 producing blocks – covering an aggregate area of approximately 28,500 km2, located in the offshore area of

the Gulf of Mexico and the southern state of Tabasco. The required minimum investments in these blocks are valued at

USD 50bn over the period 2015-2018. In Round One, SENER and CNH will also select which companies will enter into

JVs with Pemex for the development of ten specific projects. The bidding process was launched in the first quarter of 2015.

In May 2015, CNH announced that 26 companies (including Pemex, U.S. energy giant ExxonMobil and Anglo-Australian

mining and oil company BHP Billiton) had passed the first pre-qualification and would continue with the bidding process,

while others had been rejected (this included Brazilian oil major Petrobras and Anglo-Dutch peer Royal Dutch Shell). The

first portion of blocks under Round One, with a combined potential to generate USD 16.8bn in FDI, was auctioned in July

2015. However, only two blocks were awarded to a consortium between Mexican start-up Sierra Oil & Gas, U.S. peer Talos

Energy and U.K.-based oil group Premier Oil, as only nine out of 24 registered companies bid in the auction and the

offered prices fell below the established minimum by the government. The next auction will be held on 30 September 2015.

SENER, Petroleos Mexicanos (Pemex), CNN Expansion



Source:

Government Policy: Energy Reform (cont´d)

Legislation

Corporate

Re-

organisation

New Fiscal

Regime &

Anti-

corruption

Measures

The Energy Reform transformed Pemex into a corporation whose purpose is to

generate economic value, without ending its status as a state-owned company.

The company will be subject to strict accountability and transparency with regard

to its operations, debt, acquisitions and assets. The new legislation introduced a

framework for private and public companies to operate in the industry via bidding

processes and assignment of exploration and production rights.

The Energy Reform imposed a corporate reorganisation of Pemex, with the

creation of five new subsidiaries: Pemex Drilling and Services (drilling

activities), Pemex Logistics (pipeline transportation), Pemex Cogeneration and

Services (energy), Pemex Ammonia Fertilisers (production of fertilisers) and

Pemex Ethylene. Moreover, two decentralised public entities of the Mexican

government were created: CENAGAS to manage the pipeline network of the

natural gas division of Pemex, and the Mexican Oil Fund, which will manage

the government revenues from the oil & gas industry.

In May 2015, SENER and the Secretariat of Finance and Public Credit –

Mexico’s finance ministry – announced a new fiscal regime that levies taxes from

the oil & gas sector at rates comparable to those applicable to other industries

(30% of income), taking into account the investment activities of the industry. The

Energy Reform will also introduce anticorruption measures aimed at preventing

and sanctioning corruption among entities, individuals and public officials

participating in the Mexican energy sector.

The reform of the

energy sector and of the

iconic company Pemex

goes well beyond oil

bidding rounds and

requires profound

changes in the

structure, laws and

corporate governance

of Pemex and the entire

oil & gas industry in

Mexico. Here are some

of the most important

changes enacted in the

Energy Reform.




Source:

Government Policy: Bidding Rounds Timetable

Petroleos Mexicanos (Pemex), - * 3P reserves

Farm-outs

22 Existing

Contracts

Phase 1

Phase 2

Deepwater oil

Shallow waters

Onshore

Extra heavy oil

Deepwater gas

2P Reserves CAPEX

(mn boe) (USD bn) Fields

569 2.6 Poza Rica - Atamira and Burgos

1,639 32.7 ATG and Burgos

350 6.3 Bolontiku, Sinan and Ek

248 1.7 Rodador, Ogarrio and Cardenas-Mora

747 6.2 Ayatsil-Tekel-Utsil

212 6.8 Kunah-Pikis

539* 11.2 Trion and Exploratus

4,304 67.5 Total

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Aug 2014 / Dec 2015 Migration to exploration and extraction contracts (first phase)

Jan / Dec 2015 Migration to exploration and extraction contracts (second phase)

Nov 2014 / Dec 2015 Farm-outs

2014 2015



.

…

Source:

SWOT Analysis

Mexico has vast oil & natural gas reserves with high growth

potential. The country is highly competitive in terms of

exploration, drilling and production costs. The country offers a

renewed playing field with ample investment opportunities and a

new fiscal regime that assesses every investment project to

determine the right contract model and fiscal conditions.

Mexico has structural problems with violence and organised

crime that still represent important threats to industrial safety and

security. The oil & gas industry also faces the burden of large

pension liabilities, outdated infrastructure, insufficient refining

capacity and dependence on import of petrochemicals.

Corruption and inefficient allocation of financial resources remain

crucial hurdles for the sector.

At present, the most important threat to the industry is the sharp

drop of international oil prices from the second half of 2014 and

the subsequent decrease of export revenues and investment

capacity. Another risk comes from left-wing political parties, which

threaten to rescind the Energy Reform of December 2013 if they

come to power.

The country has a large number of unexplored and underdeveloped areas with good opportunities for finding oil and gas. For the first time in the past 75 years, the Energy Reform offers private domestic and foreign companies the opportunity to operate in the entire oil & gas industry value chain: exploration, drilling, extraction, transportation, refining and manufacture of petrochemicals.

SWOT Anaysis

Strengths Opportunities

Weaknesses Threats




II. Oil



Source:

Mexico in Global Oil Market

Proved Oil Reserves by Country, December 2014 Oil Production by Country, 2014

BP Statistical Review of World Energy 2015

Country mn barrels

1 Venezuela 298,350

2 Saudi Arabia 267,000

3 Canada 172,917

4 Iran 157,800

5 Iraq 150,000

6 Russian Federation 103,164

7 Kuwait 101,500

8 United Arab Emirates 97,800

9 United States 48,463

10 Libya 48,363

11 Nigeria 37,070

12 Kazakhstan 30,000

13 Qatar 25,705

14 Brazil 16,154

15 China 18,479

16 Angola 12,667

17 Algeria 12,200

18 Mexico 11,079

Country mn bpd

1 United States 11,644

2 Saudi Arabia 11,505

3 Russian Federation 10,838

4 Canada 4,292

5 China 4,246

6 United Arab Emirates 3,712

7 Iran 3,614

8 Iraq 3,285

9 Kuwait 3,123

10 Mexico 2,784

11 Venezuela 2,719

12 Nigeria 2,361

13 Brazil 2,346

14 Qatar 1,982

15 Norway 1,895

16 Angola 1,712

17 Kazakhstan 1,701



Source:

Drilling Activity

Producing Wells & Wells Under Development

Wells Drilled & Wells Under Development


4,942 5,286 5,683 6,080 6,280 6,382 6,890

7,476 8,315

9,439 9,836 9,558

505 624 668 587 610 664 1,075 1,264 1,001 1,201 785 511

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Producing wells Wells under development

635 733 759 672 615 822

1,490

994 1,000 1,290

705 535

1,763 2,106 2,004 1,858 1,798

2,199

3,770

2,589 2,541

3,007

1,627 1,413

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Wells drilled Kilometres drilled



Source:

Drilling Activity (cont’d)

Exploration & Drilling Teams

Oil & Gas Discovered Fields


11 8

3 2 4 6 6 2 2 2 4 9

22

16 13 11 10 8 7

3 6 7 2

10

33

24

16 13 14 14 13

5 8 9

6

19

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Oil fields Gas fields Total discovered fields

101

132 116

103 116

143

176

130 128 136

139

35 40 27 23 20

30 26 19 17 17 21

66

92 89 80

96 113

150

111 111 119 118

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Total Exploration & Drilling Teams Exploration Development



Source:

Oil Production

Crude Oil Production, 2014 (%)

Evolution of Crude Oil Production by Region (thou bpd)

Crude Oil Production by Region, 2014 (%)

Comments


The offshore region, the largest oil producing area in Mexico,

comprises the continental shelf and its slope in the Gulf of

Mexico along the coasts of the states of Veracruz, Tabasco,

Campeche, Yucatan and Quintana Roo, covering an area of

550,000 km2.

The Southern region covers an area of 392,000 km2, located in

the states of Guerrero, Oaxaca, Chiapas, Tabasco, Yucatan,

Quintana Roo, Campeche and the southern area of Veracruz.

The Northern region, with an area of 1.8mn km2, includes the

northern area of the state of Veracruz, and the states of

Tamaulipas (Burgos region) and Coahuila (Sabinas region).

1,895 1,896 1,851

508 481 452

145 145 125

2,548 2,522 2,429

2012 2013 2014

NorthernRegion

SouthernRegion

Offshore

Total

Offshore 76.2%

Onshore 23.8%

Offshore 76.2%

Southern Region 18.6%

Northern Region 5.1%



Source:

Oil Production (cont’d)

Crude Oil Production by Type (thou bpd)

Evolution of Crude Oil Production by Region

Crude Oil Production by Type, 2014 (%)

Comments


Mexico produces two types of heavy crude oil (Altamira and

Maya) and two varieties of light crude oil (Istmo and Olmeca).

In 2014, heavy crude oil accounted for 52% of the output, down

from 54% in 2013.

The offshore region yields mostly heavy crude oil (62.7% of

total output), while the Southern region produces mainly light

crude oil with a share of 92.3%. The Northern regions have a

relatively balanced production of heavy and light crude oil.

In 2014, oil production dropped by 3.7% y/y, as a result of lower

output in mature fields such as Cantarell, ATG and IxtalManik.

1,464 1,417 1,385 1,365 1,266

1,113 1,136 1,163 1,157 1,163

2,577 2,553 2,548 2,522 2,429

2010 2011 2012 2013 2014

Heavy crude oil Light crude oil Total Oil Production

Heavy crude oil 52.1%

Light crude Oil 47.9%

1,942 1,903 1,895 1,896 1,851

532 531 508 481 452 104 119 145 145 125

2,577 2,553 2,548 2,522 2,429

2010 2011 2012 2013 2014

Offshore Southern Region

Northern Region Total Production



Source:

Oil Production (cont’d)

Crude Oil Production by Region (thou bpd)

Crude Oil Production by Type (thou bpd)

CEIC

0

500

1,000

1,500

2,000

2,500

3,000

Total Oil Production Offshore Southern Region Northern Region

0

500

1,000

1,500

2,000

2,500

3,000

Total Oil Production Heavy crude oil Light crude oil



Source:

Production Costs

Production Costs (USD per boe, 2013)

Exploration & Drilling Costs (USD per boe, 2013)

Pemex: Production Costs Evolution (USD per boe)

Pemex: Exploration & Drilling Costs Evolution (USD per boe)


5.22

6.12

6.84

7.91 8.22

2010 2011 2012 2013 2014

13.79 13.23

12.54

14.35

17.97

2010 2011 2012 2013 2014

32.40

19.99 17.93 17.62

15.19 14.35

Total ENI Conoco Philips ExxonMobil BP PEMEX

17.22 17.10

12.19 11.48

8.51 7.91

Petrobras Chevron ENI ExxonMobil Statoil PEMEX



Source:

Oil Export

Oil Export Revenues by Region, USD mn

Crude Oil Exports by Country, 2014

Oil Export Revenues by Type, USD mn

Comments

CEIC, Petroleos Mexicanos (Pemex)

The heavy crude Maya oil type is the one most in demand on

international markets, accounting for 78.6% of exports, with

light crude oil Olmeca and Istmo making up for the remaining

21.4% of Mexico’s crude oil exports in 2014.

Historically, the United States has been the biggest export

destination for Mexican oil. In 2014, the country received nearly

70% of Mexican oil exports, down from 72.1% in 2013 and from

83.8% in 2010, mainly due to increased competition on the

U.S. market.

49,3

80

46,8

53

42,7

24

35,8

56

37,3

99

35,1

92

34,9

10

28,1

69

8,13

2

7,75

4

3,88

4

3,12

5

3,85

0

3,90

4

3,92

9

4,56

4

2011 2012 2013 2014

Total Sales Maya Olmeca Istmo

United States 69.4%

Spain 14.2%

India 7.0%

Canada 1.8%

China 1.2%

Others 6.3%

49,3

80

46,8

53

42,7

24

35,8

56

41,7

46

37,0

50

32,1

26

26,1

88

4,88

8

6,61

2

6,47

5

6,73

6

2,74

5

3,19

1

4,12

2

2,93

2

2011 2012 2013 2014

Total Exports Americas Europe Far East



Source:

Comments

Oil Export Price

International oil prices favoured Pemex after they broke the ceiling of USD 100 per barrel in 2011. High-price conditions continued through to

the second half of 2014, with an eventual decline occurring in late 2014. In the first four months of 2015, the export price continued to

decrease, falling below USD 50 per barrel. This situation puts significant pressure on the country’s finances, as oil revenues are a huge

component of the Federal budget (around 33%); hence a reduction in oil price means that the government is forced to increase taxes on

households and businesses as well as to make cuts in spending on health, education and culture to compensate this drop. The 2015 Federal

budget of Mexico was based on an oil price of USD 81 per barrel, but potential budget revisions have not been proposed so far.

Average Oil Export Price (USD per barrel)


0

20

40

60

80

100

120

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Apr. 2015

Mexican Mix Istmo Maya Olmeca



Source:

Oil Refining

Production of Selected Refined Products (thou bpd)


Product 2010 2011 2012 2013 2014

Liquefied petroleum gas 25.5 21.4 25.2 25.2 26.4

Gasoline 424.1 400.3 418 437.2 421.6

Pemex Magna 341.2 324.2 336.8 360.5 290.9

Ultra Low sulfur magna 67.3 61.7 61.5 56.7 99.1

Pemex Premium 12.5 13.7 19.7 19.8 30.8

Base Gasoline 3 0.7 0 0.2 0.8

Other Gasoline 0.1 0 0 0 0

Kerosene (jet fuel) 51.9 56.3 56.6 60.8 53.4

Diesel 289.5 273.8 299.5 313.5 286.6

Pemex Diesel 221 193.6 225.9 217.7 186.9

Ultra low sulfur diesel 67.7 80.1 72.6 92.1 97.8

Other diesel 0.8 0.1 1 3.7 1.9

Fuel oil 322.3 307.5 273.4 268.8 259.2

Other refined products 115.9 131 152.9 170.2 158.8

Asphalts 24.9 26.1 23.1 18.7 23.9

Lubricants 4.3 3.7 3.9 4.4 3.7

Parafins 0.8 0.7 0.8 0.7 0.6

Still gas 54.2 62.6 67.8 70.7 63.9

Others 31.7 37.9 57.3 75.7 66.7

Total Refined Products 1,229.2 1,190.3 1,225.6 1,275.7 1,206.0



Source:

Petrochemicals Production

Petrochemicals Production (thou tonnes)


Product 2010 2011 2012 2013 2014

Liquids 71 64 8 30 42

Hexanes 51 45 5 22 37

Heptanes 20 19 3 8 5

Other inputs 786 740 602 667 704

Oxygen 460 447 418 434 441

Nitrogen 167 165 164 172 176

Hydrogen 159 128 20 61 87

Petrochemicals 7,942 7,236 5,604 6,548 6,492

Methane derivatives 2,282 2,306 2,473 2,460 2,362

Ethane derivatives 2,831 2,750 2,775 2,473 2,089

Aromatics & derivatives 1,042 923 166 799 1,017

Propylene & derivatives 84 62 49 52 65

Petroleum derivatives 610 451 26 321 225

Others 1,093 744 115 443 734

Other products 143 114 153 93 0

Hydrochloric acid 109 98 108 63 0

Muriatic acid 34 16 45 30 0

Total Petrochemical Production 8,942 8,154 6,367 7,338 7,238



Source:

Petrochemicals External Trade

Petrochemicals External Trade (thou bpd) Comments

Mexico is a net importer of petrochemicals, as the

country lacks comprehensive refining capacity able

to cover domestic demand. At end-2014, Mexico had

only six refineries with a combined production

capacity of 4.5mn barrels per day, which covered

only 53% of domestic demand for petrol (gasoline).

As a result, the country needs to import large

quantities of petrol and other fuels to meet increasing

domestic demand. Notably, regular petrol for cars in

Mexico is between 10% and 15% more expensive

than that in the United States, the major import

source country for petrol. The price difference is

attributable to the fact that petrol prices are used as

additional source of revenue for the government in

an effort to compensate for the recent drop in oil

export prices.

According to the Energy Reform, Pemex will cease

to be the only company allowed to engage in

wholesale and retail sales of petrol in the country.

Starting from 2017, petrol under other brands will be

available, while from 2018 the first petrol stations

owned by private companies are expected to operate

in Mexico.


Product 2012 2013 2014

Export 152.6 164.7 194.9

Gasoline 76.8 71.8 67.6

Liquefied petroleum gas 0.1 0.2 1.3

Jet fuel 0.0 1.2 0.0

Fuel oil 73.2 82.9 123.6

Other products 2.5 8.6 2.4

Import 654.8 595.7 633.5

Gasoline 390.7 370.4 389.7

Fuel oil 41.4 34.1 13.0

Liquefied petroleum gas 85.6 79.5 85.0

Diesel 133.4 108.0 132.8

Other products 3.7 3.7 13.0

Trade Balance -502.2 -431.0 -438.6



Source:

Petrochemicals Price

Prices of Selected Oil Products and Petrochemicals in Mexico and the United States (USD)


Product

2010 2011 2012 2013 2014

Unit Mexico United

States Mexico

United

States Mexico

United

States Mexico

United

States Mexico

United

States

Oil Products

Unleaded

gasoline barrel 104.5 108.5 118.6 140.4 131.4 145.4 143.4 139.7 153.2 132.2

Premium

gasoline barrel 124.4 120.3 132.7 152.6 139.8 159.0 150.5 156.8 161.5 152.2

Diesel barrel 109.0 119.8 123.2 154.3 136.0 159.9 147.9 158.6 159.4 152.7

Jet fuel barrel 91.7 90.4 126.5 126.2 137.3 129.1 124.6 123.1 115.5 113.9

Kerosene barrel 109.1 92.5 123.2 125.8 136.0 128.4 147.9 122.8 159.4 113.3

Natural gas

(industrial) thou cu ft 5.3 5.5 5.0 5.1 3.7 3.9 5.3 4.6 5.7 5.5

Natural gas

(residential) thou cu ft 16.0 11.4 15.9 11.0 12.7 10.7 15.2 10.3 15.8 13.2

Selected

Petrochemicals

Ammonia tonne 350.6 369.0 496.2 533.6 530.8 562.8 453.9 505.2 451.9 494.3

Polyethlene LD tonne 1,775.0 1,550.1 1,834.3 1,624.9 1,667.7 1,447.5 1,701.0 1,493.9 1,928.4 1,632.5

Polyethlene HD tonne 1,425.0 1,225.0 1,588.2 1,365.6 1,576.5 1,359.3 1,660.2 1,438.8 1,855.9 1,570.9

Styrene tonne 1,486.2 1,301.9 1,728.4 1,511.6 1,825.9 1,559.2 1,991.6 1,706.3 1,839.2 1,678.0



III. Natural Gas



Source:

Mexico in Global Natural Gas Market

Proved Natural Gas Reserves by Country, December 2014 Natural Gas Production by Country, 2014

BP Statistical Review of World Energy 2015

Country bn cu ft/d

1 United States 70.46

2 Russian Federation 55.99

3 Qatar 17.15

4 Iran 16.70

5 Canada 15.68

6 China 13.01

7 Norway 10.53

8 Saudi Arabia 10.47

9 Algeria 8.06

10 Indonesia 7.10

11 Turkmenistan 6.70

12 Malaysia 6.43

13 Mexico 5.62

14 United Arab Emirates 5.59

15 Uzbekistan 5.54

16 Netherlands 5.40

17 Australia 5.35

18 Egypt 4.71

Country trn cu ft

1 Iran 1,201.40

2 Russian Federation 1,152.80

3 Qatar 866.20

4 Turkmenistan 617.27

5 United States 345.00

6 Saudi Arabia 288.40

7 United Arab Emirates 215.10

8 Venezuela 197.09

9 Nigeria 180.10

10 Algeria 159.06

11 Australia 132.00

12 Iraq 126.70

13 China 122.16

14 Indonesia 101.54

15 Canada 71.69

16 Norway 67.87

17 Egypt 65.20

…

31 Mexico 12.27



Source:

Natural Gas Reserves

Proved Natural Gas Reserves Breakdown (trn cu ft)

Proved Natural Gas Reserves Evolution (trn cu ft)

Developed & Undeveloped Gas Reserves (trn cu ft)

BP Statistical Review of World Energy 2015, Petroleos Mexicanos (Pemex)

29.49 28.15

14.97 14.87 14.80 14.41 13.70 13.17 12.68 11.97 12.49 12.73 12.71 12.27 12.27

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

7,94

1

7,95

8

7,95

1

7,46

1

6,74

0

4,55

3

4,77

6

4,76

2

4,81

1

4,11

9

2010 2011 2012 2013 2014

Proved developed reserves Proved undeveloped reserves

11,9

66

12,4

94

12,7

34

12,7

13

12,2

73

1,44

9

1,59

2

1,37

7

1,01

0

4

770

249

162

89

93

-1,6

91

-1,6

01

-1,5

60

-1,5

39

-1,5

11 2010 2011 2012 2013 2014

Total Reserves Revisions Discoveries Production



Source:

Natural Gas Production

Natural Gas Production, 2014 (%)

Natural Gas Production Evolution (mn cu ft/d)

Natural Gas Production by Area, 2014 (%)

CEIC

Associated 73.8%

Non Associated

26.2%

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Total Production Offshore Onshore

Offshore 47.3%

Onshore 52.7%



Source:

Natural Gas Production (cont’d)

Natural Gas Production by Region (mn cu ft/d)

Natural Gas Processing Capacity, 2014 (%)

Products from Natural Gas (mn cu ft/d)


Area 2010 2011 2012 2013 2014

Offshore Region 2,755.4 2,613.9 2,593.1 2,739.2 3,087.9

Southern Region 1,764.7 1,692.3 1,652.4 1,570.5 1,515.4

Northern Region 2,499.9 2,287.8 2,139.3 2,060.6 1,928.6

Total 7,020.0 6,594.0 6,384.8 6,370.3 6,531.9

3,628 3,693 3,640

365 362 364

176 178 176

115 109 110

72 73 77

592 620 603

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2012 2013 2014

Sulfur

Naphta

Ethane

Liquifiedpetroleum gas

Natural liquidgas

Dry gas

Sour condensates

1.3%

Sour natural gas 39.8%

Cryogenics 52.0%

Liquids fractioning

5.0%

Hydrosulfuric acid 1.9%



Source:

Natural Gas Sales

Natural Gas Domestic Sales Volume* (mn cu ft/d)

Natural Gas Sales Evolution* (MXN mn)

Natural Gas Domestic Sales Value* (MXN mn)

CEIC, Petroleos Mexicanos (Pemex), - * Sales to domestic market by Petroleos Mexicanos (Pemex)

3,255

3,383 3,388

3,464 3,451

2010 2011 2012 2013 2014

67,1

41

64,4

66

50,2

33 68

,129

78,6

66

53,3

86

57,9

81

64,9

67

71,7

29

78,2

59

2010 2011 2012 2013 2014

Natural Gas Liquefied petroleum gas

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Natural gas Petroliferous Petrochemicals



Source:

Comments

Natural Gas Apparent Consumption

Mexico has a large natural gas production that nearly covers domestic consumption, with imports accounting for some 17% of internal demand

in 2014. The export of natural gas is extremely low – in fact, almost negligible – with the United States being the largest export destination.

Over the period 2009-2014, the import of natural gas expanded at a CAGR of 26.3%, driven by the robust growth of domestic demand, which

outpaced national production. On the other hand, gas production recorded an average decrease of 1.5% per year, mainly explained by the

decline in output from the mature Cantarell field. Export has also followed a downward trend due to higher internal demand for gas and

increased competition on the U.S. market.

Natural Gas Production, Export, Import and Apparent Consumption (mn cu ft/d)


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Production Exports Imports Domestic Consumption



Source:

Natural Gas External Trade in Value (USD mn)

Liquefied Natural Gas Import by Volume (mn cu ft/d)

Natural Gas External Trade in Volume (mn cu ft/d)

Comments


The export of natural gas is negligible, accounting for only 0.3%

of total national exports. Imports, on the other hand, more than

doubled in volume terms between 2010 and 2014. The United

States remains the main supplier of natural gas, responsible for

more than 95% of gas imports in the past five years.

In 2013, Pemex started to import liquefied natural gas (LNG)

through the Manzanillo port terminal in order to meet growing

domestic demand. According to the Energy Regulatory

Commission (CRE), Mexico will continue to rely on import of

LNG until 2017, when the Los Ramones gas pipeline is

expected to reach full capacity.

114.3

107.4

2013 2014

932

1,272 1,216

1,729

2,197

31.9 1.6 0.6 2.8 4.8

2010 2011 2012 2013 2014

Imports Exports

536

791

1,089 1,175

1,250

19.3 1.3 0.9 3.1 4.1

2010 2011 2012 2013 2014

Imports Exports

Natural Gas External Trade



Comments

Source:

Shale Oil & Gas

Although Mexico is one of the ten largest holders of shale oil & gas reserves in the world, the country has a negligible production of shale gas.

Extraction of shale gas began in 2013, but by end-2014 its production was negligible, at just 0.14% of total gas output, with only four wells

being exploited. The segment faces strong opposition from a number of environmental groups and opposition parties, which advocate a total

ban on shale gas extraction. Their main concerns are that shale gas extraction has environmental side-effects which have yet to be defined,

that the process is 60% costlier than the extraction of regular gas, that it requires large quantities of water and that it can affect seismic

activity in areas of extraction. The Energy Reform envisages the development of shale gas fields in the northern area of Burgos.

Top 10 Countries with Technically Recoverable Shale Oil, 2014 Top 10 Countries with Technically Recoverable Shale Gas, 2014

U.S. Energy Information Administration (EIA), El Economista, Petroleos Mexicanos (Pemex)

Country bn barrels

1 Russian Federation 75

2 United States 58

3 China 32

4 Argentina 27

5 Lybia 26

6 Australia 18

7 Venezuela 13

8 Mexico 13

9 Pakistan 9

10 Canada 9

Other countries 65

World Total 345

Country trn cu ft

1 China 1,115

2 Argentina 802

3 Algeria 707

4 United States 665

5 Canada 573

6 Mexico 545

7 Australia 437

8 South Africa 390

9 Russian Federation 285

10 Brazil 245

Other countries 1,535

World Total 7,299



IV. Main Players



Source:

Top M&A Deals

Top M&A Deals in the Oil & Gas Sector* in Mexico (2012-Q2´2015)

EMIS DealWatch, - * NAICS Code 211

Date Target Company Deal Type Buyer Country of Buyer Deal Value

USD (mn)

Stake

(%)

Sep-14 Sierra Oil & Gas S de RL de CV Acquisition

Riverstone Holdings LLC;

Infraestructura Institucional S de

RL de CV; EnCap Investments LP

United States;

Mexico 525.0 n.a.

Nov-13 Monclova Pirineos Gas SA Acquisition Actividades de Construccion y

Servicios SA (Grupo ACS) Spain 216.1 69.8

Mar-13 Integradora de Servicios Petroleros;

Oro Negro SAPI de CV Acquisition

Axis Asset Management

S de RL de CV Mexico 200.0 66.7

Aug-12 Platform Rig 3; Todco Mexico Inc;

Servicios Todco S de RL de CV Acquisition

Integradora de Servicios

Petroleros;

Oro NegroSAPI de CV

Mexico 36.0 100.0

Dec-12 Zacatecas self-elevating oil drilling

platform Acquisition Grupo Mexico SAB de CV Mexico n.a. 100.0



Source:

M&A Activity, 2013-2014

Number and Value of Deals in Mexico´s Oil & Gas Sector*

Number of Deals by Region of Investors (%)

Number of Deals by Deal Type (%)

Number of Deals by Deal Value, USD (%)

EMIS DealWatch, - * NAICS Code 211

200

0 0

216

0 0

525

0

1

0 0

1

0 0

1

0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2013 2014

Total value of deals (USD mn) Number of Deals

Acquisition 100.0%

100.1-500mn; 66.7%

500.1-1000; 33.3%

Mexico 50.0%

Spain 25.0%

United States 25.0%



Highlights

Source:

Petróleos Mexicanos – PEMEX

Income Statement (Consolidated, MXN bn)

Balance Sheet (Consolidated, MXN bn)

Petroleos Mexicanos – Pemex – was founded in 1938 when the then Mexican president Lazaro Cardenas nationalised the assets of foreign oil companies operating in the country.

Pemex has for many decades been the largest company in Mexico and by far the biggest contributor to the Mexican treasury.

The precarious financial situation of the company, which makes chronic net losses, stems from the fact that Pemex surrenders a large portion of its revenues to the Mexican treasury, accounting for roughly one third of the national budget.

Until December 2013, Pemex had been the only company allowed to work in the oil & gas industry in Mexico. However, the Energy Reform of 2013 opened the sector to foreign companies for the first time in 75 years. By end-2015, several multinational companies are expected to receive concession rights for exploration, drilling and extraction of oil & gas in Mexico, which will change the growth fundamentals of Pemex significantly.

Petroleos Mexicanos (Pemex), own calculations

2,02

4

2,04

7

2,12

8

-271

-185

-768

789 92

9 1,21

4

0.87 1.34

2.52

2012 2013 2014

Total Assets Shareholders' Equity Net Debt Net Debt/EBITDA

1,64

7

1,60

8

1,58

7

1,04

5

876

760

3

-170

-266

63.4%

54.5%

47.9%

2012 2013 2014

Net Revenues EBITDA Net Profit EBITDA margin



Source:

Petróleos Mexicanos – PEMEX (cont´d)

Debt by Currency, 2014

Debt by Instrument , 2014

Debt by Interest Rate, 2014

Capital Expenditure & Investments (MXN Mn)


US Dollar 66.0%

Euros 7.0% UDIS 4.0% British Pounds

1.0%

Yens 1.0%

Mexican Pesos 21.0%

Fixed 73.0%

Floating 27.0%

Intl. Bonds 59.0%

Cebures 18.0%

ECAs 6.0%

Intl. Bank Loans 11.0%

Domestic Bank Loans 4.0%

Other 2.0%

194 213 222

29 30

40 8 11

16

0

50

100

150

200

250

300

2012 2013 2014

Others

Refining

Exploration &Production



Highlights

Source:

Pemex Exploración y Producción

Income Statement (carve-out, MXN bn)

Production Activity (number of wells)

Pemex Exploracion and Produccion is in charge of oil

& gas drilling, exploration and production.

The three main oil-producing areas of this Pemex

division are located in the Northeast and Southeast

regions of the country and in the offshore area of the

Gulf of Mexico.

As of December 2014, Pemex had production at more

than 9,500 wells, 80% of which were located in the

Northeast region of the country. Around 62% of all

active wells produced oil, with the remaining 38%

producing natural gas.

In 2014, the average success rate for exploratory

wells was 33.0%, compared to 61% in 2013 and 57%

in 2012.


1,33

3

1,25

1

1,13

5

1,10

8

969

852

94

-42

-153

83.1%

77.5%

75.1%

2012 2013 2014


1,29

0

705

474 1,

238

817

535

537

559

581 1,

230

1,34

0

1,42

0

7,67

2

7,93

7

7,55

7

2012 2013 2014Wells Initiated Wells Drilled

Producing Wells Offshore Producing Wells Southeast



Highlights

Source:

Pemex Refinación


Refining Capacity by Process

Pemex Refinacion is the division of Pemex specialising in oil refining and production of petrol (gasoline), diesel, fuel oil, jet fuel, asphalt and lubricants. This subsidiary also distributes and markets most of these products throughout Mexico.

As of December 2014, the company operated six refineries with a combined capacity of 4.5mn barrels per day. Atmospheric distillation and hydro-treatment are the most used refining processes, accounting for nearly 60% of total output.

In 1993, to address the structural gap between domestic demand and existing refining capacity, Pemex created a joint venture with Anglo-Dutch peer Royal Dutch Shell to operate a refinery in Deer Park, Texas (the United States) with the capacity to process 340,000 barrels of crude oil per day and the purpose of increasing gasoline supply to Mexico.

In recent years, Pemex officials have been discussing the options for increasing refining capacity by building a new refinery or expanding the existing ones. However, no final decision has been taken on the subject.


Atmospheric distillation

35.3%

Vaccum distillation

16.9%

Cracking 9.3% Visbreaking

2.0% Reforming

6.2%

Hydrotreatment 23.5%

Alkylation / Isomerization

3.4%

Coking 3.4%

787

819

841

-75

-112

-88

-102

-123

-114

2012 2013 2014

Net Revenues EBITDA Net Profit



Highlights

Source:

Pemex Gas y Petroquímica Básica


Domestic Sales Volume (MXN mn)

Pemex Gas y Petroquimica Basica is the division of

Pemex in charge of processing wet natural gas into

dry natural gas, LPG and other natural gas liquids.

This subsidiary also transports, distributes and sells

natural gas and LPG throughout Mexico, as well as

producing several basic petrochemicals used as raw

materials by Pemex Refinacion and Pemex

Petroquimica.

Since 2010, sales of LPG on the domestic market

have followed an upward trend. Indeed, in 2014

domestic sales of LPG amounted to nearly half of the

total sales of the division, a similar share to that of

natural gas. Petrochemicals (hexane, ethane, sulphur,

propane, butane, etc.) accounted for only 1.2% of total

sales.

As of December 2014, the division operated nine

manufacturing facilities with a total capacity for

processing nearly 5bcf of natural gas per day.


67,141

64,466

50,233

68,129

78,666

53,386

57,981

64,967

71,729

78,259

3,274

4,832

2,763

1,327

2,052

2010

2011

2012

2013

2014

Petrochemicals Liquified petroleum gas Natural Gas

186 21

9 244

4 9

-2

2 4 16

1.9%

3.9%

2012 2013 2014




Highlights

Source:

Pemex Petroquímica


Domestic Sales Value (MXN mn)

Pemex Petroquimica is the division of Pemex that

produces complex chemicals – including methane,

ammonia, methanol, ethane, ethylene oxide, glycols,

aromatics, and propylene and their derivatives – as

well as certain energy-related products (octane base

gasoline and heavy naphtha).

As of December 2014, the division operated seven

manufacturing facilities with a production capacity of

9,100 tonnes of petrochemical products per year.

In September 2013, Pemex Petroquimica entered into

a joint venture with Mexican chemical company

Mexichem for production of vinyl chloride. Pemex

invested MXN 3bn in the acquisition of a 44% stake in

a new entity created by both companies, called

Petroquimica Mexicana de Vinilo.

In January 2014, the division invested USD 475mn in

the acquisition of local fertiliser producer Agro

Nitrogenados and in the increase of the production

capacity of its plant to 990,000 tonnes of urea per

year.

Petroleos Mexicanos (Pemex), own calculations, EMIS DealWatch

35

40

44

-8

-13

-16 -1

1

-15

-19

2012 2013 2014

Net Revenues EBITDA Net Profit

4,536 5,634 5,123

5,544 5,298

4,777

3,452 3,786

4,211

2,341 3,245 3,982

2,367

4,652 2,987

20,326

24,490 23,616

2012 2013 2014

Others

Propylene &Deriv.

Methane &Deriv.

Aromatics &Deriv.

Ethane & Deriv.

Total



Highlights

Source:

PMI – Comercio Internacional


Crude Oil Exports by Type (thou bpd)

PMI Comercio Internacional is the subsidiary of

Pemex that handles international trade operations,

with a focus on import and export of crude oil,

petrochemicals and refined products.

The company has offices in Mexico City, Houston,

Amsterdam, Singapore and Madrid.

PMI purchases crude oil from Pemex Exploracion and

Produccion and sells it to final consumers. PMI

exported on average 1.14mn barrels of crude oil per

day in 2014, which represented 47.0% of total crude

oil production. In 2015, expectations are for a daily

export of 1.1mn barrels of oil per day.

The division has 36 active clients from 14 countries. In

national terms, the United States is by far the largest

customer of PMI Comercio Internacional, accounting

for 69.4% of total sales during 2014. Other important

markets are Spain, India, China and Canada.


1,22

2

1,09

6

1,06

5

9 8 4 7 3 4

0.7% 0.7%

0.3%

2012 2013 2014


944 968 890

100 103 134

194 99 91

19 20

27

0

200

400

600

800

1,000

1,200

1,400

2012 2013 2014

Altamira

Olmeca

Isthmus

Maya



Contact:

Corporate Headquarters

6-8 Bouverie Street

London EC4Y 8DD

UK

Voice: +44 20 7779 8100

Fax: +44 20 7779 8224

Americas Headquarters

225 Park Avenue South

New York, New York 10003

US

Voice: +1 212 610 2900

Fax: +1 212 610 2950

Asia Headquarters

Eucharistic Congress Bldg. No.

III

4th Floor, 5 Convent Street

Mumbai 400 001

India

Voice: +91 22 22881123

Fax: +91 22 22881137

Disclaimer:

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of the information. The views expressed are our best judgment as of the date of issue and are subject to change without notice. EMIS and Euromoney Institutional

Investor PLC take no responsibility for decisions made on the basis of these opinions.

Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. A Euromoney Institutional Investor company.

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