PEMEX’s Business Plan 2016 2021 - Saltec...

PEMEX’sBusiness Plan 2016‐2021

Motivation

• The Business Plan hereby presented is somewhat unique for various reasons: • On one hand, profitability is its guiding principle.• On the other, PEMEX is a State Productive Enterprise (NOC) (regulated prices, supply

guarantee, the State’s largest tax contributor, its deficit consolidates with the public sector, monopoly with asymmetric regulation, special fiscal regime, limited labor flexibility, among others).

• This plan is already being implemented, significant and tangible progress has been achieved.

• The Business Plan intends to:1. Inform society of PEMEX’s role in the Energy Reform. 2. Brief investors on PEMEX’s current financial situation and outlook. 3. Show potential partners areas of opportunity to invest in PEMEX. 4. Inform PEMEX’s workers of its vision and the path it will follow in the years to come.

2

The Short‐term Challenge

Adjust cost structure and business strategy to a low oil price scenario

• Budget adjustment• Austerity measures• Fiscal discipline• Budget control

The Historic Opportunity

Use all instruments and flexibility available from the Energy Reform

• Focus on strategic activities

• Alliances and joint ventures

• Operational efficiency and effectiveness

Positioning for the Future: Challenge and Opportunity

3

Company FORTUNE 50098°

PEMEX at a GlancePre

sent

along

the e

nti

re v

alue c

hai

n 8°

15°

5°

5°

1°

7°

Oil producer

Refining company in the world

Logistics company in the world by assets

Producer of petrochemicals in Latin America

Producer of phosphates in Latin America

Trading company in the world

Sales equivalent to Uruguay’s GDP

More than 70 Products Sold

8° Drilling company

4

Pemex Industrial Transformation

Pemex Logistics

Pemex Ethylene

Pemex Fertilizers

Pemex International

Pemex Exploration and Production

Pemex Drilling and Services

Agenda

• Financial Situation and Outlook

• Pemex Exploration and Production

• Pemex Industrial Transformation

• Pemex Logistics

• Pemex Ethylene

• Pemex Fertilizers

• Pemex Trading

• Safety and Sustainability

• Final Considerations

5

Increased access to financial markets and active liability

management

Strengthening of the financial balance1

Budget Adjustment

Financial Outlook: Achieving Stability

Today PEMEX has stable finances

In 2017 PEMEX will achieve a primary surplus

1/ The financial balance considers the result from subtracting total expenses (including financing costs) from total revenues.

6

Financial Outlook: Budget Adjustment (1/3)

• Like all other oil companies in the world, PEMEX reacted to the low oil price environment with a budget adjustment

• Budget adjustment of 100 billion pesos, approximately 20% of company's budget.

Source: Wood Mackenzie, May 20161/ For PEMEX it includes cuts in investment in the entire company, not only in Pemex Exploration and Production.

-71% -68%

-48% -45%-40% -37% -35%

-30% -29% -27%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Percen

tage

Cha

nge

Change in investment from 2014 to 20161/

7


PEMEX will meet its 100 billion pesos Budget Adjustment and its financial targets.

Adjust portfolio to profitable investments: 6 billion pesos• Halted production in wells where extraction cost was higher than 25 dollars per

barrel.

Reassess investments without compromising future production using the tools and flexibility provided by the Energy Reform: 65 billion pesos

• Deep‐water investment was cut by 13 billion pesos in 2016. That project is Trion which will be auctioned in December.

• Farm outs of Ayin‐Batsil in shallow waters and Cárdenas‐Mora and Ogarrio onshore fields will be tendered in April 2017, in Rounds 2.1 and 2.2, respectively.

• In Industrial Transformation, investments for the reconfiguration of refineries were reassessed to be carried out through joint ventures. For example, Tula's coker is being reconsidered through a tolling service contract in 2017.

8

81

27

0

10

20

30

40

50

60

70

80

90

2015 2016

Direct Award(% of the total purchased amount


Generate Efficiencies and Cost Reduction: 29 billion pesos• The 28.9 billion pesos goal was exceeded. To date, the projection of savings for the

end of the year is 35 billion pesos.

Corporate Austerity Transparency in Procurement

35% increase in the number of participants

1/ From Deputy Manager level2/ Only considers April to September 2016.

Savings from efficiencies and cost reduction (billion pesos)

Concept Amount

Renegotiation of contracts 20.3

Workforce optimization 12.0

Administrative expenses 3.0

Efficiencies and cost reduction 35.3

Administrative Austerity

914

581

0

100

200

300

400

500

600

700

800

900

1000

2015 2016

Senior1/ Corporate Positions(number of positions)

2/

9

Financial Outlook: Strengthening of the Financial Balance (1/2)

Federal Government Support Measures

Fiscal BenefitMXN 38.52 billion to reduce

financial deficit.

Cash Flow InjectionMXN 73.51 billion to reduce

accounts payable to suppliers

• As of October 2016, 142 of the 147 billion pesos have been paid, the rest have been scheduled for payment.

• The projected accounts payable to suppliers for the end of the year is in accordance with the company’s size.

Pension Liability SupportMXN 1843 billion

• Reduces funding needs

• Complements one to one the savings in the pension liability reached by PEMEX.

1/ 73.5 billion pesos comprised of 26.5 billion pesos of cash flow injection and 47 billion pesos budget liberalization for pension liabilities for 2016. 2/ Cost cap set at USD 6.1/b for shallow waters and at USD 8.3/b for onshore fields, to similar levels set on the previous fiscal regime and compared to current cost cap of 11.075% of the value of the hydrocarbons extracted. Considers 25 USD/b for the Mexican Crude Oil Basket.3/ 184 billion pesos comprised of 137.2 billion pesos of non‐tradable notes and 47 billion pesos for pension liabilities for 2016.

10

Financial Outlook: Strengthening of the Financial Balance (2/2)

‐

20,000

40,000

60,000

80,000

100,000

2016

2021

2026

2031

2036

2041

2046

2051

2056

2061

2066

2071

2076

2081

2086

2091

2096

Million 2015 pesos

Annual Expenditures in Pensions(Million 2015 pesos)

Annual expenditure with ReformPensioners in process of paymentAnnual expenditure without Reform

In 2038 a maximumsaving in annualexpenditure isreached for 17billion pesos.

• PEMEX’s pension reform stopped the increase of pension liabilities.• Starting in January 2016, new workers are incorporated into a financially sustainable

individual accounts system.• The change in the pension regime consisted of:

• A 5‐year increase in the retirement age and seniority immediately for all white collar employees and for unionized workers with less than 15 years of service.

92,475(year 2038)

75,354(year 2038)

*/ Includes a 25 billion pesos reduction, additional to the 184 billion pesos of the savings from the Reform, due to changes in the discount rate and population base for the actuarial computation in 2015 after the Reform.

1,488

1,279

1,095

184

184

25

800

900

1,000

1,100

1,200

1,300

1,400

1,500

Bef

ore

the

Ref

orm

Savi

ngs

of t

he R

efor

m a

ndch

ange

s in

dis

coun

t ra

tean

d po

pula

tion

Aft

er t

he R

efor

m

Tre

asur

y Con

trib

utio

n

Un-

fund

ed L

iabi

lity

Billion pesos

2015

Reduction of the un‐funded Pension Liability(MXN billion)

209*

11

Financial Outlook: Access to financial markets and active liability management

• The markets have responded positively. • Decrease in the spread between PEMEX’s and Mexico’s sovereign bond by 148

basis points.

150

170

190

210

230

250

270

290

310

330

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

ene.-2016 mar.-2016 may.-2016 jul.-2016 sep.-2016

Pemex vs UMS 5a Pemex 5a USD

Yieldto m

aturity

(%)

Basis

points

Historical maximum

-148bp

Moody’s Downgrade

Mar 31

Budget cut Feb 12

Capitalization Announcement

Apr 13-35 bp-3 bp-56bp

PEMEX’s Bonds 5y in Dollars

-54bp

Source: Bloomberg

Jan ‐2016 Mar ‐2016 May ‐2016 Jul ‐2016 Sept ‐2016Spread vs. UMS Pemex 5Y USD

12


February March June July October

USD 5 Billion

Rate6.5%

USD 2.5 Billion

USD 380 Million

USD 760 Million

USD 5.6 Billion

Rate4.3%

Rate1.8%

Rate0.5%

Rate5.6%

Oversubscribed by 3.5 times

Oversubscribed by 2.7 times

Oversubscribed by 1.0 times (Common Market

Demand)

Minimum nominal rate reached in any

currency

First operation of this kind since

2007

Most Important Emissions

Active Liability

Management

13


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Jan-

09M

ay-0

9Se

p-09

Jan-

10M

ay-1

0Se

p-10

Jan-

11M

ay-1

1Se

p-11

Jan-

12M

ay-1

2Se

p-12

Jan-

13M

ay-1

3Se

p-13

Jan-

14M

ay-1

4Se

p-14

Jan-

15M

ay-1

5Se

p-15

Jan-

16M

ay-1

6Se

p-16

Millions

USD

Consolidated historical balance in cash(USD million)7.9

5.0

5.5

6.0

6.5

7.0

7.5

8.0

Dec

-11

Mar

-12

Jun-

12S

ep-1

2D

ec-1

2M

ar-1

3Ju

n-13

Sep

-13

Dec

-13

Mar

-14

Jun-

14S

ep-1

4D

ec-1

4M

ar-1

5Ju

n-15

Sep

-15

Dec

-15

Mar

-16

Jun-

16S

ep-1

6

Years Average term of PEMEX’s debt

• During 2016, the average term of the debt portfolio increased by 1 year. • PEMEX's consolidated cash position was improved.

14

Financial Outlook: Scenarios with Realistic Premises and Conservative Assumptions

• The financial scenario for 2017 marks an inflection point in the trend: • Primary Surplus (first time since 2012) 8.4 billion pesos• Attainable Production Platform 1.944 million barrels per day• Conservative Price Projection 42 dollars per barrel

• Going forward we will focus on:

Accelerating the implementation of the Energy

Reform

Profitability approach

Improvements in costs and efficiency

Short‐Term Medium‐Term

15

Financial Outlook: Scenarios with Realistic Premises and Conservative Assumptions

5558

59 60 61

42

54 5557 5648

56

6871 71

40

45

50

55

60

65

70

75

2017 2018 2019 2020 2021

Price of Oil(USD per Barrel)

BRENT futuros PEMEX PETROBRAS

Source: Bloomberg (October), Company´s website and Pemex.

5.2%

5.4%

5.5%5.6% 5.6%

5.20%

5.40%

5.60%

5.80%

2017 2018 2019 2020 2021

Pemex Funding Costs(Percentage)

Realistic Premises

Projected oil prices in line with Brent futures and adjusted for the Mexican Mix.

Increasing interest rates in accordance with the averages for the market´s futures.

Exchange rates used in the SHCP´s 2017 Economic Package.

Conservative Assumptions

Additional earnings from divestments are not taken into consideration.

Considers the same cost structure achieved in 2016. Going forward, increases in productivity are documented individually.

Liberalization of resources due to investments through partnerships will be destined to improve the company´s financial flows.

Futures

16

Financial Outlook: Scenarios

• Pemex Exploration and Production:• Concentrates on assignments that are profitable after taxes.

• Pemex Industrial Transformation:• Partnerships in the operation of auxiliary activities and partnerships toconfigure refineries.

• Operational and budgetary discipline and reliability.• Cost efficiency and gradual recognition of the opportunity costs intransportation prices

Business Plan Scenario

-32-58

-40 -49-36

-133-147 -149

-94-84

-64

-1

43

‐200

‐150

‐100

‐50

0

50

100

150

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Financial Balance(Billion pesos)

Plan de Negocios

632

665 78

3

787

841 1,

143

1,49

3 1,79

4

1,86

3

1,90

4

1,97

8

1,99

0

1,95

6

0

500

1,000

1,500

2,000

2,500

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Consolidated Debt(Billion pesos)

Plan de NegociosBussines Plan

Bussines Plan

17

• Pemex Exploration and Production• Aggressive farm out program: taking advantage of the opportunitiesprovided by the Energy Reform.

• PEMEX develops fields that are profitable for the country and which, underthe same fiscal conditions as private contracts, are profitable for PEMEXafter taxes.

• The incremental income due to increased farm out production is sharedbetween PEMEX and the Federal Government. The Federal Governmentincreases its earnings in real terms compared to 2017 and PEMEX improvesits cash flow.

ImprovedScenario

Financial Outlook: Scenarios

18

-32-58

-40 -49-36

-133-147 -149

-94-84

-64

-1

43

-35

3

92

145

‐200

‐150

‐100

‐50

0

50

100

150

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Financial Cash Flow(billions of pesos)

Plan de Negocios Mejorado

632

665 78

3

787

841 1,

143

1,49

3 1,79

4

1,86

3

1,90

4

1,97

8

1,99

0

1,95

6

1,86

3

1,85

4

1,86

0

1,77

6

1,63

8

0

500

1,000

1,500

2,000

2,500

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Consolidated Debt(billions of pesos)

Plan de Negocios Mejorado2,

601

2,57

7

2,55

3

2,54

8

2,52

2

2,42

9

2,26

7

2,13

0

1,94

4

2,00

6

2,03

7

2,07

2

2,19

6

-

500

1,000

1,500

2,000

2,500

3,000

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Oil Production(Thousands of barrels per day)

Business Plan ImprovedBussines Plan Bussines Plan ImprovedImproved

Agenda




• Pemex Logistics

• Pemex Ethylene


• Pemex Trading



19

Pemex Exploration and Production: Context

• Round 0 gave PEMEX 22.2 billion barrels of 3P reserves in 2016.• The Ministry of Energy successfully auctioned 528 million barrels in rounds 1.2 and 1.3. • The Trion field, currently undergoing the farm out process, has 500 million barrels of 3P

reserves.• The fields that PEMEX will auction in rounds 2.1 and 2.2 have 444 million barrels.

• PEMEX went from being the 3rd biggest oil producer in the world in 2004 to the 8th in 2015. World ranking by oil production

1/ In 2015, PEMEX’s total hydrocarbons production totaled 3.3 million barrels of oil equivalent per day.

Oil production in 2015 (Millions of barrels of oil per day)

20

• The Challenge is to replace Cantarell’s drop in production, stabilize production and eventually increase the platform in a profitable, safe and sustainable manner.

• The opportunity is that with the Energy Reform, production and investments can be achieved through partnerships (farm outs).

∆+54%

PEP investment Evolution

∆-38%

0

50

100

150

200

250

300

350

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Billion

s of p

esos (current)

Pemex Exploration and Production: Challenge and Opportunity

PEMEX Oil Production(Million barrels of oil per day)

Onshore Other offshoreCantarell Ku-Maloob-Zaap

21

• Focus on entitlements that are profitable for PEMEX.Business Plan

Scenario

•Aggressive farm out program that increases production by 15%.•PEMEX develops fields that are profitable for the country and which, under the same fiscal conditions as private contracts, are profitable for PEMEX after taxes.

Farm‐outs

• The incremental income due to increased farm‐out production is shared between PEMEX and the Federal Government. The Federal Government increases its earnings in real terms compared to 2017 and PEMEX improves its cash flow.

Improved Scenario1/

1

2

3

Note: PEP´S flows include all of PEMEX´s debt. 1/ Improved Scenario is constructed by adding Scenario 1 and Scenario 2

‐120

‐100

‐80

‐60

‐40

‐20

0

20

40

60

80

2017 2018 2019 2020 2021

Billion

s of P

esos

PEP´s Flows with PEMEX´s Total Debt

Escenario Plan de Negocios Farmouts Escenario Mejorado

Pemex Exploration and Production: Strategy

Bussines Plan Improved

22

• The Business Plan scenario’s reserve incorporation goal is 1,100 million barrels of oil equivalent at 3P level from 2017 to 2021.

• In case of additional resources, a sustainable increase of 1,500 million barrels is considered.

Reserves incorporation for 2017 in the incremental scenario considers bringing into operation 6 available exploration equipments.

Pemex Exploration and Production: Exploration

InvestmentsBillion pesos

IncorporationMillion of barrels of oil equivalent

Incorporation Investments

Investments and incorporation of 3P reserves from 1990 – 2015 and projections for 2016 – 2021Million of barrels of crude oil equivalent

23

• As part of the Energy Reform, Pemex Drilling and Services Company was separated from Pemex Exploration and Production, a common practice in the international context.

• The challenge is to transition from being a drilling and service company that solely worked for Pemex Exploration and Production to a company that is capable of competing in the market for other companies contracts.

• The opportunity is that Pemex Drilling and Services has all the necessary tools required to succeed: assets and personnel with knowledge of Mexican fields. • It is the 8th onshore driller in the world by its assets, with 25 thousand wells drilled and

75 years of experience in Mexico.

Pemex Exploration and Production: Pemex Drilling and Services

Market participation in drilling equipment, number Market participation in services

Num

ber o

f eq

uipm

ent

onshore OffshoreTotal

PPS

Other

Milli

ons

of U

SD

RegistrationsRegistrations FlexiblePipes

Cementations Pumps IronLine

24

Agenda




• Pemex Logistics

• Pemex Ethylene


• Pemex Trading



25

Pemex Industrial Transformation: Context

• Six refineries in Mexico with a refining capacity of 1,640 thousand barrels per day and one in the United States in a joint venture with Shell.

• Nine gas processing centers. • 15th refining company worldwide /1 .

Production infrastructure and commercial representations

1/Energy Information Administration & Petroleum Intelligence Weekly, 2015.

0

2

4

6

ExxonM

obil

Sino

pec

CNPC

Shell

Saud

i Aramco

Valero

PDV

Petrob

ras

Total

Phillps66 BP

Rosneft

Chevron

NIOC

Pemex

2015 (Millones de barriles día)

15

Biggest companies by refining capacity 2015(millions of barrels per day)

Petroleum Products Commercial Repr. (4)

Other Complexes (aromatics and other) (2)

Refineries (7)

Gas Processing Complex (9)

L.P. GasCommercial Repr. (10)

26

• Pemex Industrial Transformation´s market is attractive: • Mexico is the 6th largest market in gasoline consumption, the 9th in natural gas and the 3rd

in LPG. • Good growth perspectives (2.5% yearly), that contrasts with mature markets where

stagnation is expected. • With the Energy Reform prices will be gradually liberated and the private sector is now

allowed to participate in the entire gas and oil product chain.

Internal Sales 2015(Billion dollars)

1/ others: other gasolines, kerosene, fats, lubricants, among others. 2/ Aromatics and others: methanol, aromatics.

Changes due to the Energy Reform

47.2 51.1

59.5

42.7

51.8

60.4 63.3 69.3 68.8

45.3

0

15

30

45

60

75

90

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Gasolinas Diésel Gas L.P.Gas Natural Turbosina CombustóleoOtros 1/ Aromáticos y otros 2/

Pemex Industrial Transformation: Context

GasolinesNatural Gas

Others 1/

DieselTurbosineAromatics and others

LPG

Fuel Oil

27

• The challenge is to reverse the economic and operational losses of close to 100 billion pesos.

Hidrogen Supply63%

Equipment and Proceses

20%

Repairment delays3%

CFE3%

Service supply (vapor, water,

electriity)11%

Main causes for non programmed shut‐downs 2016 1/

1/ From January to August 2016

Pemex Industrial Transformation: Operational Diagnosis

Non programmed shut-downs index (%) Equivalent distillation capacity Usage (%)

International reference (goal)International reference

28

Financial Balance2025 Partnerships

Safe and reliableoperations

Transportation costs recognition and efficiency

Stolen Product

Result

Impact of the Strategic Initiatives on the Financial Balance until 2025(Billion pesos in cash flow)

• Auxiliary activities• (hydrogen, water, etc.)

• Reconfiguring and operating refineries

• Timely attention to risk factors

• Revert the maintenance lag

• Dynamic prices

• Cost efficiency and recognition of import and transportation costs

• Pipeline custody• Terminals• Illicit markets

(Equivalent to‐96.3 in 2017)

Pemex Industrial Transformation: Strategy

49.2

41.9

36.211

‐108.9

29.4

‐150

‐100

‐50

0

50

29

• The supply of hydrogen, vapor and electricity are critical aspects for operation reliability in refineries.

• PEMEX demands 8.8 thousand tons of vapor per hour. If all of this vapor came from cogeneration, that would imply a generation capacity of 5 Gigawatts of electricity, close to 7% of the national capacity.

• The challenge is to design cogeneration projects in a way that maximizes value to PEMEX. • The opportunity is that given the Energy Reform, these efficient co‐generation plants can be

created through partnerships with companies specialized in cogeneration.

Pemex Industrial Transformation: Cogeneration

Short term total cost, 2015USD/ MWh

Demand Marginal Cost

Generation

Win

d

Hyd

roel

ectr

ic

Sola

rN

ucle

arG

eoth

erm

icC

o-ge

nera

tion

Com

bine

d C

ycle

Coa

l

Turb

ofan

s

Ther

moe

lect

ric

Inte

rnal

C

ombu

stio

n

Co-generation is among the most competitive

technologies inside the National Electric System

30

Agenda




• Pemex Logistics

• Pemex Ethylene


• Pemex Trading



31

Pemex Logistics: Context

• Pemex Logistics was created by separating primary treatment, transport and storage of hydrocarbons and oil products from Pemex Exploration and Production and from Pemex Industrial Processing.

• According to the size of its assets and sales, Pemex Logistics is the 5th largest Logistics company in the world.• It has 17 thousand kilometers of pipelines, 89 storage facilities, 10 ports, 16 marine

vessels, 520 rail cars and 1,485 trucks.

Sales and EBITDA BenchmarkSales (millions of pesos)

EBITDA (millions of pesos)

Mainbusiness Integrated Integrated Integrated Pipelines Integrated Integrated StorageStorageIntegratedIntegrated StorageIntegrated Pipelines Integrated Integrated StorageStorageIntegratedIntegrated Storage

Pemex Logistics’ infrastructure

TerminalsTreatment systemsand primary logistics

Terminals

PoliductsLPG pipelinesOil pipeline

32

• The challenge Pemex Logistics faces is to become a competitive logistics company, and transform itself

from being: to being:

Pemex Logistics: Challenge and opportunity

• The opportunity is to take full advantage of its infrastructure, knowledge,experience and possibility to associate with other companies in an open marketwith promising growth potential.

• A company designed to serve a unique client (Pemex Exploration and Production or Pemex Industrial Transformation), without redundancies in its infrastructure and without facing competition.

• Guaranteeing supply, without taking into account costs.

• A service provider to only one company, without market orientation.

• A logistics company with multiple clients.

• A company that provides services in a profitable and competitive manner.

• Regulated by the Energy Regulator Commission with maximum fees.

33

Pemex Logistics: Strategy

1/ Financial cash flow. 2017 Federation Budget Draft.2/ Pemex will free pipeline capacity and auction it in the market.

60

65

70

75

80

85

90

2017 2018 2019 2020 2021

Business Plan scenario

Financial Balance Projection(billions of pesos)

83.3

1

2

3

Element

1. Costs reduction and infrastructure modernization

2. Reliability strengthening in logistics businesses

3. Refocusing only on the most profitable and strategic markets

Total:

Initiative

• Cost reduction• Port efficiency• Operation reliability improvement in primary logistics

• Open season2/• 13 strategic storage nodes• 3 strategic transport projects through pipelines

• Consolidation in main business lines, avoiding losses in local distribution, tank cars, tank trucks and marine vessels

ImpactBillion pesos

2.8

3.9

6.0

12.7

1

2

3

34

Agenda




• Pemex Logistics

• Pemex Ethylene


• Pemex Trading



35

Pemex Ethylene: Context

• Pemex Ethylene is the second largest petrochemical firm in the country. It has twopetrochemical complexes, Cangrejera andMorelos.

• It’s the only ethylene oxide producer in Mexico, it has a 32% share in the nationalpolyethylene market and a 36% share in the monoethyleneglycol (MEG) market.

Pemex

Industrial Processing

FacilityWorkplace Main uses

Cangrejera

44% PMV

Refrigerated EthyleneTerminal

� Ethylene� High density polyethylene (Asahi y Mitsui)� Linear low density polyethylene� Ethylene oxide� Glycol� Acrylonitrile� Auxiliary services (water, steam, electricity)

� Ethylene� High density polyethylene (Asahi y Mitsui)� Linear low density polyethylene� Ethylene oxide� Glycol� Acrylonitrile� Auxiliary services (water, steam, electricity)

Raw Material

Ethane

Natural Gas

Propylene

� Ethylene� Low density polyethylene� Ethylene oxide� Auxiliary services (water, steam, electricity)

� Ethylene� Low density polyethylene� Ethylene oxide� Auxiliary services (water, steam, electricity)

Morelos

� Storage� Liquefaction and vaporization� Pumping for exportation

� Storage� Liquefaction and vaporization� Pumping for exportation

� Chlorine – Sosa� Ethylene� Vinyl chloride

� Chlorine – Sosa� Ethylene� Vinyl chloride

AssistanceLaboratory

� Mexican Petroleum Institute / Pemex Ethylene� Mexican Petroleum Institute / Pemex Ethylene� Technical assistance

to clients

� Piping� Industrial use

� Storage� Ethylene handling

� Bags and packaging� Ethoxylates

� Bags and packaging� Polyester� Antifreezers� Piping� Ethoxylates

36

Pemex Ethylene: Challenge and Opportunity

• The challenge is to increase operative reliability and ensure the provision of raw materials.• The opportunity is that Pemex Ethylene can become a profitable company with attractive margins

with a reliable provision of raw materials.• The value chain for ethylene increases the raw material’s value (ethane) between 12 and 20 times.

• Take full advantage of ethane through storage.Raw Material

• Increase labor productivity and close non‐profitable businesses. Administrative Actions

•Carry out associations in the provision of nitrogen and oxygen, water treatment and electricity and steam through cogeneration.

Associations in Secondary Services

1

2

3

‐2‐101234567

2017 2018 2019 2020 2021

Billion

s of p

esos

Initiatives’ annual cash flow

1.1 Optimum ethane

.97 Services outsourcing

1.4 Administrative and commercial management

1.3 Raw materials

37

Agenda




• Pemex Logistics

• Pemex Ethylene


• Pemex Trading



38

Pemex Fertilizers: Context, challenge and opportunity

• The fertilizer industry was privatized in 1991 in a fragmented manner. The ammoniaproduction plants, which are an essential input, remained in Pemex. As a consequence,the cost of raw material surged, competitiveness eroded and fertilizer production fell.

• In 2014 and 2015 Pemex acquired Agro Nitrogenados and Fertinal.

• The challenge is to restructure these companies to maximize their value.

• The opportunity is that PEMEX is able to integrate ammonia to the value chain andguarantee the supply of gas increasing the value of the integrated business.

39

Agenda




• Pemex Logistics

• Pemex Ethylene


• Pemex Trading



40

Pemex International (PMI): Challenge and opportunity

• In terms of traded volume PMI is the 7th largest trader in the world, with 2.2 million barrels traded per day.

• The challenge is to transform itself from an exclusive trader for PEMEX into a global and competitive trader.

• The opportunity is that it will now be able to provide trading services for third parties both in Mexico and internationally, with PEMEX as its main client.

Note: Integrated Oil Companies are excluded, since it’s not possible to separate downstream commercial activity and trading activity. Source: companies’ web pages.

Trading Houses RankingBy traded volume of oil and oil products, 2015

Million barrels per day

41

Agenda




• Pemex Logistics

• Pemex Ethylene


• Pemex Trading



42

PEMEX has an absolute commitment to its workers’ safety

* Reference indicator utilized internationally to account for the number of disabling injuries in a certain period, for every million man‐hours exposed to risk. ** Estimate to the end of 2016.*** The international reference is obtained from de mean index of companies who are part of the International Oil and Gas Producers (IOGP).

4.92

3.96

2.68

1.391.19

11.17

1.09

1.5

0.67

0.42 0.420.54 0.61 0.57

0.38 0.470.39 0.36 0.34 0.32 0.31 0.3

2.68

2.671.88

1.09

0.97

0.45 0.42 0.43 0.48 0.45 0.36 0.290

1

2

3

4

5

6

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

**

2017

2018

2019

2020

2021

PemexReferencia***

Freq

uenc

yin

dex

Goals

The system for management of Safety, Health at Work and Environmental

Protection started

Best performance of the frequency index*

12 zero tolerance guiding principles

Reference***Pemex

43

Environmental protection and sustainable development are a priority for PEMEX

Reduce carbon dioxide equivalent emissions by 25% in 2021

Reduce water consumption

Execute initiatives to preserve and restore the ecosystem

• Cogeneration in diverse process centers.• Reduction of gas burning in assets in shallow water, by rehabilitating compression modules.

• Energy consumption optimization in Refineries.

• Integral water management in refineries. • Increase in water reuse of over 60% for 2021.

• Integration of the Ecological Corridor “JATUSA” (2,500 hectares): parks Jaguaroundi and Tuzandépetl and the swamp of Santa Alejandrina.

• Strengthening of programmes for restoration, management and conservation of ecosystems in the swamps of Centla and sensible areas in Tabasco.

Action lines 2016‐2021

44

Agenda




• Pemex Logistics

• Pemex Ethylene


• Pemex Trading



45

Final Considerations

• PEMEX has tackled the short run challenges with determination and today has stable finances.⁻ Budget adjustment (costs reductions and outlook of investments)⁻ Strengthening of financial balance (Federal Government transfers and pensions reform)⁻ Increased access to financial markets and active debt management⁻ Primary surplus in 2017.

• PEMEX has begun to harness the historic opportunity that the Energy Reform provides:⁻ The first farm‐outs are already in process, both in deep and shallow waters, as well as in

onshore fields.⁻ There is a plan to accelerate this process in the future.⁻ Gasoductos de Chihuahua was successfully divested.*

• With all these actions, using realist scenarios and conservative assumptions, PEMEX will return to financial equilibrium by 2019/2021 and stabilize its debt.

* (1.1 billion dollars)

46

ANNEXES

47

Annex. Business Opportunities: Exploration & Production

Projects Year Scheme� Trion 2017 Farmout

� Ogarrio 2017 Farmout

� Cárdenas‐Mora 2017 Farmout

� Ayín‐Batsil 2017 Farmout

� Ayatsil‐Tekel‐Utsil 2017 Farmout

� Chicontepec 2017 Farmout

� 7 onshore assignments (North & South regions) 2017 Farmout

� 6 shallow water assignments (North region) 2018 Farmout

� 64 onshore assignments (North & South regions) 2018 Farmout

� 86 non‐associated gas assignments (Burgos & Veracruz) 2018 Farmout

� Integrated Exploration and Production Contracts 2017 Incentivized service contract

� Misión & Altamira pipelines 2017 Dilution

� Atasta corridor and Dos Bocas maritime terminal 2017 Dilution

� Litoral de Tabasaco Processing Center 2017 Dilution

� Treatment of sour wet gas with high nitrogen content 2017 Service contract

� Offshore compression 2017 Service contract

� Offshore and onshore oil dehydration 2017 Service contract

� Offshore and onshore water treatment 2017 Service contract

48

Annex. Business Opportunities: Drilling & Services

Projects Year Scheme

� Co‐investment to acquire marine drilling equipment (jack ups)

2019‐2020 Joint venture

� Acquisition and overhaul of drilling equipment and wells


� Acquisition and overhaul of wells’ service units (entry logs, flexible pipes, cementing and steel line)


� Complementary service and execution capacity � Entry logs� Cementing� Drilling fluids� Directional drilling � Equipment maintenance


49

Annex. Business Opportunities: Industrial Transformation


� Coker Partnership in Tula 2017 “Tolling”

Partnership to improve operations and/or reconfigure: � Tula (phase II)� Salamanca and Salina Cruz

20172017‐2018

Capital partner + Operating partner

� Partnerships for UBA Diesel plants in refineries 2017 Contract(investment + operation +

maintenance)

� Partnerships to improve performance andstreamlining

2017 Multiple: capital partner/ operator/Service contract

� Oil supply to increase returns 2017 Supply contract

� Residual and sub‐product retirement contract(fuel oil, coke and asphalt)

2017 Long‐term contract

� Humid gas supply to increase CPG load (Burgos CPG and south‐east CPG)

2017 Supply contract

� Hydrogen supply for refineries� Waste water and black water treatment� Sulfur recovery in refineries� Humid sour gas nitrogen removal� Co‐generation in refineries and gas processing

centers

2017201720172019

(to be defined)

Service contract(investment + operation +

maintenance)

50

Annex. Business Opportunities: Cogeneration & Services

ProjectsElectric Power (MW)

Water Vapor(t/h)

Estimated Investment(MMUSD)Capacity PEMEX

Consumption

Nuevo Pemex Cogeneration Plant 300 300 800 ‐

Salamanca External Project 373 0 662 ‐

Cactus 633 29 480 877

Nuevo Pemex Third Train 262 0 140 288

Tula 444 267 1,150 489

Cadereyta 525 135 850 638

Salina Cruz 436 120 800 569

Minatitlán 541 90 800 405

La Cangrejera 512 102 899 747

Morelos 516 89 788 785

Measurement and Regulation Stations 102 0 0 172

51

Annex. Business Opportunities: Fertilizers


• Cosoleacaque Petrochemical Complex: Long‐term natural gas supply.

2017

A 150 MMcfd contract subscription is in process of

consolidation.Additional 60 MMcfd to

guarantee the supply of four ammonia plants.

• Cosoleacaque Petrochemical Complex: Conclude pending overhauls.

2017 Service contract

52

Annex. Business Opportunities: Ethylene


� Construction of a propane cracker and a glycol plant 2018‐2019 Joint venture

� Overhaul of polyethylene plants 2017 Co‐investment with third parties

� Moreleos and Cangrejera water treatment plantsoverhaul

2017 Services with third parties

� Replacement of steam turbines for gas turbines throughcogeneration

2018 Services with third parties

� Modernization of industrial gases supply 2017 Services with third parties

� Overhaul of the ethylene oxide plant at Cangrejera 2019 Co‐investment with third parties

53

Annex. Business Opportunities: Logistics


� Water management capacity increase and crude oil stabilization

2017‐2018Service contracts

(Investment + operation + maintenance)

� Storage infrastructure construction 2017‐2020Operator partner contributing

with current assets

� Discharge speed improvement and product management capacity

2017‐2018Service contracts

(Investment + operation + maintenance)

� Auto tanks 2017 Participation with third parties

� Railroad transportation 2017 Participation with third parties

� Local pipes distribution 2018 Participation with third parties

� Vessel repair 2017 Participation with third parties

� Open‐season 2017 Joint ventures

� Progreso‐Cancún pipeline construction 2017‐2018Operator partner contributing

with current assets

� Tuxpan‐Tula oil pipeline conversion 2017‐2018 Joint ventures

� Offer of current infrastructure of the Reynosa, Cadereytaand Nuevo Laredo corridor

2017‐2018Operator partner contributing

with current assets

� Utilization of idle capacity of Logistics seaports through its modernization

2017‐2018Operator partner contributing

with current assets

� Recovery of reliability levels primary infrastructure logistics 2017‐2020Operator partner contributing

with current assets

54

Annex. Business Opportunities: PMI

Projects Year Action

Increase oil deliveries from the Pacific coast2017–2018 Establish strategies to place additional oil through

collaborative relations

Restore Istmo supply to clients on the west coast of the United States of America.

2017 Restore clients on the west coast of the United States of America.

Find new opportunities in South American markets(Colombia and Brasil)

2017–2018Explore new markets

Create gasoline, oil fuel and petrol mixtures

2018–2020 Rent sufficient storage space to perform the mixtures

Hire tank truck distribution from the North American Gulf Coast

2017–2020Optimize logistical hiring

Hire long term vessels under Time Charter and COA (Contract of Afreighment) instead of Spot to minimize logistical costs

2017–2020Explore hiring opportunities

Develop businesses in markets other than Mexico(Caribbean, Latin America and Asia)

2017–2020

Commercialize state hydrocarbons2017

55

Annex. Pension System Modifications

Modifications for workers that joined PEMEX before the Energy ReformUnionized

Before the Energy Reform

After the Energy Reform

Más de 15 años de servicio Menos de 15 años de servicio

55 years old and 25 of antiquity with 80% of salary (increasing 4% each year until reaching 30 years of

antiquity)or

35 years of antiquity regardless of age with 100% of salary

No change

60 years old and 30 of antiquity*

or40 years of antiquity

regardless of age with 100% of salary

White Collar

Before the Energy Reform After the Energy Reform

55 years old and 25 of antiquity with 80% of salary (increasing 4% each year until reaching 30 years of

antiquity)or


60 years old and 30 antiquity with 100% of salaryor


*/ By August 2021. It is foreseen that retirement by age requisites will be standardized according to the appropriate federal law.

56

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