Pemex oil production falls as incumbent Mexican president fails to prop up state giant

Mexican oil company Pemex saw its oil production fall 6 percent in August compared to August 2023 as incumbent Mexican President Andres Manuel Lopez Obrador failed to turn around the fortunes of the heavily indebted state company.

Pemex produced a total of 1.77 million barrels per day (bpd) of liquids, which include crude oil and condensate, last month, down 6% from last August, according to company data cited by Reuters.

Crude output averaged below 1.5 million bpd in August as Pemex’s crude output fell in recent years and hit a 40-year low.

Mexico’s state oil company also failed in Lopez Obrador’s pledge to significantly reduce fuel imports with the start of its flagship oil project, the Olmeca refinery, also known as Dos Bocas. The project was designed to reduce Mexico’s dependence on fuel imports from the United States and was touted by Lopez Obrador as a key step toward “energy independence.”

The Olmeca refinery, which began commercial operations in early August, has a crude oil processing capacity of 340,000 barrels per day (bpd).

Pemex said at the start of refinery operations that the facility would produce 175,000 bpd of gasoline and 130,000 bpd of ultra-low sulfur diesel in August.

But the refinery produced only 28,400 bpd of gasoline and 1,100 bpd of diesel last month, according to figures reported by Reuters.

In June, sources familiar with the operations of the Olmeca refinery told Reuters that the facility was unlikely to be ready to produce commercial quantities of fuels by the end of this year.

While the refinery struggles to ramp up, Mexico’s fuel imports remain at high levels, far higher than Pemex management and the incumbent president have promised.

Lopez Obrador leaves office next week and will be succeeded by his ally, President-elect Claudia Sheinbaum.

Sheinbaum promised to continue the policy of government support for the state oil company.

Continued support for Pemex remains a key challenge for Mexico’s new administration, Fitch Ratings said after the June election.

“Pemex’s debt, equivalent to almost 6% of GDP, remains a significant contingent liability for the sovereign,” the rating agency noted.

By Tsvetana Paraskova for Oilprice.com

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