Contents

Introduction

Pemex has been, as one worker on an oil platform put it, the "rich kid who pays for everybody."

Mexico's giant NOC covers the whole value stream from exploration to retail to petrochemical production. It is practically a sector of the economy in itself and in 2006 contributed 10% of Mexico's GDP and 37% of public sector revenue.

Those numbers are down significantly. In 2017, 31.2% of Pemex' sales revenue went to the government's coffers and Pemex accounted for 11.3% of the Mexican government's income. Peme'x budget in 2018 is 113bn pesos (US$5.9bn).

Mexico's president-elect Andrés Manuel López Obrador has put strengthening Pemex high on his agenda, and his pick for minister of energy, Rocio Nahle, is a former Pemex petrochemical engineer. But a strong Pemex can mean different things to different people; the key question being the degree of vertical integration. For many years Pemex fundamentally had an integrated monopoly throughout the value chain. But since the early aughts there has been an evolution toward a vision of Pemex as a company competing in different niches of the value chain and not using its market power in one segment to subsidize inefficient operations in other segments.

Since 2015 Pemex has been organized into seven business divisions: Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Cogeneration and Services, Pemex Drilling and Services, Pemex Fertilizers, Pemex Ethylene and Pemex Logistics. Of these far and away the most important is Pemex Exploration and Production, which accounts for 72% of Pemex' budget.

The big question now is what does López Obrador have in mind? Will it be Pemex as a vertically integrated giant blasting away full throttle on all fronts and shifting resources from one area to another as is convenient for market dominance? Or a company which leaves its weaker parts to wither while its more competitive areas compete globally?

López Obrador has said in his economic plan that he wants to convert Pemex into "one integrated company with a corporate governance allowing for the company's autonomy." This sounds like he will attempt to revert the trend toward dividing Pemex into its component parts and preparing the weaker areas for sale. His economic plan also postulates the strategic importance of energy self-sufficiency for Mexico. This means that at least from oil production to fuel production Pemex will need to be the motor of Mexican energy independence.

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