Rafael Espino de la Peña, Independent member of the board, Pemex • Interview

Pemex’s independent board of directors will ensure it truly transforms to become a productive state enterprise.

What vision do you want to convey as an appointed independent director of Pemex?

I was appointed in September 2019. With the reforms to the Mexican oil law and as a result of the energy reform carried out by the previous government, Pemex evolved from being a parastatal company to a productive state enterprise. On the board of directors, the figure of independent directors was established. The board is made up of 10 positions, of which five members are part of the federal government. The independent directors exist to provide a diverse or non-biased vision from that of the government.

What is needed to increase the production of Pemex?

As a state-owned productive company, Pemex must increase its oil reserves and extractive activities. Mexico is rich in natural resources. In the last 18 years, there has been a persistent decline in production due to restrained investment for maintenance of the production infrastructure. In the previous six-year period, public policy followed by the Ministry of Energy was to promote explore and extractive activities within the private sector. This public policy has changed to one that will no longer be centered around privatization of the energy sector. Pemex is back to increasing its oil exploitation and refining activities This is not to say that the private sector could not get involved in these activities, but it would be mainly by partnering with Pemex in various forms of mutually beneficial associations. The current administration inherited Pemex in a critical financial situation. Debt and interest payments nearly tripled in the previous 12-year period, and on top of that, there are huge pension and labor liabilities. The current administration improved the balance sheet in the past year, mainly through capital contributions by the federal government. Recently, a very successful debt restructuring took place, and capital contributions from the federal government have improved the balance sheet. Another positive result from 2019 is that Pemex managed to stop the decline in oil production that had been present during the past 14 years. We closed 2019 with 1.58 million bpd. The goal is to reach 2.4 million bpd by 2024.

Pemex is currently in a discussion with Talos about the Zama field. What have been the main advances, and in your opinion and what will be the result of these discussions?

There are ongoing conversations with the company to agree as to who will carry out production activities, because due to geological formations in that field not previously known, the same reserves were assigned for exploitation in two separate areas to both Talos and Pemex by the National Hydrocarbons Commission. I am sure a joint production agreement will be reached to the mutual benefit of Pemex and Talos.

What can be done to create more synergy between Pemex and other private-sector companies investing in the energy sector?

The main goal is to increase production; Mexico is rich in fossil fuels, and it is important to implement a sustainable exploitation of natural resources. Companies grow with capital. Pemex is in a difficult financial situation, and the participation of private capital in exploration and exploitation is important in order to maintain and increase production. The challenge is to find the most appropriate legal instrument to attract private capital, generate certainty in the business environment, and ensure that the oil exploitation will reap benefits for the people of Mexico. That is why new association agreements are being explored and there are conversations with private international oil companies.

Although the company was received by the new administration in a critical situation, it is moving forward. Clear rules are being generated, an environment of certainty is being created, and there is a new and healthy management of the company’s finances; the debt has been restructured in favorable terms, and there has been a sound and solid response by the international financial markets. ✖ Targets 2.4 producing million bpd by 2024