By Julie Etra
As this issue explores Mexico’s president one year after her remarkable rise to the presidency, I decided to write about one of the many challenges she faces: a perpetually lingering, decades-old economic problem — PEMEX and its viability.
First, a little background. The acronym stands for Petróleos Mexicanos. For a detailed, in-depth analysis of its origins, see the 2022 The Eye archives: https://theeyehuatulco.com/2022/03/28/politics-petroleum-and-the-environmenthow-to-doom-your-countrys-climate-targets. This excellent article was by Deborah van Hoewyk, who sadly recently passed away. Deborah was a long-time contributor to The Eye and a scholar in her own right (a tribute to her by Randy Jackson is included in this issue).
To quote Deborah’s article: “Before expropriation, there were 17 international firms producing oil in Mexico, dominated by the Mexican Eagle Company (a subsidiary of the Royal Dutch/Shell Company, now just ‘Shell’) and various U.S. firms (Jersey Standard, a branch of Standard Oil, and Standard Oil Company of California, SOCAL, now Chevron); together the Dutch and the Americans (basically, the Rockefellers) controlled 90% of the production of Mexican oil; Gulf Oil added another 5%.”
In 1938, President Lázaro Cárdenas expropriated foreign oil assets and created a state oil monopoly. Mexico’s major new refinery project, Olmeca (often called Dos Bocas), is located in Paraíso, Tabasco; it is designed for 340,000 barrels per day and to produce ultra-low-sulfur fuels.
What propelled expropriation was a union strike against the international petroleum consortium and the refusal of foreign companies to accept new contract terms—an inflection point that reshaped Mexico’s energy sector.
PEMEX’s solvency has been a persistent issue, in part because government budgets long relied on PEMEX revenues for far more than exploration, refining, storage, distribution, and maintenance. Expectations were high—perhaps unrealistically so.
President Enrique Peña Nieto’s 2013 energy reform amended the Constitution to allow private participation across the sector; it did not privatize PEMEX. Subsequent policy under Andrés Manuel López Obrador (AMLO) reasserted a larger state role and increased support for PEMEX, while also emphasizing “energy sovereignty.”
PEMEX’s profitability remains complex. Factors include insufficient new exploration, aging and poorly maintained infrastructure, spills, vandalism, corruption, and long-term production declines — along with exposure to oil-price cycles. Above all, debt is the headline problem: around US$100 billion in financial debt, with more than US$20 billion owed to suppliers, making PEMEX the world’s most-indebted oil company.
Fuel theft, called huachicol, is a major drag. Recent cases underscore its scale: on Sept. 8, 2025, authorities announced 14 arrests, including customs officials, businesspeople, and members of the armed forces, in a probe into a fuel-smuggling network; in parallel enforcement, authorities have reported large seizures of stolen diesel.
So, what is the Sheinbaum administration proposing?
1) Energy security + cleaner mix.
Mexico imports significant volumes of U.S. natural gas via pipelines from Texas, much of it used for power generation. The administration has signaled plans to bolster domestic gas output while pushing renewables, like solar and wind, and exploring strategic inputs such as lithium for batteries, alongside a national energy plan to expand generation capacity toward 2030.
2) Tax and debt overhauls.
In late 2024, the government simplified PEMEX’s fiscal regime to a single levy, the Derecho Petrolero para el Bienestar (roughly 30% on oil and ~11.6–12% on non-associated gas in 2025), explicitly to reduce PEMEX’s historic tax burden and allow more investment. A broader 10-year plan (2025–2035) aims to lower debt, reprofile maturities, and gradually phase out federal financial support by 2027—a pledge reiterated in August–September 2025 as the government arranged bond issues and buybacks tied to a debt-management strategy.
3) Anti-corruption enforcement.
President Sheinbaum recently said former PEMEX CEO Carlos Treviño was arrested in the U.S. and would be deported to Mexico to face corruption charges linked to the Odebrecht/Braskem case—an extradition request pending for about five years.
Separately, U.S. authorities in August 2025 indicted two Mexico-based businessmen over alleged bribes to obtain PEMEX contracts.
Given the ambition of the 10-year plan and the 2027 support “off-ramp,” it will be worth revisiting this in 2027, when federal support is slated to cease. As Sheinbaum put it: the goal is for PEMEX to stand on its own by 2027.