Pemex needs massive investment to meet targets
Mexico relies on the United States for two-thirds of its energy consumption, despite having abundant domestic fossil fuel resources. The country’s energy vulnerabilities stem from its limited diversity in energy mix and low reserves. Mexico has just 2.4 days’ worth of gas storage capacity, leaving it extremely exposed to supply shocks or market volatility.
The Mexican government aims to increase national energy output, particularly oil and gas production and refining capacities. However, the International Institute for Sustainable Development (IISD) argues that this strategy is misguided, as it would require significant investment and produce limited energy security gains.
Pursuing the government’s current oil and gas production targets would require around $160 billion in capital expenditure, including nearly $110 billion from Pemex. This investment would be used to develop uncommercial fields that could generate net losses of $17.4 billion over 15 years.
Even with this level of spending, production targets may not be met within the planned timeframe. They suggest that Mexico would be better off investing in a more diversified and resilient energy system, including renewable energies and supportive infrastructure.
The development of Mexico’s oil and gas sector would come at a major cost to the climate and environment. Environmentalists have raised concerns over the recent partnership between Petrobras and Pemex to explore mature and deepwater oilfields in the Gulf of Mexico.
Renata Terrazas, vice president of the Mexican branch of Oceana, expressed concerns about the lack of transparency and potential risks of the project, including oil spills and displacement of coastal communities. Terrazas emphasized the need for careful consideration of the project’s impact.
Prioritizing investment in renewables makes economic sense for Mexico, according to the IISD. Investing in domestic renewable power, grids, and storage can cut imports, strengthen sovereignty, and attract private capital. The IISD’s report highlights the benefits of investing in renewable energy.
Luis Martnez, co-author of the IISD report, stated that Mexico has a choice about where to direct public investment. Investing in uncommercial oil and gas fields risks large losses without meeting production targets, while investing in renewable energy can provide a more resilient and diversified energy system. Martnez emphasized the importance of making informed investment decisions.
