Exclusive: Mexico’s Pemex destroyed resources worth $342 million from two top fields

MEXICO CITY, Jan. 18 (Reuters) – Mexico’s state-owned oil company Pemex has illegally burned hydrocarbon wells worth more than $342 million at two of its major new fields in the three years to August 2022, internal documents from the oil regulator of Mexico have revealed. the country.

The three documents, prepared by the regulator and dated August 2022, describe how Pemex (PEMX.UL) destroyed $275 million from the Ixachi field in three years and $67 million from the Quesqui field in two years.

To calculate the value, the regulator used prices from non-public contracts to market such hydrocarbons.

Neither Pemex nor the Department of Energy responded to requests for comment.

Late last year, Pemex said it would stop flaring at Ixachi after reports from Reuters of development plan violations at the two fields and associated fines.

Pressed to meet ambitious production targets by Mexican President Andres Manuel Lopez Obrador, it has been repeatedly fined by the oil regulator for violating its own commitments to develop the Ixachi and Quesqui fields.

Plans for the exploration and production of natural gas and other hydrocarbons in the southeastern states of Veracruz and Tabasco have been approved by the regulator – responsible for compliance.

Burning gas and condensate – a mixture of liquid hydrocarbons similar to a very light crude oil – has also caused major environmental damage.

Reuters reported last year that Pemex had been flaring excessive gas across the region, but the value of the destruction has not previously been reported.

Mexico – the world’s eighth largest gas flarer – is under increasing pressure, including from the United States, to reduce the practice and methane emissions.

Controlling emissions will become more challenging as fields age and the world’s most indebted oil company lacks sufficient resources to improve ailing infrastructure.

In Ixachi, the destruction was particularly dramatic because production started a year earlier. There, the documents show that Pemex burned about 62.9 billion cubic feet of gas and 310,000 barrels of condensate.

That’s the equivalent of 31% of the total gas produced from the field and 1.3% of the total condensate, according to Reuters calculations.

The documents were sent to the country’s energy minister, Rocio Nahle, the head of regulatory compliance at Pemex’s exploration and production arm, and senior officials at the regulator and the interior ministry.


Pemex produced 201.2 billion cubic feet of gas and 24.3 million barrels of condensate from Ixachi. But it still fell short of its goals.

The documents also show that 77.6% of the field investments that Pemex committed to in its development plan — a total of $2.9 billion — have not been made.

Lopez Obrador declared early in his presidency that Ixachi and Quesqui were part of 17 new priority areas expected to dramatically boost national production as part of a broader effort to make the country energy independent.

The fields were intended to increase resources so that Pemex can begin exploration and production sooner and faster, and offset declining production from aging fields elsewhere.

But Pemex failed to complete the wells, pipelines and other infrastructure needed to produce gas and condensate from the fields without much waste.

In Ixachi, value destruction from condensate burning exceeded $21 million in three years; in Quesqui, it was nearly $8 million in two years, the documents show.

It has not previously been reported that condensate has also been burned on the fields. Under Mexican law, documentation of such violations is not made public.

“The goal should be to maximize the use of all hydrocarbon products in the field,” said one of the documents, adding that “(Pemex) is not meeting production commitments because wells and infrastructure are not in place.”

In the documents, the regulator also recommends changes so that Pemex “avoids the burning down and destruction of the commercial value of the hydrocarbon products.”

Pemex found investing in infrastructure to explore and produce gas historically too costly and instead imported a lot from the United States.

In recent years it has come under pressure due to the environmental damage that gas burning causes.

Late last year, Pemex acknowledged in its updated business plan for 2023 to 2027 that its poor environmental, social and governance (ESG) record threatened to hurt its funding as rivals moved faster to clean energy.

Reporting by Stefanie Eschenbacher Edited by Stephen Eisenhammer and Lisa Shumaker

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