Big Oil Avoids Mexico as Pemex Struggles with Debt and Production

Mexico’s state-owned oil company, Pemex, continues to face significant challenges, grappling with a persistent decline in oil and gas production. The firm, officially known as Petroleos Mexicanos, is burdened with an astonishing debt of approximately $100 billion, making it the most indebted energy firm globally. Despite receiving substantial government support under President Claudia Sheinbaum, Pemex has struggled to attract major international investors into its upstream sector.

Unlike her predecessor, Andres Manuel López Obrador, who implemented a more nationalistic energy policy, Sheinbaum has expressed a willingness to allow foreign firms to participate in joint ventures with Pemex. This year, her administration introduced a new contract framework for mixed contracts, enabling Pemex to collaborate with private firms on development projects. Despite this shift, the first five contracts awarded in this framework went to smaller local companies—Consorcio Petrolero 5M del Golfo, Geolis, Petrolera Miahuapan, and Cesigsa—rather than major international corporations.

Analysts suggest that these smaller players are unlikely to significantly impact Pemex’s production levels or financial recovery. Earlier in the year, Pemex secured a $1.99 billion agreement with Carlos Slim’s Grupo Carso to drill 32 wells over three years. Additionally, Woodside Energy has committed to develop the offshore Trion field, aiming for first oil by 2028. Despite these developments, the broader trend shows a lack of interest from major oil firms in Mexico’s new joint venture contracts.

The reluctance of international companies to engage with Pemex follows a period of tightening policies under López Obrador, which stifled foreign investment and reversed open-market reforms introduced by previous administrations. While President Sheinbaum’s approach is more welcoming, ongoing issues related to Pemex’s debt and its failure to timely settle payments to contractors deter potential investors. An anonymous industry source highlighted concerns about Pemex’s ability to meet its financial obligations, particularly given the outstanding bills owed to firms such as Italy’s Eni and oilfield services giants SLB, Halliburton, and Baker Hughes.

As of now, oil production remains stagnant. The country saw a minor increase of just 17,600 barrels per day (bpd) in the third quarter of 2025, with current output at approximately 1.64 million bpd. Pemex aims to achieve a production target of 1.8 million bpd by 2030. Analysts at BBVA Research emphasize that to reach this goal, Pemex must effectively halt declines from mature fields and enhance output from new discoveries.

In response to its financial struggles, the Mexican government has bolstered Pemex with an additional $12 billion in debt this year. This support has helped improve the company’s credit rating, as noted by Fitch Ratings in August. However, Fitch cautioned that Pemex’s financial situation remains precarious, with ongoing negative funds from operations and a heavily strained EBITDA due to reduced crude prices and production levels. As of June 30, 2025, Pemex’s debt stood at nearly $98.8 billion, with an interest expense of $2 billion, exceeding half of the second quarter’s EBITDA.

Fitch underlined the risks associated with exploration and production capital expenditures, stating that declining production and development of new fields pose significant threats to Pemex’s long-term viability. The combination of financial instability and a challenging investment climate has led major oil companies to reassess the risks of engaging with Mexico’s upstream sector compared to other regions offering more favorable conditions.