Big Oil Avoids Mexico as Pemex Struggles with $100 Billion Debt

Mexico’s state-owned oil company, Pemex, faces ongoing challenges in reversing a prolonged decline in oil and gas production. The firm is grappling with an immense debt burden of approximately $100 billion, making it the world’s most indebted energy company. Under the administration of President Claudia Sheinbaum, Pemex has received significant governmental support this year. Unlike her predecessor, Andrés Manuel López Obrador, who adopted a more protectionist energy policy, Sheinbaum has indicated a willingness to include foreign firms in the Mexican upstream sector, while still maintaining majority stakes for Pemex in joint ventures.

This year, the Sheinbaum administration introduced a new framework for joint ventures titled “mixed contracts.” This allows Pemex to collaborate with one or more private companies to develop oil resources. Recently, Pemex awarded the first five of an expected eleven joint venture contracts, as reported by Reuters. Despite these developments, none of the contracts went to major international oil companies. Instead, Pemex partnered with four lesser-known local firms: Consorcio Petrolero 5M del Golfo, Geolis, Petrolera Miahuapan, and Cesigsa.

Analysts express skepticism regarding the impact of these small domestic players on Pemex’s production challenges. While Pemex did sign a notable $1.99 billion contract with Carlos Slim’s Grupo Carso to drill 32 wells over three years, the overall production remains stagnant. Despite earlier claims of interest from larger oil companies, Pemex has struggled to attract major players to its new joint venture contracts.

The energy landscape in Mexico has shifted significantly under the Lopez Obrador administration, which implemented a “Mexico first” policy that reversed many open-market reforms introduced by his predecessor, Enrique Pena Nieto. Although President Sheinbaum is more open to foreign investment, the combination of Pemex’s significant debt and its history of delayed payments to contractors has deterred major international firms. An unnamed industry source remarked, “There’s always the doubt about whether Pemex can honor its commitments, given that paying suppliers remains an issue.”

Companies awaiting payments from Pemex include Italy’s Eni, as well as global oilfield services firms SLB, Halliburton, and Baker Hughes. The joint ventures with smaller domestic firms are unlikely to substantially increase Pemex’s production levels. Current oil production has not experienced a major increase this year; output fell in early 2025 and saw only a marginal rise of 17,600 barrels per day (bpd) in the third quarter compared to the previous quarter. Pemex aims to reach a target of 1.8 million bpd by 2030, up from approximately 1.64 million bpd today. Analysts at BBVA Research emphasize that Pemex must halt the decline in production from mature fields while boosting output from new resources to achieve this goal.

Government support for Pemex has notably increased under President Sheinbaum, with Mexico issuing an additional $12 billion in debt to assist the state oil company. This funding has reinforced the relationship between the government and Pemex, leading to an upgraded rating from Fitch Ratings. In August, Fitch noted that this financial support improved Pemex’s standing, although it warned that the company’s financial profile remains weak. Pemex continues to face persistent negative funds from operations, decreased earnings before interest, taxes, depreciation, and amortization (EBITDA) due to lower crude prices and production levels, and ongoing losses in its downstream operations. As of June 30, 2025, Pemex’s debt was reported at $98.8 billion, with an interest expense of $2 billion—more than half of its EBITDA for the second quarter.

Fitch projected that Pemex’s leverage would exceed 15 times through the rating horizon, indicating a concerning financial trajectory. The rating agency noted that the decline in production and development of new fields poses significant risks to exploration and production capital expenditures. Major oil companies appear to recognize that the risks associated with investing in Mexico’s upstream sector are higher than those in other regions competing for their capital.

As Pemex continues to navigate these challenges, the outlook remains uncertain. The combination of substantial debt, production declines, and the struggle to attract foreign investment raises critical questions about the future of Mexico’s oil industry and Pemex’s role within it.