Sheinbaum Sets Limit on Mexican Oil Production

President Claudia Sheinbaum has committed to limiting national oil production to increase self-sufficiency, while maintaining a sustainable vision for PEMEX and the country. She outlined plans to continue strengthening PEMEX and CFE, restricting oil production to meet domestic needs and promoting renewable energy initiatives.

In her inaugural speech, President Sheinbaum detailed her 100 commitments for her administration. Regarding her Sovereign Republic With Sustainable Energy plans, Sheinbaum reiterated that she aims to bolster PEMEX and CFE as strategic public entities. She announced an oil production cap of 1.8MMb/d, emphasizing that the primary objective is for this production to be consumed domestically rather than exported, an initiative that will be supported by the rehabilitation of the National Refining System. “The 2014 Energy Reform proposed a production target of 3MMb/d. This is environmentally unsustainable. It is better to promote efficiency and renewable sources,” she said.

Former President Andrés Manuel López Obrador began his administration with a target production of 2.6MMb/d, which was subsequently adjusted during his term. To counter PEMEX’s declining production, the NOC implemented several strategies focused on mature fields and shallow waters. This strategy was supported by significant government financial backing, including tax breaks and direct capital injections.

Capping oil production directly contradicts the main strategy López Obrador had for PEMEX during his administration and signals a redirection for the company. Nonetheless, due to the financial burden PEMEX has, diversification toward cleaner ventures could prove tricky. According to credit rating agencies Moody’s and S&P, for a company with such financial and operational challenges its focus should be where the money is: production. Rating firms have also warned that PEMEX loses money from its refining division and has debt problems that could hinder its diversification attempts.

Still, Sheinbaum committed to promoting renewable energy, aiming to increase its share in the national mix to 45% by 2030. Her plans include the introduction of electromobility and energy efficiency standards to ensure vehicles sold in Mexico are fuel-efficient, thereby reducing gasoline and diesel consumption. She also proposed a photovoltaic panel program to help residents reduce their electricity bills and environmental impact.

Sheinbaum reiterated CFE’s role in power generation, aiming for 54% of electricity to be produced by CFE, with the remainder coming from private generation. The administration will also focus on boosting the national production of petrochemicals and fertilizers.

Sheinbaum also announced that soon she will announce her government’s National Energy Plan for the 2024-2030 administration. “[The plan] includes new investments in generation and transmission and an ambitious energy transition program toward renewable energy sources that contribute to reducing greenhouse gasses that cause climate change,” she said.

As reported by El Economista, this would be the first time the Mexican government issues a national plan focused on the energy transition, directly following an administration marked by favoritism toward oil production and prioritizing state control over energy generation, often relegating promotion and investment in alternative energies to the back seat.