PEMEX’s Business Plan 2017-2021
Motivation •
The Business Plan hereby presented is somewhat unique for various reasons: • On one hand, profitability is its guiding principle. • On the other, PEMEX is a Productive State Enterprise (NOC) (regulated prices, supply guarantee, the State’s largest tax contributor, its deficit consolidates with the public sector, monopoly with asymmetric regulation, special fiscal regime, limited labor flexibility, among others). • This plan is already being implemented, significant and tangible progress has been achieved.
•
The Business Plan intends to: 1. Inform society of PEMEX’s role in the Energy Reform. 2. Brief investors on PEMEX’s current financial situation and outlook. 3. Show potential partners areas of opportunity to invest in PEMEX. 4. Inform PEMEX’s workers of its vision and the path it will follow in the years to come.
Positioning for the Future: Challenge and Opportunity
The Short-term Challenge
The Historic Opportunity
Adjust cost structure and business strategy to a low oil price scenario
Use all instruments and flexibility available from the Energy Reform
• • • •
Budget adjustment Austerity measures Fiscal discipline Budget control
•
Focus on strategic activities Alliances and joint ventures Operational efficiency and effectiveness
• •
Present along the entire value chain
PEMEX at a Glance
Pemex Exploration and Production
Pemex Drilling and Services
Pemex Industrial Transformation
Pemex Logistics
Pemex Ethylene
Pemex Fertilizers
Pemex International
Sales equivalent to Uruguay’s GDP
98°
8° 8° 15° 5° 5° 1° 7°
Oil producer Drilling company
Refining company in the world Logistics company in the world by assets Producer of petrochemicals in Latin America Producer of phosphates in Latin America Trading company in the world
Company FORTUNE 500
More than 70 Products Sold
Agenda •
Financial Situation and Outlook
•
Pemex Exploration and Production
•
Pemex Industrial Transformation
•
Pemex Logistics
•
Pemex Ethylene
•
Pemex Fertilizers
•
Pemex Trading
•
Safety and Sustainability
•
Final Considerations
Financial Outlook: Achieving Stability
Budget Adjustment
Today PEMEX has stable finances
1/ The financial balance considers the result from subtracting total expenses (including financing costs) from total revenues.
Strengthening of the financial balance1 Increased access to financial markets and active liability management In 2017 PEMEX will achieve a primary surplus
Financial Outlook: Budget Adjustment (1/3)
•
•
Like all other oil companies in the world, PEMEX reacted to the low oil price environment with a budget adjustment Budget adjustment of 100 billion pesos, approximately 20% of company's budget.
Change in investment from 2014 to 20161/ 0% Percentage Change
-10% -20% -30% -40% -50%
-48%
-60% -70% -80%
-71%
-45%
-40%
-37%
-35%
-68%
Source: Wood Mackenzie, May 2016 1/ For PEMEX it includes cuts in investment in the entire company, not only in Pemex Exploration and Production.
-30%
-29%
-27%
Financial Outlook: Budget Adjustment (2/3)
PEMEX will meet its 100 billion pesos Budget Adjustment and its financial targets. Adjust portfolio to profitable investments: 6 billion pesos • Halted production in wells where extraction cost was higher than 25 dollars per barrel. Reassess investments without compromising future production using the tools and flexibility provided by the Energy Reform: 65 billion pesos • Deep-water investment was cut by 13 billion pesos in 2016. That project is Trion which will be auctioned in December. • Farm outs of Ayin-Batsil in shallow waters and Cárdenas-Mora and Ogarrio onshore fields will be tendered in April 2017, in Rounds 2.1 and 2.2, respectively. • In Industrial Transformation, investments for the reconfiguration of refineries were reassessed to be carried out through joint ventures. For example, Tula's coker is being reconsidered through a tolling service contract in 2017.
Financial Outlook: Budget Adjustment (3/3) Generate Efficiencies and Cost Reduction: 29 billion pesos •
The 28.9 billion pesos goal was exceeded. To date, the projection of savings for the end of the year is 35 billion pesos.
Corporate Austerity
Transparency in Procurement
Senior1/ Corporate Positions (number of positions) 1000
Direct Award (% of the total purchased amount) 90
914
900
80
800
70
700
581
600
81 35% increase in the number of participants
60 50
500
40
400 200
20
100
10
0
0 2015
2016
1/ From Deputy Manager level 2/ Only considers April to September 2016.
Savings from efficiencies and cost reduction (billion pesos)
Concept
Amount
Renegotiation of contracts
20.3
Workforce optimization
12.0
Administrative expenses
3.0
Efficiencies and cost reduction
35.3
27
30
300
Administrative Austerity
2015
2016 2/
Financial Outlook: Strengthening of the Financial Balance (1/2)
Cash Flow Injection
MXN 73.51 billion to reduce accounts payable to suppliers
Federal Government Support Measures
Fiscal Benefit
•
•
As of October 2016, 142 of the 147 billion pesos have been paid, the rest have been scheduled for payment. The projected accounts payable to suppliers for the end of the year is in accordance with the company’s size.
MXN 38.52 billion to reduce financial deficit.
•
Reduces funding needs
Pension Liability Support MXN 1843 billion
•
Complements one to one the savings in the pension liability reached by PEMEX.
1/ 73.5 billion pesos comprised of 26.5 billion pesos of cash flow injection and 47 billion pesos budget liberalization for pension liabilities for 2016. 2/ Cost cap set at USD 6.1/b for shallow waters and at USD 8.3/b for onshore fields, to similar levels set on the previous fiscal regime and compared to current cost cap of 11.075% of the value of the hydrocarbons extracted. Considers 25 USD/b for the Mexican Crude Oil Basket. 3/ 184 billion pesos comprised of 137.2 billion pesos of non-tradable notes and 47 billion pesos for pension liabilities for 2016.
Financial Outlook: Strengthening of the Financial Balance (2/2) PEMEX’s pension reform stopped the increase of pension liabilities. •
The change in the pension regime consisted of: A 5-year increase in the retirement age and seniority immediately for all white collar employees and for unionized workers with less than 15 years of service. Annual Expenditures in Pensions (Million 2015 pesos)
Reduction of the un-funded Pension Liability 1,488
1,400
184
1,300
Million 2015 pesos 100,000
25 1,279
209*
1,200
1,095
1,100
184
1,000
92,475 (year 2038)
In 2038 a maximum saving in annual expenditure is reached for 17 billion pesos.
80,000 75,354 (year 2038)
60,000 40,000 20,000
2096
2091
2086
2081
2076
2071
2066
2061
2056
2051
-
2046
Un-funded Liability
Treasury Contribution
After the Reform
Savings of the Reform and changes in discount rate and population
Before the Reform
800
2041
900
2021
1,500
(MXN billion)
2016
Billion pesos
2036
•
2031
•
Starting in January 2016, new workers are incorporated into a financially sustainable individual accounts system.
2026
•
Annual expenditure with Reform Pensioners in process of payment Annual expenditure without Reform
2015
*/ Includes a 25 billion pesos reduction, additional to the 184 billion pesos of the savings from the Reform, due to changes in the discount rate and population base for the actuarial computation in 2015 after the Reform.
Financial Outlook: Access to financial markets and active liability management • •
The markets have responded positively. Decrease in the spread between PEMEX’s and Mexico’s sovereign bond by 148 basis points. PEMEX’s Bonds 5y in Dollars Budget cut Feb 12
7.5
-54bp
Moody’s Downgrade Mar 31
-56bp
-3 bp
Capitalization Announcement Apr 13
-35 bp
330 310
Yield to maturity (%)
7.0
290
6.5
270
6.0
250
5.5
230
5.0
210
4.5
190
4.0 3.5 Jan -2016 ene-2016
Source: Bloomberg
170 Mar -2016 mar-2016
May -2016 may-2016 Spreadvsvs.UMS UMS5a Pemex
Jul -2016 jul-2016 Pemex 5a 5Y USD Pemex USD
Sept -2016 sep-2016
150
Basis points
Historical maximum -148bp
Financial Outlook: Access to financial markets and active liability management Most Important Emissions February
March
June
July
October Active Liability Management
USD 5 Billion
USD 2.5 Billion
USD 380 Million
Rate 6.5%
Rate 4.3%
Rate 1.8%
Rate 0.5%
Rate 5.6%
Oversubscribed by 2.7 times
Oversubscribed by 1.0 times
Minimum nominal rate reached in any currency
First operation of this kind since 2007
Oversubscribed by 3.5 times
(Common Market Demand)
USD 760 Million
USD 5.6 Billion
Financial Outlook: Access to financial markets and active liability management During 2016, the average term of the debt portfolio increased by 1 year. PEMEX's consolidated cash position was improved.
• •
Average term of PEMEX’s debt
Years
7.9
8.0
8,000
Consolidated historical balance in cash (USD million)
7,000 Millions USD
7.5 7.0 6.5
6,000 5,000 4,000 3,000
6.0
2,000
5.5
1,000 0 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16
Sep-16
Jun-16
Mar-16
Dec-15
Sep-15
Jun-15
Mar-15
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
5.0
Financial Outlook: Scenarios with Realistic Premises and Conservative Assumptions •
The financial scenario for 2017 marks an inflection point in the trend: • • •
•
Primary Surplus (first time since 2012) Attainable Production Platform Conservative Price Projection
8.4 billion pesos 1.944 million barrels per day 42 dollars per barrel
Going forward we will focus on: Short-Term
Medium-Term
Profitability approach
Improvements in costs and efficiency
Accelerating the implementation of the Energy Reform
Financial Outlook: Scenarios with Realistic Premises and Conservative Assumptions Realistic Premises Projected oil prices in line with Brent futures and adjusted for the Mexican Mix. Increasing interest rates in accordance with the averages for the market´s futures. Exchange rates used in the SHCP´s 2017 Economic Package.
Conservative Assumptions Additional earnings from divestments are not taken into consideration. Considers the same cost structure achieved in 2016. Going forward, increases in productivity are documented individually. Liberalization of resources due to investments through partnerships will be destined to improve the company´s financial flows. Price of Oil
(USD per Barrel)
75
68
70 65 60 55 50
56
55 48
59
58 54
55
71
Pemex Funding Costs (Percentage)
71 5.80%
61
60
5.60%
57
56
5.6%
5.6%
2020
2021
5.4% 5.40%
45 40
5.5%
5.2%
42 2017
2018 Futures BRENT futuros
2019 PEMEX
2020
2021
PETROBRAS
Source: Bloomberg (October), Company´s website and Pemex.
5.20% 2017
2018
2019
Financial Outlook: Scenarios • Pemex Exploration and Production: • Concentrates on assignments that are profitable after taxes. • Pemex Industrial Transformation: • Partnerships in the operation of auxiliary activities and partnerships to configure refineries. • Operational and budgetary discipline and reliability. • Cost efficiency and gradual recognition of the opportunity costs in transportation prices
1,956
1,904
2018
2021
1,863
2017
1,493 841
2013
1,000
-84
787
-64
2012
-36
783
-100
-49
2011
-40 -58
665
-32
2010
-50
1,500
-1
632
0
2,000 1,143
43
2009
50
1,794
2,500
100
1,990
150
2020
Consolidated Debt (Billion pesos)
Financial Balance (Billion pesos)
1,978
Scenario
2019
Business Plan
-94
500 -149
2021
2020
2019
2018
2017
2016
2015
2013
2012
2011
2010
2009
2014
Business Plan Plan de Negocios
0 2016
-147
-200
2015
-133
2014
-150
Business Plan Plan de Negocios
Financial Outlook: Scenarios • Pemex Exploration and Production • Aggressive farm out program: taking advantage of the opportunities provided by the Energy Reform. • PEMEX develops fields that are profitable for the country and which, under the same fiscal conditions as private contracts, are profitable for PEMEX after taxes. • The incremental income due to increased farm out production is shared between PEMEX and the Federal Government. The Federal Government increases its earnings in real terms compared to 2017 and PEMEX improves its cash flow.
2,037
2,072
2019
2020
2,196
2,006 2018
1,944
2,130
2,522 2013
2,267
2,548 2012
2,429
2,553 2011
2,577 2010
1,956 1,638
1,990 1,776
1,904 1,854
1,978
1,863
2,601
Business Plan
Improved
2021
2017
2016
2021
2020
2019
2018
2017
Improved Mejorado
2015
Plan de Negocios Business Plan
2016
0
2014
Mejorado Improved
2009
Plan de Negocios Business Plan
1,500
500 2015
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
-200
2,500
1,000
500
2014
-133 -147 -149
3,000
2,000
-84 -94
-150
1,000
2013
-49
-64
2012
-58
-36
2010
-40
665
-35 -32
632
-100
1,500
2009
-50
-1
1,863
0
2,000
1,493
3
43
1,143
50
1,794
2,500
92
100
Oil Production (Thousands of barrels per day)
1,860
145
2011
150
Consolidated Debt (billions of pesos)
841
Financial Cash Flow (billions of pesos)
787
Scenario
783
Improved
Agenda •
Financial Situation and Outlook
•
Pemex Exploration and Production
•
Pemex Industrial Transformation
•
Pemex Logistics
•
Pemex Ethylene
•
Pemex Fertilizers
•
Pemex Trading
•
Safety and Sustainability
•
Final Considerations
Pemex Exploration and Production: Context •
Round 0 gave PEMEX 22.2 billion barrels of 3P reserves in 2016. • • •
•
The Ministry of Energy successfully auctioned 528 million barrels in rounds 1.2 and 1.3. The Trion field, currently undergoing the farm out process, has 500 million barrels of 3P reserves. The fields that PEMEX will auction in rounds 2.1 and 2.2 have 444 million barrels.
PEMEX went from being the 3rd biggest oil producer in the world in 2004 to the 8th in 2015. World ranking by oil production Oil production in 2015
(Millions of barrels of oil per day)
1/ In 2015, PEMEX’s total hydrocarbons production totaled 3.3 million barrels of oil equivalent per day.
Pemex Exploration and Production: Challenge and Opportunity
PEMEX Oil Production
PEP investment Evolution
(Million barrels of oil per day) Onshore
Other offshore
Ku-Maloob-Zaap
350 300
200 150 100 50
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2003
2002
0 2001
∆+54%
250
2000
∆-38%
Billions of pesos (current)
Cantarell
2005
•
The Challenge is to replace Cantarell’s drop in production, stabilize production and eventually increase the platform in a profitable, safe and sustainable manner. The opportunity is that with the Energy Reform, production and investments can be achieved through partnerships (farm outs).
2004
•
Pemex Exploration and Production: Strategy 1
2
3
Business Plan Scenario
• Focus on entitlements that are profitable for PEMEX.
Farm-outs
• Aggressive farm out program that increases production by 15%. • PEMEX develops fields that are profitable for the country and which, under the same fiscal conditions as private contracts, are profitable for PEMEX after taxes.
Improved Scenario1/
• The incremental income due to increased farm-out production is shared between PEMEX and the Federal Government. The Federal Government increases its earnings in real terms compared to 2017 and PEMEX improves its cash flow. PEP´s Flows with PEMEX´s Total Debt Billions of Pesos
80 60 40 20 0 -20
2017
2018
2019
2020
2021
-40 -60 -80 -100 -120
Escenario BusinessPlan Plande Negocios
Farmouts
Note: PEP´S flows include all of PEMEX´s debt. 1/ Improved Scenario is constructed by adding Scenario 1 and Scenario 2
Escenario Mejorado Improved
Pemex Exploration and Production: Exploration •
•
The Business Plan scenario’s reserve incorporation goal is 1,100 million barrels of oil equivalent at 3P level from 2017 to 2021. In case of additional resources, a sustainable increase of 1,500 million barrels is considered. Investments and incorporation of 3P reserves from 1990 – 2015 and projections for 2016 – 2021 Million of barrels of crude oil equivalent Incorporation Million of barrels of oil equivalent
Investments Billion pesos Incorporation
Investments
Reserves incorporation for 2017 in the incremental scenario considers bringing into operation 6 available exploration equipments.
Pemex Exploration and Production: Pemex Drilling and Services
•
•
As part of the Energy Reform, Pemex Drilling and Services Company was separated from Pemex Exploration and Production, a common practice in the international context. The challenge is to transition from being a drilling and service company that solely worked for Pemex Exploration and Production to a company that is capable of competing in the market for other companies contracts. The opportunity is that Pemex Drilling and Services has all the necessary tools required to succeed: assets and personnel with knowledge of Mexican fields. • It is the 8th onshore driller in the world by its assets, with 25 thousand wells drilled and 75 years of experience in Mexico.
Number of equipment
Market participation in drilling equipment, number
PPS
Market participation in services
Millions of USD
•
Other Registrations Registrations
Total
onshore
Offshore
Flexible Pipes
Cementations
Pumps
Iron Line
Agenda •
Financial Situation and Outlook
•
Pemex Exploration and Production
•
Pemex Industrial Transformation
•
Pemex Logistics
•
Pemex Ethylene
•
Pemex Fertilizers
•
Pemex Trading
•
Safety and Sustainability
•
Final Considerations
Pemex Industrial Transformation: Context •
• •
Six refineries in Mexico with a refining capacity of 1,640 thousand barrels per day and one in the United States in a joint venture with Shell. Nine gas processing centers. 15th refining company worldwide /1 . Production infrastructure and commercial representations
Biggest companies by refining capacity 2015
Gas Processing Complex (9)
(millions of barrels per day) 2015 (Millones de barriles día)
6
Refineries (7)
Other Complexes (aromatics and other) (2) Petroleum Products Commercial Repr. (4) L.P. Gas Commercial Repr. (10)
4
15 2
Pemex
NIOC
Chevron
Rosneft
BP
Phillps66
Total
Petrobras
PDV
Valero
Saudi Aramco
Shell
CNPC
Sinopec
ExxonMobil
0
1/Energy Information Administration & Petroleum Intelligence Weekly, 2015.
Pemex Industrial Transformation: Context •
Pemex Industrial Transformation´s market is attractive: • Mexico is the 6th largest market in gasoline consumption, the 9th in natural gas and the 3rd in LPG. • Good growth perspectives (2.5% yearly), that contrasts with mature markets where stagnation is expected. • With the Energy Reform prices will be gradually liberated and the private sector is now allowed to participate in the entire gas and oil product chain. Internal Sales 2015
75 60
Changes due to the Energy Reform
(Billion dollars)
90
60.4
59.5 47.2
51.8
51.1
45
63.3
69.3 68.8
45.3
42.7
30 15 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Gasolinas Gasolines Gas Natural Natural Gas Otros Others1/1/
Diésel Diesel Turbosina Turbosine Aromáticos y otros 2/ Aromatics and others
Gas L.P. LPG Combustóleo Fuel Oil
1/ others: other gasolines, kerosene, fats, lubricants, among others. 2/ Aromatics and others: methanol, aromatics.
Pemex Industrial Transformation: Operational Diagnosis •
The challenge is to reverse the economic and operational losses of close to 100 billion pesos.
Non programmed shut-downs index (%)
Equivalent distillation capacity Usage (%)
International reference International reference (goal)
Main causes for non programmed shut-downs 2016 1/
Service supply (vapor, water, electriity) 11%
Hidrogen Supply 63%
Repairment delays CFE 3% 3% 1/
From January to August 2016
Equipment and Proceses 20%
Pemex Industrial Transformation: Strategy Impact of the Strategic Initiatives on the Financial Balance until 2025 (Billion pesos in cash flow)
50
36.2
0 -50
49.2
-108.9 41.9
-100 -150
Financial Balance 2025 (Equivalent to -96.3 in 2017)
Safe and reliable operations
Transportation costs recognition and efficiency
11 Stolen Product
Partnerships
• Auxiliary activities • Timely attention to • Cost efficiency • Pipeline custody • (hydrogen, water, risk factors and recognition • Terminals • Revert the • Illicit markets etc.) of import and • Reconfiguring and maintenance lag transportation • Dynamic prices operating costs refineries
29.4 Result
Pemex Industrial Transformation: Cogeneration
Short term total cost, 2015 USD/ MWh Co-generation is among the most competitive technologies inside the National Electric System
Demand
Marginal Cost
Internal Combustion
Thermoelectric
Turbofans
Coal
Combined Cycle
Generation
Geothermic Co-generation
•
Solar Nuclear
•
Hydroelectric
•
The supply of hydrogen, vapor and electricity are critical aspects for operation reliability in refineries. PEMEX demands 8.8 thousand tons of vapor per hour. If all of this vapor came from cogeneration, that would imply a generation capacity of 5 Gigawatts of electricity, close to 7% of the national capacity. The challenge is to design cogeneration projects in a way that maximizes value to PEMEX. The opportunity is that given the Energy Reform, these efficient co-generation plants can be created through partnerships with companies specialized in cogeneration.
Wind
•
Agenda •
Financial Situation and Outlook
•
Pemex Exploration and Production
•
Pemex Industrial Transformation
•
Pemex Logistics
•
Pemex Ethylene
•
Pemex Fertilizers
•
Pemex Trading
•
Safety and Sustainability
•
Final Considerations
Pemex Logistics: Context •
•
Pemex Logistics was created by separating primary treatment, transport and storage of hydrocarbons and oil products from Pemex Exploration and Production and from Pemex Industrial Processing. According to the size of its assets and sales, Pemex Logistics is the 5th largest Logistics company in the world. • It has 17 thousand kilometers of pipelines, 89 storage facilities, 10 ports, 16 marine vessels, 520 rail cars and 1,485 trucks.
Sales and EBITDA Benchmark
Sales (millions of pesos)
Pemex Logistics’ infrastructure
EBITDA (millions of pesos)
Terminals Treatment systems and primary logistics Terminals Main business
Integrated Integrated
Integrated Pipelines Pipelines
Integrated
Integrated Integrated
Integrated
Storage
Storage
Storage
Poliducts LPG pipelines Oil pipeline
Pemex Logistics: Challenge and opportunity •
•
The challenge Pemex Logistics faces is to become a competitive logistics company, and transform itself from being: to being: A company designed to serve a unique client (Pemex Exploration and Production or Pemex Industrial Transformation), without redundancies in its infrastructure and without facing competition.
•
Guaranteeing supply, without taking into account costs.
•
A service provider to only one company, without market orientation.
•
•
A logistics company with multiple clients.
•
A company that provides services in a profitable and competitive manner. Regulated by the Energy Regulator Commission with maximum fees.
•
The opportunity is to take full advantage of its infrastructure, knowledge, experience and possibility to associate with other companies in an open market with promising growth potential.
Pemex Logistics: Strategy Financial Balance Projection (billions of pesos)
Element
Impact Billion pesos
Initiative
90
83.3 85
11. Costs reduction and infrastructure modernization
2.8
1
• Cost reduction • Port efficiency • Operation reliability improvement in primary logistics
80
2
22. Reliability
strengthening in logistics businesses
75
3.9
3 33. Refocusing only on the
70
Business Plan scenario
most profitable and strategic markets
6.0
65
Total: 60
2017
2018
2019
2020
2021
1/ Financial cash flow. 2017 Federation Budget Draft. 2/ Pemex will free pipeline capacity and auction it in the market.
12.7
• Open season2/ • 13 strategic storage nodes • 3 strategic transport projects through pipelines • Consolidation in main business lines, avoiding losses in local distribution, tank cars, tank trucks and marine vessels
Agenda •
Financial Situation and Outlook
•
Pemex Exploration and Production
•
Pemex Industrial Transformation
•
Pemex Logistics
•
Pemex Ethylene
•
Pemex Fertilizers
•
Pemex Trading
•
Safety and Sustainability
•
Final Considerations
Pemex Ethylene: Context •
•
Pemex Ethylene is the second largest petrochemical firm in the country. It has two petrochemical complexes, Cangrejera and Morelos. It’s the only ethylene oxide producer in Mexico, it has a 32% share in the national polyethylene market and a 36% share in the monoethyleneglycol (MEG) market. Raw Material
Workplace
Ethane Natural Gas
Main uses
Morelos
Ethylene High density polyethylene (Asahi y Mitsui) Linear low density polyethylene Ethylene oxide Glycol Acrylonitrile Auxiliary services (water, steam, electricity)
Cangrejera
Ethylene Low density polyethylene Ethylene oxide Auxiliary services (water, steam, electricity)
Bags and packaging Ethoxylates
Pemex Industrial Processing
Facility
Refrigerated Ethylene Terminal
Propylene 44% PMV Assistance Laboratory
Bags and packaging Polyester Antifreezers Piping Ethoxylates
Storage Liquefaction and vaporization Pumping for exportation
Storage Ethylene handling
Chlorine – Sosa Ethylene Vinyl chloride
Piping Industrial use
Mexican Petroleum Institute / Pemex Ethylene
Technical assistance to clients
Pemex Ethylene: Challenge and Opportunity • •
The challenge is to increase operative reliability and ensure the provision of raw materials. The opportunity is that Pemex Ethylene can become a profitable company with attractive margins with a reliable provision of raw materials. •
1 2
The value chain for ethylene increases the raw material’s value (ethane) between 12 and 20 times.
Raw Material
• Take full advantage of ethane through storage.
Administrative Actions
• Increase labor productivity and close non-profitable businesses.
3 Associations in
Billions of pesos
Secondary Services
• Carry out associations in the provision of nitrogen and oxygen, water treatment and electricity and steam through cogeneration.
7 6 5 4 3 2 1 0 -1 -2
Initiatives’ annual cash flow 1.1 Optimum ethane .97 Services outsourcing 1.4 Administrative and commercial management 1.3 Raw materials
2017
2018
2019
2020
2021
Agenda •
Financial Situation and Outlook
•
Pemex Exploration and Production
•
Pemex Industrial Transformation
•
Pemex Logistics
•
Pemex Ethylene
•
Pemex Fertilizers
•
Pemex Trading
•
Safety and Sustainability
•
Final Considerations
Pemex Fertilizers: Context, challenge and opportunity •
The fertilizer industry was privatized in 1991 in a fragmented manner. The ammonia production plants, which are an essential input, remained in Pemex. As a consequence, the cost of raw material surged, competitiveness eroded and fertilizer production fell.
•
In 2014 and 2015 Pemex acquired Agro Nitrogenados and Fertinal.
•
The challenge is to restructure these companies to maximize their value.
•
The opportunity is that PEMEX is able to integrate ammonia to the value chain and guarantee the supply of gas increasing the value of the integrated business.
Agenda •
Financial Situation and Outlook
•
Pemex Exploration and Production
•
Pemex Industrial Transformation
•
Pemex Logistics
•
Pemex Ethylene
•
Pemex Fertilizers
•
Pemex Trading
•
Safety and Sustainability
•
Final Considerations
Pemex International (PMI): Challenge and opportunity •
•
•
In terms of traded volume PMI is the 7th largest trader in the world, with 2.2 million barrels traded per day. The challenge is to transform itself from an exclusive trader for PEMEX into a global and competitive trader. The opportunity is that it will now be able to provide trading services for third parties both in Mexico and internationally, with PEMEX as its main client. Trading Houses Ranking By traded volume of oil and oil products, 2015
Million barrels per day Note: Integrated Oil Companies are excluded, since it’s not possible to separate downstream commercial activity and trading activity. Source: companies’ web pages.
Agenda •
Financial Situation and Outlook
•
Pemex Exploration and Production
•
Pemex Industrial Transformation
•
Pemex Logistics
•
Pemex Ethylene
•
Pemex Fertilizers
•
Pemex Trading
•
Safety and Sustainability
•
Final Considerations
PEMEX has an absolute commitment to its workers’ safety
6 5
4.92
Pemex Pemex Reference*** Referencia***
4
Best performance of the frequency index*
The system for management of Safety, Health at Work and Environmental Protection started
12 zero tolerance guiding principles
3
2.68
2.68
2.67
0.36 0.34 0.32 0.31 0.3
0.39
* Reference indicator utilized internationally to account for the number of disabling injuries in a certain period, for every million man-hours exposed to risk. ** Estimate to the end of 2016. *** The international reference is obtained from de mean index of companies who are part of the International Oil and Gas Producers (IOGP).
2021
2019
0.29
2018
2014
2013
2008
0.45 0.42 0.43 0.48 0.45 0.36
2007
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
0
0.54 0.61 0.57 0.38 0.47
2017
0.67
0.42
2016**
0.42
2015
1.09
2012
1.09
2011
1.19
Goals
0.97
2010
1.39
1
1.5 1.17
2009
1
2020
1.88
2
2006
Frequency index
3.96
Environmental protection and sustainable development are a priority for PEMEX Action lines 2016-2021
Reduce carbon dioxide equivalent emissions by 25% in 2021
Reduce water consumption
Cogeneration in diverse process centers. • Reduction of gas burning in assets in shallow water, by rehabilitating compression modules. • Energy consumption optimization in Refineries. •
Integral water management in refineries. • Increase in water reuse of over 60% for 2021. •
Integration of the Ecological Corridor “JATUSA” (2,500 hectares): parks Jaguaroundi and Tuzandépetl and the swamp of Santa Alejandrina. • Strengthening of programmes for restoration, management and conservation of ecosystems in the swamps of Centla and sensible areas in Tabasco. •
Execute initiatives to preserve and restore the ecosystem
Agenda •
Financial Situation and Outlook
•
Pemex Exploration and Production
•
Pemex Industrial Transformation
•
Pemex Logistics
•
Pemex Ethylene
•
Pemex Fertilizers
•
Pemex Trading
•
Safety and Sustainability
•
Final Considerations
Final Considerations •
PEMEX has tackled the short run challenges with determination and today has stable finances. ⁻ ⁻ ⁻ ⁻
•
PEMEX has begun to harness the historic opportunity that the Energy Reform provides: ⁻ ⁻ ⁻
•
Budget adjustment (costs reductions and outlook of investments) Strengthening of financial balance (Federal Government transfers and pensions reform) Increased access to financial markets and active debt management Primary surplus in 2017.
The first farm-outs are already in process, both in deep and shallow waters, as well as in onshore fields. There is a plan to accelerate this process in the future. Gasoductos de Chihuahua was successfully divested.*
With all these actions, using realist scenarios and conservative assumptions, PEMEX will return to financial equilibrium by 2019/2021 and stabilize its debt.
* (1.1 billion dollars)
ANNEXES
Annex. Business Opportunities: Exploration & Production Projects
Year
Scheme
Trion
2017
Farmout
Ogarrio
2017
Farmout
Cárdenas-Mora
2017
Farmout
Ayín-Batsil
2017
Farmout
Ayatsil-Tekel-Utsil
2017
Farmout
Chicontepec
2017
Farmout
7 onshore assignments (North & South regions)
2017
Farmout
6 shallow water assignments (North region)
2018
Farmout
64 onshore assignments (North & South regions)
2018
Farmout
86 non-associated gas assignments (Burgos & Veracruz)
2018
Farmout
Integrated Exploration and Production Contracts
2017
Incentivized service contract
Misión & Altamira pipelines
2017
Dilution
Atasta corridor and Dos Bocas maritime terminal
2017
Dilution
Litoral de Tabasaco Processing Center
2017
Dilution
Treatment of sour wet gas with high nitrogen content
2017
Service contract
Offshore compression
2017
Service contract
Offshore and onshore oil dehydration
2017
Service contract
Offshore and onshore water treatment
2017
Service contract
Annex. Business Opportunities: Drilling & Services Projects
Year
Scheme
Co-investment to acquire marine drilling equipment (jack ups)
2019-2020
Joint venture
Acquisition and overhaul of drilling equipment and wells
2017-2019
Joint venture
Acquisition and overhaul of wells’ service units (entry logs, flexible pipes, cementing and steel line)
2017-2020
Joint venture
Complementary service and execution capacity Entry logs Cementing Drilling fluids Directional drilling Equipment maintenance
2017-2018
Joint venture
Annex. Business Opportunities: Industrial Transformation
Projects
Year
Scheme
Coker Partnership in Tula
2017
“Tolling”
Partnership to improve operations and/or reconfigure: Tula (phase II) Salamanca and Salina Cruz
Capital partner + Operating partner 2017 2017-2018
Partnerships for UBA Diesel plants in refineries
2017
Contract (investment + operation + maintenance)
Partnerships to improve performance and streamlining
2017
Multiple: capital partner/ operator/ Service contract
Oil supply to increase returns
2017
Supply contract
Residual and sub-product retirement contract (fuel oil, coke and asphalt)
2017
Long-term contract
Humid gas supply to increase CPG load (Burgos CPG and south-east CPG)
2017
Supply contract
Hydrogen supply for refineries Waste water and black water treatment Sulfur recovery in refineries Humid sour gas nitrogen removal Co-generation in refineries and gas processing centers
2017 2017 2017 2019 (to be defined)
Service contract (investment + operation + maintenance)
Annex. Business Opportunities: Cogeneration & Services Electric Power (MW) Projects
Water Vapor (t/h)
Estimated Investment (MMUSD)
Capacity
PEMEX Consumption
Nuevo Pemex Cogeneration Plant
300
300
800
-
Salamanca External Project
373
0
662
-
Cactus
633
29
480
877
Nuevo Pemex Third Train
262
0
140
288
Tula
444
267
1,150
489
Cadereyta
525
135
850
638
Salina Cruz
436
120
800
569
Minatitlán
541
90
800
405
La Cangrejera
512
102
899
747
Morelos
516
89
788
785
Measurement and Regulation Stations
102
0
0
172
Annex. Business Opportunities: Fertilizers Projects
Year
Scheme
• Cosoleacaque Petrochemical Complex: Long-term natural gas supply.
2017
A 150 MMcfd contract subscription is in process of consolidation. Additional 60 MMcfd to guarantee the supply of four ammonia plants.
• Cosoleacaque Petrochemical Complex: Conclude pending overhauls.
2017
Service contract
Annex. Business Opportunities: Ethylene Projects Construction of a propane cracker and a glycol plant
Year 2018-2019
Scheme Joint venture
Overhaul of polyethylene plants
2017
Co-investment with third parties
Moreleos and Cangrejera water treatment plants overhaul
2017
Services with third parties
Replacement of steam turbines for gas turbines through cogeneration
2018
Services with third parties
Modernization of industrial gases supply
2017
Services with third parties
Overhaul of the ethylene oxide plant at Cangrejera
2019
Co-investment with third parties
Annex. Business Opportunities: Logistics Projects
Year
Scheme
Water management capacity increase and crude oil stabilization
2017-2018
Service contracts (Investment + operation + maintenance)
Storage infrastructure construction
2017-2020
Operator partner contributing with current assets
Discharge speed improvement and product management capacity
2017-2018
Service contracts (Investment + operation + maintenance)
Auto tanks
2017
Participation with third parties
Railroad transportation
2017
Participation with third parties
Local pipes distribution
2018
Participation with third parties
Vessel repair
2017
Participation with third parties
Open-season
2017
Joint ventures
Progreso-Cancún pipeline construction
2017-2018
Operator partner contributing with current assets
Tuxpan-Tula oil pipeline conversion
2017-2018
Joint ventures
Offer of current infrastructure of the Reynosa, Cadereyta and Nuevo Laredo corridor
2017-2018
Operator partner contributing with current assets
Utilization of idle capacity of Logistics seaports through its modernization
2017-2018
Operator partner contributing with current assets
Recovery of reliability levels primary infrastructure logistics
2017-2020
Operator partner contributing with current assets
Annex. Business Opportunities: PMI Projects Increase oil deliveries from the Pacific coast Restore Istmo supply to clients on the west coast of the United States of America. Find new opportunities in South American markets (Colombia and Brasil)
2017–2018 2017 2017–2018 2018–2020
Create gasoline, oil fuel and petrol mixtures Hire tank truck distribution from the North American Gulf Coast Hire long term vessels under Time Charter and COA (Contract of Afreighment) instead of Spot to minimize logistical costs Develop businesses in markets other than Mexico (Caribbean, Latin America and Asia) Commercialize state hydrocarbons
Action
Year
2017–2020 2017–2020 2017–2020 2017
Establish strategies to place additional oil through collaborative relations Restore clients on the west coast of the United States of America. Explore new markets Rent sufficient storage space to perform the mixtures Optimize logistical hiring Explore hiring opportunities
Annex. Pension System Modifications
Modifications for workers that joined PEMEX before the Energy Reform Unionized After the Energy Reform Before the Energy Reform More than 15 years of service
Less than 15 years of service
No change
60 years old and 30 of antiquity* or 40 years of antiquity regardless of age with 100% of salary
55 years old and 25 of antiquity with 80% of salary (increasing 4% each year until reaching 30 years of antiquity) or 35 years of antiquity regardless of age with 100% of salary
White Collar Before the Energy Reform
After the Energy Reform
55 years old and 25 of antiquity with 80% of salary (increasing 4% each year until reaching 30 years of antiquity) or 35 years of antiquity regardless of age with 100% of salary
60 years old and 30 antiquity with 100% of salary or 40 years of antiquity regardless of age with 100% of salary
*/ By August 2021. It is foreseen that retirement by age requisites will be standardized according to the appropriate federal law.
