While Pemex isn’t the sole oil company to produce crude with high water and salt content, it stands out for willingly sending customers a product with six times more water than international standards allow. Why would a company like Pemex ship such a blatantly non-compliant product, knowing it could lead to significant penalties or rejection?
Several factors might explain this situation: perhaps Pemex has neglected crude quality monitoring on several platforms, found it cheaper to accept the costs of non-compliance rather than fixing the issue, or even naively assumed customers wouldn’t notice. However, what’s clear is that failing to adhere to commercial standards has led to serious consequences.
This violation implies overcosts of at least 5% during crude transportation—and potential penalties—due to the water content being treated as waste. If clients indeed returned the crude, costs could surge by more than 100%. Pemex would ultimately need to desalinate and dehydrate, or send crude as customers prefer, risking further infrastructure damage.
The secondary effects are even more severe: Pemex’s crude exports plummeted over 44% in January, ceding market share in the U.S., traditionally its primary revenue source. Despite recent recovery, commercial damage is significant. If Trump imposed a 25% tariff on Mexican crude tomorrow, it’s unclear if the U.S. market would react as it did a decade ago. Pemex’s commercial wing has the challenging task of finding new markets with diminished and damaged bargaining power.
Though this crisis could be temporary, as Pemex’s leadership claims, for any oil company, it’s become routine for Pemex. Last week, the CFE blamed a massive blackout in southeastern Mexico on poor gas quality from Pemex. Meanwhile, Bloomberg reported on dire working conditions for some Pemex employees: rationed tortillas and limited meal options on platforms operated by Pemex.
The situation worsens with escalating incidents. Accident-related days lost exceeded those in 2023 by nearly 500%, despite increased ‘Pemex Cumple’ training compliance (down 24.9%). Ironically, due diligence for third parties collaborating with Pemex dropped to 11.3%. Outstanding Pemex payments total tens of billions of dollars.
Pemex’s standard has become non-compliance: crude laden with water, humid gas, sulfurous fuel oil, underpaid workers, accident-prone operations, unfulfilled contracts, and overdue payables. Apart from tragic incidents, it’s hard to find precedents of oil companies in such a deteriorated state.
