Petroleos Mexicanos had to put out a gas-induced blaze that set alight the waters of the Gulf. Then its already floundering bonds were downgraded deeper into junk territory by Moody’s Investor Service, which cited the company’s increasing business risk as it struggled under a $115 billion mountain of debt, the highest of any major oil company. Finally, on Sunday, Pemex suffered one of the worst offshore platform accidents of the year, resulting in five deaths and cutting output by a quarter.
Pemex announced that it will start reporting its carbon-equivalent emissions on a quarterly basis due to requests from investors to disclose ESG data — but it didn’t explain why greenhouse gas emissions had risen by double-digits from April to June, compared to a year ago. After two back-to-back offshore platform explosions, investors and analysts aren’t convinced Pemex is doing enough to address climate and safety concerns.“It’s going to take more than a powerpoint slide in their quarterly presentation to say that they’re handling ESG issues,” said John Padilla, managing director at energy consultancy IPD Latin America.
The company is under enormous pressure after about a decade and a half of production declines and soaring debt. Combined, these negative trends have reduced Pemex’s ability to invest in new fields. To climb out of junk status, it will have to balance the environmental demands of foreign bondholders while also expanding its fossil-fuel production to support the Mexican economy. Unlike international, privately owned peers, national oil companies are beholden to their governments, and their core mandate is to generate revenue for state coffers, leaving them little flexibility to reduce their carbon footprint.
Even before the blasts, Pemex’s accident record had drawn international criticism, particularly after it announced plans to buy the Deer Park refinery in Texas from Royal Dutch Shell PLC in May. About a month later, U.S. Representative Brian Babin published a letter to the Committee on Foreign Investment in the United States opposing the deal because he claimed that Pemex did not have a record of operating refineries to international standards.
Pemex noted that between April to June, 32 of its workers — equivalent to one in every 4,000 or so employees — suffered injuries, including 13 at its refining arm, eight in oil and gas exploration and production, eight at its corporate division and three from its logistics subsidiary. The company also has one of the highest Covid-19 death tolls in the world, reaching almost 600 employees on Tuesday evening.
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