“Unlocking Mexico’s Green Potential: Why Claudia Sheinbaum Must Diversify Pemex Now”

Investing even more in oil and gas would be a huge financial risk, so Claudia Sheinbaum should order Pemex to diversify its operations, according to Fernanda Ballesteros, who leads the Natural Resource Governance Institute’s work in Mexico.

Last week, Claudia Sheinbaum began her six-year term as Mexico’s president, sparking great expectations for change. Many are curious about how she will balance her background as a climate scientist with upholding the legacy of her predecessor and ally, Andrés Manuel López Obrador.

López Obrador’s administration heavily focused on fossil fuel production and provided unconditional financial support to Pemex, Mexico’s national oil company, despite its debts exceeding $100 billion dollars, approximately 6% of Mexico’s Gross Domestic Product.

In her inauguration speech to Congress, Sheinbaum emphasized the importance of promoting energy efficiency and transitioning to renewable energy sources to meet the growing energy demand while limiting Pemex’s oil production to 1.8 million barrels per day. The question now is whether Mexico can achieve its climate goals while also fulfilling its energy needs.

Sheinbaum has pledged to make Mexico a global leader in the fight against climate change and energy transition. However, her green ambitions may conflict with some of her election promises, such as making Mexico self-sufficient in gasoline, which would require significant investments in Pemex’s refining capacity.

Pemex, being the world’s most indebted national oil company, faces financial challenges that are well-known among investors and the Mexican public. Sheinbaum and her team must outline their plans promptly and demonstrate their viability to address the justified scepticism surrounding the company.

To ensure Mexico’s fiscal health and embark on a meaningful energy transition, Sheinbaum and her team should take three crucial steps:

1. Reassess Pemex’s future production and business plans: Pemex ranks high in financial risk from oil and gas assets that may lose value as the world transitions away from fossil fuels. Diversifying Pemex’s business and mitigating risks should be a priority.

2. Reduce Pemex’s operational greenhouse gas emissions: Despite declining production, emissions continue to rise significantly. Accountability and governance are crucial to achieving methane reductions and enforcing regulations on Pemex.

3. Develop and publish a full-scale energy transition plan: Sheinbaum must devise a credible strategy to phase out fossil fuels in Mexico while prioritizing the public purse. The plan should address Pemex’s financial situation and assign clear roles for a coordinated energy transition.

Civil society organizations have proposed solutions for a just energy transition in Mexico, urging Sheinbaum to consider these recommendations and release the country from its reliance on Pemex and fossil fuels. With Pemex extracting a majority of Mexico’s oil and gas and contributing significantly to the country’s emissions, Sheinbaum’s climate ambitions hinge on the actions taken at the national oil company.