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PEMEX: Perspectives and main Challenges

PEMEX: Perspectives and main Challenges. Nov 6, 2008. Content. Results and evolution Main challenges. Pemex at a glance. International. Operating statistics. 2007 3.1 6.1 1.3 5.2 1.2 3.1 1.7 147.3. 11th oil and gas company worldwide(1) 3rd in oil production 11th in oil reserves

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PEMEX: Perspectives and main Challenges

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  1. PEMEX: Perspectives and main Challenges Nov 6, 2008

  2. Content Results and evolution Main challenges

  3. Pemex at a glance International Operating statistics • 2007 • 3.1 • 6.1 • 1.3 • 5.2 • 1.2 • 3.1 • 1.7 • 147.3 • 11th oil and gas company worldwide(1) • 3rd in oil production • 11th in oil reserves • 14th in gas production • 13th in refining capacity • 33th in gas reserves • Production • Oil (Mln b/d) • Gas (bcfd) • Crude oil refined (Mln b/d) • Petrochemicals (Mln Tones) • Domestic sales: • Transportation fuels (Mln b/d) • Natural gas (bcfd) • Oil exports (Mln b/d) • Employees (thousands) National • According to rankings by Petroleum Intelligence Weekly, December 2007 • Current dollars.

  4. Pemex: Crude oil and natural gas production Total Hydrocarbon Production, (Mln boed) • Sustained total production since 2004 • Crude oil production has decreased since peaking in 2004 • Increased natural gas production since 2003

  5. Crude oil and natural gas reserves Total reserves (1), (Bln BOE) Possible Probable Proven reserves/production (years) 13 12 11 10 10 9 • Higher reserve replacement ratios are required to sustain current reserve levels (1) As of December 31 of each year

  6. Oil products, gas and petrochemical production Crude run - SNR (Mln bd) Product Yields – SNR (%) • Construction of deep conversion units has improved margins at Madero and Cadereyta by increasing distillate yields and processing heavier crude mixes • Gas processing units were built to handle the increasing production from Burgos • Petrochemical operations are focused on the most profitable chains: ethane and aromatics • 1.1 • 1.2 • 1.2 • 1.3 • 100% = • 100% = • Gasoline • 33 • 39 • 58 • Light • 64 • Intermediate • Distillates • 30 • 35 • 42 • Fuel oil • 37 • Heavy • 36 • 26 • 2000 • 2007 • 2000 • 2007 Gas production (Mln cfd) Petrochemical sales (Bton/y) 5,097 8.3 3,653 3.9 3.2 1996 2000 2007 • 2000 • 2007

  7. Content Results and evolution Main challenges

  8. Main goals • Sustain crude production above 2.8 Mln b/d by 2012. Seek new opportunities to increase the production level above 3.0 Mln b/d in the long term • Maintain gas production above 6 bcfd • 100% reserve-replacement ratio by 2012 • Maintain long term reserve/production ratio above 9 years • Residual conversion in all existing refineries & the new capacity (reduction of gasoline imports) • Close safety and reliability gaps • Reduce environmental liabilities • Enact crucial operational upgrades • Close efficiency gaps through operational improvement programs

  9. Balanced exploitation strategy to sustain production Crude oil production (Thousand barrels per day) Exploitation Deep water Average: 2,884 Other exploration • Manage depletion rate of mature fields • Develop low-permeability fields • Implement enhanced recovery methods • Develop Burgos and Veracruz basins to increase non-associated gas production • Implement best practices in project management Cantarell Chicontepec KMZ Other Exploitation Projects Natural gas production (Million cubic feet per day) Exploration Deep water Average: 6,649 • Maintain a proved reserve life above 9 years and reach replacement rate of 100% by 2012 • Explore deepwater and sub-saline prospects Burgos Other exploration Cantarell Chicontepec Other Exploitation Projects

  10. Additions 2008: 1,053 Mln boe 100% Production 66% 57% 45% 53% Additions 37% 50% 14% 4% 23% 12% Additions from existing projects Production and reserve replacement ratio evolution (Million barrels of crude oil equivalent) 1P Reserves. Includes additions, development and revisions 3P reserves Only discoveries Enforcement SEC´s guidelines

  11. Mexico’s untapped resource potential 3P Reserves, (Bln BOE)(1): Total prospective resources (Bln BOE)(2): 45.4 53.8 As a % of Total Prospective Resources Prospective Resources(2) (Bln BOE) Basins 55% of prospective resources are found in the deep waters of the Gulf of Mexico 34% are located in Southeast Mexico, where PEMEX currently has a large amount of its operations Golfo de México Profundo • 29.5 • 54.8% Sureste • 18.1 • 33.6% Burgos • 3.1 • 5.8% Tampico-Misantla • 1.7 • 3.1% Veracruz • 0.8 • 1.5% Sabinas • 0.3 • 0.6% Plataforma de Yucatán • 0.3 • 0.6% • As of December 31, 2006 • As of December 31, 2006. Stochastic addition, results may vary from an algebraic addition

  12. Fuel quality & residual conversion Fuel quality New capacity Refining growth challenges In recent years Mexico’s demand for automotive fuels has grown above the GDP while production capacity has stagnated. It is expected that this trend on demand will continue in the future. On the other hand, fuel oil demand has decreased due to substitution with natural gas for power generation. Gasoline demand (T b/d) Main projects 2007-2015 Current production + projects under construction 523 T b/d Current production 458 T b/d Cadereyta Madero Location under study Salamanca Tula Minatitlán Part. of imports Salina Cruz With projects under construction 14% 40% 44% 48% With new projects 14% 40% 30% 20%

  13. Refining Investment Priorities Increase imports capacity and strengthen storage and distribution Increase storage and distribution capacity to satisfy domestic demand Deep conversion projects at Minatitlán, Salamanca, Tula & Salina Cruz Increase refining margin through deep conversion projects (coking) over national production of heavy crude oil New refining capacity Additional refining capacity to face growing demand, based on national availability of heavy crude oil Ultra low sulfur fuels (NOM-086) Modernization of existing units and construction of new plants to meet ultra-low sulfur fuels standard

  14. Natural Gas and Petrochemicals Strategies Natural Gas Increase process infrastructure according to primary production (sweetening, NGL recovery, liquid fractionation, and sulfur recovery). Capture the benefit associated with rich gas production (non associated) in the Northern Region Increase transport capacity as required by production and demand Encourage private sector participation in transport and storage Diversify supply sources and analyze participation in LNG projects Petrochemicals • Focus on most profitable chains and retrieve from non profitable ones: • Encourage participation of private sector to develop new projects and capture business opportunities in selected chains • Increase efficiency and debottlenecking of profitable chains • Divest nonprofitable and marginal chains

  15. Pemex Strategic lines Pemex strategy focuses on value maximization and sustainability, involving positive financial results in every business unit, through four strategic lines: Close efficiency gaps in all operations Improve reliability and productivity Excel in investment project planning and execution Develop human resources Operational efficiency Discover and develop new reserves Sustain oil and gas production levels Build Downstream and Logistics infrastructure to meet market opportunities, demand growth and environmental standards Growth • Strengthen environmental protection, industrial safety and physical security • Develop healthy relationships with Stakeholders : • Communities where Pemex has operations • Clients and suppliers • Government Social responsibility Management Implement new regulatory framework Improve Corporate Governance Strengthen business oriented culture to improve performance

  16. Energy Reform: benefits • The energy reform represents an answer to diverse aspects of Pemex’s problems providing several benefits: Deregulation / new operational flexibility • New budgetary flexibility • More latitude in contracting debt • Gradual use of company’s profits New modalities for contracting construction and services • Increase legal certainty • New contractual models for high complexity projects

  17. Envisages a smooth transition that will not be a shock to public finances and will not threaten short-term production and product supply Energy Reform: benefits Improved corporate governance • Strengthening of the Board • Independent members • Creation of committees - More effective oversight • Citizen bonds - market accountability • More accountability and transparency New fiscal adjustments for strategic projects • Chicontepec, deep waters, abandoned fields

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