Feedstock supply and past experiences challenge Pemex’s petrochemical aspirations

This content is part of the WPC 2025 series, where we explore key themes from the 40th annual World Petrochemical Conference.

Mexico aims to increase its petrochemical production as President Claudia Sheinbaum unveils plans to strengthen the industry and move toward self-sufficiency. However, it remains to be seen whether she will succeed or if this will become yet another unsuccessful attempt to boost output, as experienced by several of her predecessors.

Over the past few months, Mexican state-controlled oil company Petróleos Mexicanos (Pemex) has outlined a project to reactivate its production at the Cangrejera and Morelos petrochemical complexes. However, this project faces important challenges, as both plants have significantly reduced their petrochemical output in the past decade.

The complexes' total production of ethane derivatives shrunk by 87.84% in the last decade, according to official Pemex data. Aromatics output in Cangrejera fell similarly by 86.38% over the same period. The rest of the complexes under the control of the state company are not producing either category of petrochemical commodities.

This decline is directly tied to feedstock supply. The liquid natural gas that Pemex has historically used as feedstock comes from associated gas extracted from its shallow water fields. But those fields have already entered their natural downward production curve. Pemex's total monthly liquid hydrocarbon production fell from 2.56 million b/d in December 2012 to 1.69 million b/d in November 2024, data from the National Hydrocarbon Commission (CNH) shows.

In its latest earnings call, Pemex said it is trying to ramp up its production in the short term by restarting suspended operations in some drilling rigs by the end of the year. However, as its production fields keep maturing, the federal government has few alternatives outside of investing in deepwater or shale deposits.

However, both options will be difficult to implement. According to Miguel Benedetto, general director of the National Association of the Chemical Industry (ANIQ), deepwater investments can take up to 10 years to mature.

Shale deposits, on the other hand, might be ready to use in just one year, according to Benedetto. However, according to independent energy consultant Rosanety Barrios, shale deposits are an unlikely option given Sheinbaum's political and personal background.

"The previous president tried to prohibit [shale deposits] via the constitution, and the current president is an environmentalist. Will she really open shale oil projects? Seems unlikely, given her vocation", Barrios said.

Recycled ambitions

Mexico's previous experiences with increasing its petrochemical output also play against the current project, as Claudia Sheinbaum is not the first president to attempt to promote self-sufficiency in the market.

President Sheinbaum's current strategy "is, for the most part, recycled ideas that were floated by previous administrations," said Oscar Ocampo, Energy and Environment Coordinator of the public policy think tank Mexican Institute for Competitiveness (IMCO).

Each of the last four presidents had an emblematic project to increase Mexico's petrochemical production, always involving Pemex and frequently involving the same Cangrejera and Morelos complexes that Sheinbaum wants to reactivate during her tenure:

• President Vicente Fox tried to build two new petrochemical complexes in Mexico in 2004, but by 2006, he had downgraded the project to an expansion of the petrochemical plants of Cangrejera and Morelos.
• In 2012, President Felipe Calderón announced a plan to invest $254 million to boost Cangrejera's aromatics production, including benzene and xylenes. However, although production increased in 2013 and 2014, it has steadily dropped during the past decade.
• Etileno XXI, the biggest petrochemical investment in Mexico in three decades, ran into corruption allegations and ethane supply issues just four years after President Enrique Peña Nieto inaugurated it in 2016. The complex, now under a different name, is now preparing to operate solely on imports.
• And President Andrés Manuel López Obrador was supervising a rehabilitation project to increase the rentability of Cangrejera's petrochemical complex by mid-2020. Production of ethylene was stopped immediately for maintenance and didn't restart until 2023, and it hasn't increased substantially since.

Other market participants think that the most likely outcome for the current proposal is that it will eventually be abandoned.

Pemex's petrochemical complexes "restart the production, stop, try to begin again, and then two, three months have already passed," said a polyethylene producer source in Mexico. "The odds are on our side, and [I think] they are going to postpone" the reactivation of Cangrejera and Morelos petrochemical complexes, the producer added.

"In public policy, Pemex's petrochemical production will always have a secondary role compared to upstream and refining," Ocampo said.