petroleum executive of the year, emilio lozoya austin presents his keynote

Petroleum Executive of the YearKeynote Address

Emilio Lozoya Austin - Chief Executive Officer Pemex

CHAIR Thomas Wallin - Editor-in-Chief Energy Intelligence

PERSPECTIVES AFTER ENERGY REFORM

Oil & Money - October 2014

Maximize wealthfrom

hydrocarbons

Energyrevolution in

North America

Acceleratingtechnological

change

Different geologyin the fields of the

future

Energy policy forcompetitiveness Transform the oil

and gas industryTransform Pemex

Energy Reform is Mexico’s answer to the challenges of the 21st century

A strongerPemex

New players

PotentialalliancesbetweenPemex and others

Energy reform faces challenges through:

5000

25000

45000

65000

Base CasePotential

25,000

62,000

CAPEXAnnual average 2014-2025 (mmusd)

Energy reform faces challenges through:

1000

2000

3000

4000

5000

Base CasePotential

2,7944,083

CRUDE OILAnnual average 2014-2025 (mbd)

Energy reform poses a major challenge to Pemex:

• Experience• Knowledge• Skills• Accumulated assets• Competitive advantages

Pemex is treated like a firm

INITIAL ASSETS ENERGY REFORM EXPECTED RESULT

Pemex is able to compete succesfully

COMPETITION

WILL PEMEX BE COMPETITIVE?

PEMEX:A potentially

competitive firm

New fiscal regime

New corporate

Managerialautonomy

New regime for

internalcontrol

Strategicalliances

Newcompensation

policy

Budgetaryautonomy

New procurement

regime

governance

New

Le

gal F

ram

ewo

rk

Round zero

Pension fundrestructuring

CHANGE IN CORPORATE STRUCTURE

CULTURAL CHANGE

WILL PEMEX BE COMPETITIVE?

CH

AN

GE

IN

STR

ATE

GY

Transforming Pemex: strategy

CHANGE IN STRATEGIC VISION

LEADING COMPETITOR IN EACH

RELEVANT MARKET

- Choice of markets

- Choice of partners

- Choice of business model in each market

Transforming Pemex: new corporate structure

•Optimal output

• Sustainable growth of reserves

Exploration and Production:

•Operational efficiency for competitiveness

•Focused growth in selected marketsDownstream:

•Cogeneration

•Drilling services

•LogisticsNew SPVs:

Transforming Pemex: results oriented management

Support processes

- Security, reliability and sustainability

- Competitive procurement

- Cutting edge technology

- Optimal project execution

- Talent management

- Financial and administrative efficiency

Transforming Pemex: entrepreneurial governance

Governance

- Best practices in corporate government

- Business process management

- Business like internal control and risk management

Transforming Pemex: corporate culture CULTURAL CHANGE

Values, attitudes and behavior for competitiveness

Strengthen leadership and develop human capital

- Meritocratic compensation policy

- Career plans

- Pemex’s Corporate University

- Continuous acquisition of skills and competencies

Perspectives for Mexican oil and gas after energy reformCompetitive

Pemex, operating as a

corporation

New players, in association or competing with Pemex

Substantial increase in

investment.

Optimal use of hydrocarbon

resources

Round Zero results

Reserves and prospective resources allocated to Pemex

Volume (mmbcoe) Granted(% of total)

Area granted (km2) Reserves/Production

(years)

Reserves (2P) 20,589 83 17,010 15.5

Prospective resources 23,447 21 72,897 5.0*

Conventional 18,222 35 64,489

Non-conventional 5,225 9 8,408

* Estimated on the basis of potential reserves to be incorporated

PEMEX will be able to produce, at least, 2.5 mmbdover the next 20.5 years

New Round Zero related investment

1 – Shift from

allocations to

contracts

11,380

32,780

1,083

3,439

569

1,639

Reserve-3P

mmbcoe

Reserve-2P

mmbcoe

Area

Km2

11,440

8,626

2 – “Farm outs”

(High priority)

First stage

(11 contracts)

Second stage

(11 contracts)

32,2952,6641,556612

Total 76,4557,1863,76420,678

CAPEX

mmdlls

Investment opportunities/projects

Mega projects(above $1,000 mm USD)

Projects(below $1,000 mm

USD)

Energy Infrastructure

• Deep and ultra deep water

• Shale gas/oil*

1. Gas pipes

2. Reconfiguration of refineries

1. Gas Pipes

2. Transport pipes

3. Logistic projects

4. Marine terminals

5. Platforms

1. Co-generation

2. Mature fields

3. Shallow water

(heavy crudes)

Other projects

1

3 4

2

5

*Shale considered as one project; may be divided into smaller projects

Reserves and prospective resources in Mexico

Unconventionals (shale oil and gas)

BasinCummu

lative Prod.

Reserves Prospective resources

1P(90%)

2P(50%)

3P(10%)

Conv. Unconv.

Southeast 46.5 11.8 17.0 23.4 15.8

TampicoMisantla

6.5 1.1 6.6 15.7 2.3 34.8

Burgos 2.4 0.3 0.5 0.7 3.2 10.8

Veracruz 0.8 0.2 0.2 0.3 1.4 0.6

Sabinas 0.1 0.0 0.0 0.1 0.4 14.0

Deepwater

0.0 0.1 0.4 2.0 27.8

YucatánPlatform

1.7

Total 56.2 13.4 24.8 42.2 52.6 60.2

Mm of barrels of oil equivalentGas and oil basins

Exploration projectsDevelopment and production projects

28.4

E & P opportunities more than double Pemex’s present CAPEX

1000

2000

3000

4000

5000

BaselineFull Potential

2,794 4,083

OILAnnual average 2014-2025 (mbd)

5000

7000

9000

BaselineFull Potential

6,0819,079

GASAnnual average 2014-2025 (mmcfd)

5000

25000

45000

65000

BaselineFull Potential

$24,329

$62,267

INVESTMENTAnnual average 2014-2025

(mmusd)

Transport pipes: expansion projects

Gaspipes: expansion projects

National gaspipes Length (km)Investment

(MDD)

Los Ramones 842 2,535

1 Ramones Phase I 114 688

2 Ramones Phase II 728 1,847

North-East 1,944 2,411

3El Encino (Chih.) -

Topolobampo (Sin.)574 1,008

4 Sásabe - Guaymas 544 569

5 Guaymas - El Oro 364 429

6 El Oro - Mazatlán 462 405

Other projects 1,032 1,304

7 Tamazunchale 229 468

8 Zacatecas 172 70

9 Morelos 172 246

10 Mayakán 76 125

11 Chihuahua** 383 395

Total 3,818 6,250

International gaspipes Length (km)Investment

(MDD)

12 Agua Dulce -Frontera 200 828

13 Tucson - Sásabe 97 208

Total 297 1,036

** Chihuahua gaspipe started operations on July 2013 * Includes projects from the Comprehensive Strategy, and the new 222 km from Jáltipan-Salina Cruz gaspipe.

2013 gaspipes

Comprehensive strategy

gaspipes

12

13

11

4

5 3

6

7

28

1

9

10

SNG length (2013): 11,342 km

Total investment: 7,454 MDD

SNG new length : 15,160 km*

Oil & gas as an engine for growth

Investment in oil & gas equals 2% of GDP. Energy Reform should push that to 4% in a few years

INCREASED

GROWTH

Cheaper, cleaner and more abundantenergy: increased competitivity

Increased opportunities for the private sector

National Content= 25% (will rise to 35%)