Pemex contract cancellations expose weakness in Sheinbaum’s oil strategy

The company failed to get commitments on four of its mixed-contract portfolio’s largest fields.

WHAT Pemex has cancelled four ‘mixed contracts’ covering some of Mexico’s most closely watched offshore prospects

WHY The prospects had attracted interest from the likes of BP, Eni, Shell, SLB and Woodside, but the companies did not make final commitments.

WHAT NEXT President Claudia Sheinbaum is seeking to stabilise oil production

Petróleos Mexicanos (Pemex) has cancelled four ‘mixed contracts’ covering some of Mexico’s most closely watched offshore prospects, dealing a setback to President Claudia Sheinbaum’s attempt to stabilise oil production through partnerships with private investors.

The state oil company invoked force majeure after it failed to resolve investor concerns within the allotted timeframe, according to Mexico Business News. The Nobilis-Maximiliano, Kayab-Pit-Utsil, Macuil-Paki and Tlatitok-Sejkan contracting processes had been suspended since late 2025.

Together, the areas contain more than 2.1bn barrels of oil equivalent in proven, probable and possible, or 3P, reserves. First-year financial guarantees associated with the four projects totalled $175mn.

Global interest?

The prospects had attracted interest from international operators and oilfield service companies including BP, Eni, Shell, SLB and Woodside. Their failure to make final commitments suggests that the principal obstacle was not the quality of the resources but the allocation of financial and operational risk under Pemex’s new mixed-contract framework.

Pemex is the most indebted oil company globally.

The cancellations do not remove 2.1bn barrels from Mexico’s current production base. Much of the quoted volume consists of probable and possible reserves, rather than oil that is certain to be commercially recovered. Nor were the fields already producing the volumes needed to meet the government’s target.

Nevertheless, the decision removes an important potential development route and creates further delays as Pemex struggles to reverse a prolonged decline in output.

Pemex currently produces about 1.65mn barrels per day (bpd), compared with more than 3mn bpd two decades ago. Sheinbaum’s government wants national liquids production, which Pemex dominates, to reach or average approximately 1.8mn bpd during her term, which ends in 2030.

Mature fields declining

That goal was already challenging. Pemex’s large, mature fields are declining, while constrained investment has limited drilling and the development of replacements. Capital spending on exploration and production dropped by 51% in real terms in early 2026, while the number of active drilling rigs fell from 32 in January to 25 in May.

The company’s proven reserves have fallen by about 40% over 11 years, from 12.4bn barrels of oil equivalent in 2014 to 7.5bn at the end of 2025. Although its reserve-replacement ratio reached almost 103% last year, indicating that additions slightly exceeded production, this represents stabilisation after years of decline rather than a substantial rebuilding of the resource base.

The four cancelled projects included acreage ranging from shallow-water fields with confirmed reserves to a technically demanding deepwater prospect.

Nobilis-Maximiliano is located in deep water off Tamaulipas in the Paleogene geological formation, which extends across the maritime boundary into the US Gulf of Mexico. Shell and BP have committed billions of dollars to developments on the US side, demonstrating the formation’s potential but also the level of investment and technical capacity needed to exploit it.

Kayab-Pit-Utsil, off Campeche, was the largest of the four by resource volume. The 128 sq km area contains an estimated 822mn barrels of crude and nearly 95bn cubic feet, or 2.69bn cubic metres, of gas. Pemex had drilled five wells and envisaged another 70 during the next phase.

Kayab-Pit-Utsil and Macuil-Paki together hold about 400mn barrels of proven, or 1P, reserves, which carry an estimated 90% probability of recovery. Tlatitok-Sejkan contains around 40mn barrels of crude.

Sheinbaum’s 2030 target

The loss of Kayab-Pit-Utsil and the shallower Tabasco projects may be particularly important for the 2030 target because they potentially offered faster development than Nobilis-Maximiliano. Deepwater projects typically require several years of appraisal, engineering and construction before producing their first oil.

Restarting the selection processes under revised terms would add further delays. Even if Pemex quickly reaches agreement with new partners, significant production may not arrive before the end of Sheinbaum’s administration.

More broadly, the cancellations expose the tension at the centre of the government’s hydrocarbons policy. Sheinbaum wants to maintain state ownership and Pemex’s dominant role while drawing on private companies for the money, technology and operational expertise the heavily indebted state producer lacks.

Mixed contracts were designed to reconcile those objectives. Under the model, private participants would finance capital expenditure and operating costs and assume the associated financial risk. Pemex retains control and receives at least 40% of net revenue.

The arrangements are more generous to private investors than the equivalent model in the electricity industry, where state utility CFE must retain at least 54%. Even so, the conditions were insufficient to secure commitments on four of the mixed-contract portfolio’s largest fields.

Investors reportedly objected to the lack of direct agreements giving lenders explicit rights over project assets, uncertainty surrounding remedies for contractual breaches and the continuation of production-payment arrangements and questions over whether permits could be transferred.

These concerns are particularly important because of Pemex’s financial position and history of delayed payments to suppliers. Companies being asked to commit large amounts of upfront capital need confidence that project revenue will be ring-fenced and that they will be paid even if Pemex experiences further financial difficulties.

Energy specialist Javier Estrada said Pemex and private companies were discussing changes to the agreements.

“Private companies demand greater payment certainty, operational capacity and efficiency-based benefits, so it should be evaluated whether oil reserves can be linked to the project, not as the property of the applicant, but as part of the asset where investment is needed, as is done in other countries to make them attractive,” Estrada told Reforma.

The government has already reduced Pemex’s tax burden from more than 50% to a flat 30% and approved a package of legislation intended to establish rules for strategic partnerships. However, lower taxes do not by themselves make individual projects financeable if investors remain uncertain about payment, operational control and enforcement rights.

Lakach deepwater gas failure

The experience also echoes the repeated failure to develop the Lakach deepwater gas field. Grupo Carso chairman Carlos Slim said in May that Lakach was technically and financially unviable. His company never invested or began work despite signing a contract in July 2024 involving a proposed $1.88bn programme.

Lakach had previously been suspended by Pemex in 2016, while a subsequent arrangement with New Fortress Energy collapsed in 2023. Slim argued that four wells at the onshore Ixachi field could provide comparable production at substantially lower cost and risk.

Pressure throughout the oilfield services industry compounds the problem. Halliburton has linked weakness in its international revenue partly to reduced Mexican activity and delayed supplier payments. Service companies are increasingly seeking shared-risk financing, milestone-based payments and stronger guarantees instead of making large unsecured commitments.

What next?

Pemex must now decide how far it is prepared to revise the mixed-contract structure. Possible changes include ring-fenced project revenues, firmer payment guarantees, lender intervention rights, clearer dispute procedures, transferable permits and rewards tied to efficiency and production.

The government’s 1.8mn bpd objective is not necessarily unattainable because the four contracts have been cancelled. The fields were not expected to contribute their entire potential by 2030, and Pemex could still obtain additional production through repairs, mature-field developments and other partnerships.

However, the cancellations weaken one of the principal mechanisms intended to finance new output. Cooperation with Petrobras on deepwater development and a scientific review of unconventional gas could open other opportunities, but neither is likely to deliver substantial production before 2030.

Unless Pemex offers investors materially greater commercial certainty or receives more state funding, Sheinbaum’s target will increasingly depend on slowing declines at existing fields rather than bringing major new projects into production.