A Turning Point: Defining the Future of

Midstream and Downstream Activities

PEMEX Investor Day New York December 4, 2014
Alejandro Martnez Sibaja

Pemex-Gas General Director

Content
Strategic Assets
Integrating the Value Chain

Main Projects
Production Objectives
Collaboration, Association & Divestitures
1

Downstream Rankings
Pemex Downstream is ranked among the largest producers in the world in different areas of
the value chain.

Pemex is the 9th

producer of gasoline

Mexico is the 5th

largest consumer market for
gasoline

Source: Pemex Statistical Yearbook, Forbes and ICIS Top 100 Chemical Companies.

Pemex is the 15th

producer of natural gas

Domestic Sales 2006 - 2013

USD MM

Diesel, 6,919

Diesel, 16,558

Natural Gas,
5,896
Gasolines,
31,669

Gasolines,
17,358

Natural Gas,
5,334

Fuel Oil, 3,390

Fuel Oil, 6,107
LPG, 4,131
LPG, 5,622

Others, 696

Petrochemicals,
1,903
Jet Fuel, 1,480

Others, 981

Petrochemicals,
2,707
Jet Fuel, 2,773

Downstream Infrastructure
Production Capacity

Refining
Atmospheric distillation capacity 1,690 Mbd
Gas Processing
Sour Nat Gas 4.5 Bcfd
Cryogenic 5.9 Bcfd
Condensate Sweetening 144 Mbd
Fractioning 568 Mbd
Sulfur Recovery 3,256 t/d
Petrochemical
13.55 MMt nominal per year

Producer Zone

Refinery
Petrochemical Center
Gas Processing Center
Sales Point

Camargo

Pipeline
Maritime Route

Reynosa
Monterrey

Burgos
Cadereyta

Infrastructure
Madero

Refining
6 Refineries
Fleet: 21 tankers
Storage of 13.5 MMb of Refined Products
14,176 km of pipelines
Gas
70 Plants in 11 Gas Processing Centers
12,678 km of pipelines
Petrochemical
8 Petrochemical Plants

Arenque
Poza Rica
Salamanca
Guadalajara

Tula
Cd. Mxico

Matapionche
Pajaritos Morelos
La Venta

San Martn

Cd. Pemex

Cosoleacaque
Minatitln

N. Pemex

Cangrejera

Cactus

Salina
Cruz

Gasoline Balance 2006-2013

900
800

732

769

798

798

803

800

804

787

Demand

700
600
500

456

456

451

472

308

340

329

2007

2008

2009

PEMEX Supply

437

424

400

379

405

395

358

2010

2011

2012

2013

400

418

300
200
100

Imports

204

2006

Gasoline market has shown a compound annual growth rate (CAGR) of 2.7% between 2006 and 2013, meanwhile
PEMEXs own production has declined 0.6% over the same period.

This trend led to an increase in imports (CAGR 8.4%) representing 31% of demand in 2006 and 45% of demand in
2013.
5

Natural Gas Balance PEMEX Gas Market,

2006-2013
MMcfd

6,000

Demand

5,000

PEMEX Supply

4,000
3,000
2,000
1,000

Imports
451

386

447

422

536

2006

2007

2008

2009

2010

791

1,089

1,290

2011

2012

2013

Domestic market for natural gas has shown great dynamism in recent years, due to lower prices in the reference
market in USA and Canada, and its environmental benefits.
The increasing trend in demand coupled with a decrease in domestic supply in recent years has led to a significant
increase in import volumes of natural gas.
6

Petrochemical Production 2006-2013

Thousands Tons2

5,551

5,241

1,085

1,089

5,864
1,058

6,155
5,614

5,980

5,733

1,042

923

5,414
166

2,831

2,750

2,775

2,473

957

799

2,604

2,695

1,859

2,202

1,962

2,282

2,306

2,473

2,460

2007

2008

2009

2010

2011

2012

2013

2,607
2,748

1,404
2006

Methane derivatives

1.
2.

Ethane derivatives

Aromatics and derivatives

Main petrochemicals chains

Includes petrochemicals produced by Pemex-Petrochemicals, Pemex-Refining, and ethane and sulfur produced by Pemex-Gas and Basic Petrochemicals. January August 2014 .

Content
Strategic Assets
Integrating the Value Chain

Main Projects
Production Objectives
Collaboration, Association & Divestitures
8

Integrating the Value Chain

The Energy reform implies that all market players may participate in all segments of the value chain.
Open and regulated market under the principles of asymmetric regulation and unbundling.

Raw
Materials

Processing
Transport1

Storage

Delivery

Sales

Imports

1. The new law creates the CENAGAS, responsible for the transportation of natural gas (PEMEX will be another participant).

Integrating the Value Chain: Key Dates

There are key dates for some segments of the value chain

Processing

Raw
Materials

Transport

Storage

Delivery

Sales

Imports
Until 2015, import permits only CENAGAS

for PEMEX, Productive

Companies and its
Subsidiaries.
From 2016, propane & butane
open to imports.
From 2017, open market for
gasoline and diesel imports.

Operation, 2015.

PEMEX becomes
service user.

Propane & butane prices

will be determined under
market conditions until
2017 or before.

Gasoline & diesel prices

will be determined under
market conditions until
2018.
10

New Downstream Framework

PEMEX creates value through the consolidation of the value chain of industrial processing activities in
an open and regulated market. This will be achieved through:

Production
(Supply)

Cost efficiency and strategic pricing policies

Infrastructure

Market
(Economic
Agents)

Diversify marketing by geographic area

Prices
and
Rates

Commercial
(Demand)

Assessment of infrastructure to maximize business value

and returns

Strategic alliances with private companies in a regulated

environment
High performance of human resources

11

Industry Transition
Regulatory guidelines:
I.
II.
III.

Terms for firsthand sales (CRE)

Retail prices, transit of "regulated" free-market
Regulated tariffs for transport, storage and
distribution (CRE)

III.
IV.
V.

Permits access to industry segments (SENER, CRE)

Open access in logistics systems (CRE)
"Adequate" energy supply (SENER)

Flexible
Rigid

Regulatory Framework

Road to transition
Market prices
Private property,
associations, PEMEX
Free product access
Social projects

Regulated Prices
State property
PEMEX obligated to
provide products
Product access through
PEMEX

Future
TRI1
New focus: participation in
relevant markets (profitable)
Business strategy: leadership in
the industry

Current
Only (PEMEX)
Multiple
Enterprises

1. TRI: Downstream

12

PEMEX as a State Productive Enterprise (SPE)

State Productive Enterprise aims to maximize
economic value and profitability for the Mexican state,
by improving its productivity, maximize oil revenues
and contribute to national development.

PEMEX

SPE
Exploration &
Extraction

Logistic

Cogeneration
& Services

Downstream

Ethylene

Oil Treatment
Refining
Gas & Petrochemical Processing
Import & Export
First-Hand Sales
Marketing
Sales & Distribution

Fertilizers

Given market conditions and the need for

greater operational flexibility there will be
new subsidiaries_1/ companies that will give
an array of services, from logistics to the end
sale of fertilizers.

1. The fertilizers business line will be under the umbrella of the PEMEX Productive Enterprise; meanwhile the Ethylene Subsidiary will be part of the downstream process,.

13

Value proposal
Maximizing sustainable value
Value proposal to the market
Business Organization
A renewal of the Mission and Vision of Downstream
Value generation analysis by market segment, identifying "key segments

Growth and profit improvement based on target markets

A business model for every market
Reformulate the overall flow in decision-making
Execution and development of new business models
Cost structure analysis to identify target markets" and "vulnerabilities
Performance indicators to measure segments of participation
A new perspective (based on value generation) in:
CAPEX Investment
Alliances
14

Content
Strategic Assets
Integrating the Value Chain

Main Projects
Production Objectives
Collaboration, Association & Divestitures
15

Project Development Strengthening

Executive Business Process
Elaborate the Business Plan focused on economic value creation
Align projects to the strategy
Promote coordinated execution of projects
Business
Process
Management

Optimized Business Portfolio

Business portfolio focuses on substantive areas of high
profitability, attending relevant industry markets

Projects Development
Project Development Institutional System which:
Uses international best practices
Promotes effectiveness in capital management
Supports efficient assignment of investment resources
PEMEX will participate only where it generates value
16

Downstream Business Portfolio:

Main Challenges
Main Projects

Challenges

Increase operational
efficiency
Infrastructure for better fuels

Expand gas pipeline network

Capture trading opportunities

Integrate value chains:

ethane, methane and
aromatics

Refining

Gas
Processing

Petrochemicals

Cogeneration

Take advantage of PEMEXs

power cogeneration potential

Investments in supply infrastructure

(Project Gulf-Center),
Refineries reconfiguring,
Clean fuels projects

Finish Los Ramones project

Transoceanic Corridor Project for
propane, gas and refined products

Fertilizers strategy,
Ethylene oxide and monoethylene
glycol projects
Modernization of Aromatics Train

Cogeneration projects
17

Refining Transport & Storage Gulf-Center System

The required infrastructure for this system will be implemented through two
projects:
Import Project Gulf-center by PMI (paid via a built-in contract molecule to
import a minimum volume of 125 Mbd).
Projects Tula-Salamanca, debottlenecking and storage in Bajo Terminals.
Tuxpan
San Luis
Potos

Aguascalientes

Salamanca

24

[167]

Tula

[XX]

New pipeline
Debottlenecking
Import project
Gulf-Center
Capacity in Mbd

(XX)

Capacity in Mb

Regin
Centro

16

14

[80]

(295)
10

[35]
Cuernavaca
(195)

1.
2.
3.
4.

[280]
CAB (1,500)
Arco Norte

18

[100]
Morelia

Tuxpan- Arco Norte

Arco Norte Tula

Arco Norte Regin
Centro
Arco Norte - Apizaco

Quertaro
Irapuato
Guadalajara

Project Gulf Center(1)

Regin Centro
Cuernavaca
MT(2) Tuxpan
CAB(3) Arco Norte
Tula

Apizaco
(175)

Estimated diameters. New pipeline project under analysis.

MT: Maritime Terminal
CAB: Pump & Storage Station
TAR: Storage and Distribution Terminal

24, 250 Mbd,

235 km
18, 150 Mbd,
87 km
16, 100 Mbd,
89 km
14, 80 Mbd,
64 km
10, 32 Mbd,
78 km
250 Mb,
3 days
1,500 Mb,
6 days
450 Mb,
3 days

TAR(4) Apizaco

175 Mb

TAR Regin Centro

295 Mb

TAR Cuernavaca

195 Mb

Pipeline

Pipeline
Pipeline
Pipeline
Pipeline
Pier,
tanks, land
CAB,
land
Tanks,
land
Storage
Terminal,
land
Storage
Terminal
Storage
Terminal, land

18

Revamping Pemex Refineries

Objectives:
Investment in high conversion
plants to increase profitability
by producing higher value
distillates products.
Increase process capacity to
receive more heavy oil
volumes (i.e Maya Crude).
Strategic reduction of residual
fuel oil to balance the market.

Salamanca

Tula
Salina Cruz

Operations of Tula and

Salamanca projects will start in
2018, and Salina Cruz in 2020.

19

Refining: Clean Fuels Projects

To address changes in specifications for distillate fuels Ultra Low Sulfur (ULS) in accordance with the needs of
the Mexican market, a set of projects is developed for the six refineries at the National Refining System,
considering the following plants and investment:

Gasoline (8 new plants), this projects are ongoing and will be completed by 2015.
Diesel (5 new plants, 17 revamps) to be completed by 2018.
Cadereyta Refinery (2015)

Salamanca Refinery
Gasoline

New plant.
Postreat.Gnas.
catalytic

Diesel

1 New HDS1 diesel

3 Revamps HDS DI

Gasoline
New plant.
Postreat. Gnas.
catalytic

Tula Refinery

1 New HDS diesel

3 Revamps HDS DI

Gasoline
2 New plants.
Postreat. Gnas.
catalytic

Salina Cruz Refinery

Gasoline

New plant.
Postreat. Gnas.
catalytic

Diesel

Madero Refinery

Diesel

5 Revamps HDS DI

1.

Gasoline

2 New plants.
Postreat. Gnas.
catalytic

HDS: hydro-desulphurization Process Plant

Diesel

4 Revamps HDS DI

Diesel
2 New HDS diesel
1 Revamp HDS DI

Minatitln Refinery
Gasoline
New plant. Postreat.
Gnas. catalytic

Diesel
1 New HDS
1 Revamp HDS DI

20

Natural Gas: Integrated Supply Strategy

Gas Supply Strategy

Actions
Short-term:
Increasing imports of liquefied
natural gas (LNG) (carried out
during 2013 and 2014).
Long-term:
Increase investments in gas
production.
Expand gas transportation
infrastructure.
Explore and evaluate the potential of
shale gas reserves.
Expand the production of
hydrocarbons in the country through
the Energy Reform.

21

View of Natural Gas Transportation Infrastructure

Projects, 2028
5
1
2

Pipelines
1. Nvo. Pemex - Cd.Pemex (Mayakn)
2. Los Ramones phase I
3. Los Ramones phase II (North &
South)
4. Agua Dulce - Frontera
5. Tucson - Ssabe
6. Los Ramones - Cempoala
7. Colombia - Escobedo
8. Matapionche - Medelln
9. Jltipan - Salina Cruz

1
2
4

2
3

PEMEX Gas pipelines

Private pipelines
Pipeline projects
Import capacity increase
Liquid natural gas terminal

Private:
10. Morelos
11. Tamazunchale - El Sauz
12. Norte - Noroeste

11
10

ii

8
9

Storage and liquefaction

i.
Natural gas storage (Altamira)
ii.
Underground storage (Shalapa, Ver.)
iii.
Liquefaction plant (Salina Cruz)

iii
22

Los Ramones Phase I & II: Success Case

Project Los Ramones phase I
PEMEX Gas signed a long term transport service
contract with the company Gasoductos del Noreste.
The construction of a 115 km pipeline was sped up, from
the US border to Los Ramones, NL.
Operations start: December, 2014.
Maximum transportation capacity: 2,100 MMcfd

Project Los Ramones phase II

738 km pipeline goes, from Los Ramones, NL. to the

central west region of the country.
Operations start: December 2015
Additional maximum transport capacity: 1,430 MMcfd

Scheme

Los Ramones I is being constructed by Gasoductos del

Noreste, in strategic alliance with Pemex-Gas.
Los Ramones II is developed by Tag Pipelines, a company
owned by Mex Gas Supply and Mex Gas Enterprise, two
Pemex Gas affiliates.
Los Ramones pipeline will be supplied of natural gas by a new
pipeline from Agua Dulce, Texas to the Mexican Border; it is
constructed in a strategic alliance with NET Midstream.

The advantages of the Tag Pipelines Subsidiary:

More flexibility and agility to analyze and develop infrastructure
projects.
Time and cost reduction in project execution.

Ability to venture with third parties for project development and

ownership in an efficient manner.
23

Trading Opportunities: PEMEX as a key player in the

Pacific market (Transoceanic Corridor Project)
Pemex has identified the opportunity to move product from the US Gulf Coast to the Pacific markets

Mexico has a privileged geographical position to move

hydrocarbons from the Gulf Coast to the Pacific, through
the Tehuantepec Isthmus.

PEMEX has operating infrastructure in both coasts which

are 186 miles apart.

Expanding current existing infrastructure would allow PEMEX

to move product from the USGC to the Pacific reducing
shipping costs and time (compared to Panama Canal) and
optimizing vessels fleet routes.
The products to move to the Pacific are natural gas, crude oil,
propane, naphtha, diesel and gasoline.
24

Petrochemicals: Fertilizer Market Strategy

Energy Reform
requires PEMEX to
supply fertilizers to
the domestic
industry and
distributors of
ammonia, with longterm contracts and
fixed prices.

Ammonia production for PEMEX is of

utter importance to ensure the supply of
raw materials with which the fertilizers
are made.
Currently, there are plants located at
Cosoleacaque, Veracruz, and in
Camargo, Chihuahua.

A new enterprise will

integrate the production
chain from ammonia to
the end sale of fertilizers.
The additional
investment is focused on:
three networks;
four products; and

new development
center.
25

Petrochemicals: Second Stage of the Ethylene

Oxide Plant
Scope
Construction and startup of two new watercooled reactors at the Morelos complex which
will replace the four existing oil-cooled reactors
to increase the plant capacity from 280 Mt/y to
360 Mt/y of ethylene oxide equivalent.
Operations start in 2018

Morelos

Source: Pemex Business Plan 2015-2019

26

Petrochemicals: Modernization and Expansion of

Aromatics Train at Cangrejera P.C.
Scope
Modernization of the aromatics chain
Technology upgrade
Broad operational flexibility
Lower energy consumption and overall cost
of production
Minimum feedstock consumption
Minimal environmental impact
Increase the offer of Para-xylene in the domestic
market.
Increase the capacity of Para-xylene
production to 448 Kt/a
Reduce imports
Take advantage of the available benzene.
Start of operations in 2020.

Source: Pemex Business Plan 2015-2019

Cangrejera

27

PEMEXs Power Cogeneration Potential

PEMEXs productive processes consume large amount of
energy.
Cadereyta

Project

Strategy for taking advantage of cogeneration potential

(PEMEXs Business Plan).

E.E. Generation
(MW)

Cactus

560

Salina Cruz

690

Tula

640

Minatitln

690

Cadereyta

390

Total

2,970

On April 2013 the CPG Nuevo PEMEX cogeneration project

(300 MW and 550 t/h steam) began operations.
Five projects which represent 2,970 MW of energy generation.

Tula

Minatitln

Cactus

PEMEX Sites
Refinery

Salina Cruz

Gas Processing Plant

28

Content
Strategic Assets
Integrating the Value Chain

Main Projects
Production Objectives
Collaboration, Association & Divestitures
29

Refining: Transition to Cleaner Fuels

8%

9%

21%
44%

40%

38%

33%
8%

58%
57%

61%

15%
17%
5%
29%

20%

16%

Magna

19%

Diesel

11%
7%
20%

Premium ULS

59%

9%

Premium

Magna ULS

21%

Diesel ULS

18%

32%

31%
2%

2006

7%
4%

2008

15%

17%

16%

20%

2010

2012

2013

2014

11%
2016

2018

Decline in demand for fuel oil mainly due to environmental restrictions and competition with natural gas.
Introduction of Premium Ultra Low Sulphur (ULS) from October 2006 and all the demand since 2007.
Magna ULS since October 2008 in metropolitan areas. Total demand in 2015.
Diesel ULS from January 2007 in northern border and metropolitan areas. Total demand in 2017.
30

Natural Gas Domestic Balance 2015-2018

MMcfd

3,639

4,429

4,996

5,829

4,417

4,267

4,195

4,103

2015

2016

2017

2018

National Supply

Net Imports

Net Exports

Demand

Expected demand will need transportation infrastructure to handle natural

gas imports
The domestic supply considering PEP Round Zero granted by SENER.
31

Petrochemicals Production 2015-2018

Thousand Tons per year

6,286
941

7,408

7,553

947

944

7,748
944

2,424

2,321

2,486

4,037

4,288

4,318

2016

2017

2018

2,256

3,090

2015
Methane derivatives

Derived
Ethane
Ethane derivatives

Aromatics and Derivatives

Take advantage of growing demand for ethane and ammonia.

1.

Main petrochemicals chains

32

Content
Strategic Assets

Integrating the Value Chain

Main Projects
Production Objectives
Collaboration, Association & Divestitures
33

New Business Models - Downstream

PEMEX is seeking to create value through successful business
schemes for new projects.
The business schemes PEMEX is looking for are:
Alliances with partners that have capital and operational
excellence.
Strategic suppliers of materials.
Joint Ventures (transportation, cogeneration, etc.)

34

New Business Models - Downstream

PEMEX has developed successful strategic alliances in our downstream activities

Project

Gas Pipelines

PEMEX Mexichem

1. Joint Venture
2. Oil supply

1. Joint Venture

1. Joint Venture
2. Fixed assets
3. Supply of raw materials

Refine Mexican heavy

crude oil and increase
gasoline supply to Mexico

Natural Gas and LPG

transportation to power
plants in the northern region
of Mexico

Increase production of vinyl

chloride

1993

1997

2012

Deer Park

Partner
PEMEXs
Participation

Objective

Operations
Startup

35

Investor Relations
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