What’s behind string of accidents at Mexico’s Pemex?

MEXICO CITY (AFP) – A series of accidents has added to the challenges facing Mexican state-owned energy giant Pemex, which is battling back from what it called the worst crisis in its history.

Pemex has suffered seven significant accidents since 2013 that generated around USD1 billion of mitigation and repair costs, according to its Chief Octavio Romero.

On August 22, a fire on a platform in the Gulf of Mexico during maintenance work left five people dead and shut down more than 100 oil wells that relied on it for electricity and injections of natural gas.

On July 2, a spectacular blaze and gas leak from an underwater pipeline in the Gulf of Mexico caused what was dubbed an “eye of fire” in the sea, though no victims.

Other incidents included fires in 2015 and 2016 on offshore installations that each left several people dead.

In addition to the risks inherent in the oil industry, experts blame poor maintenance and ageing facilities. They said investment has been insufficient, despite President Andres Manuel Lopez Obrador’s vow to “rescue” Pemex.

A Pemex gas station is seen in Mexico City. PHOTO: AFP

“The trend of not investing much worsened under this administration,” Energy Consultant Gonzalo Monroy told AFP.

The average maintenance budget since Lopez Obrador took office in 2018 has been almost 40 per cent lower than in the preceding five years, said Raymundo Sanchez, an energy expert at consultancy firm EY-Parthenon.

The amount of funds set aside for maintaining production facilities dropped from MXN16 billion (about USD800 million) in 2020 to MXN10.8 billion in 2021.

An important part of this work was done by specialised companies, but many no longer work with Pemex, Sanchez said.

“Their contracts were not renewed or they are no longer working for Pemex because they are owed money,” he said. Pemex personnel “do not necessarily have these capabilities”, he added.

“The infrastructure is already old. The platform where unfortunately five people died dates back to 1982,” said Monroy.

Pemex’s refineries are all decades old.

The oldest, in the northeastern state of Tamaulipas, was inaugurated in 1914. Even the most recent ones in Nuevo Leon and Oaxaca have been operating since 1979.

The government is currently developing a new refinery in the southeastern state of Tabasco.

Pemex’s chief has insisted that none of the accidents during Lopez Obrador’s administration were the result of neglect.

Before Lopez Obrador took office, Mexican governments focussed more on oil production than refining because it was more profitable. As a result, there was a lack of investment in refining, and the plants worked at a lower capacity.

“Today, the refineries are operating at full capacity, and that also means that operational stress leads them to take greater risks,” increasing the danger of accidents, Sanchez warned.

Pemex lost around USD23 billion in 2020 as the pandemic hammered demand for energy, creating what the group called its worst crisis ever, though it has since returned to profit.

The company has been trying to arrest a steady decline in its oil production, which fell from an average of 3.4 million barrels a day in 2004 to 1.7 million bpd in 2020.