What are PEMEX’s current production levels? What are your expectations for the future?

MORALES-GIL: PEMEX produces between 2.5m – 2.6m barrels of oil every day. In total, we produce more than 4m barrels of oil equivalent. We process 1.3m barrels of oil in our 6 refineries in Mexico. We supply all of the energy in Mexico, either through the processes of these refineries or through imports. We also contribute very substantially to the government’s income. More than 30% of the government’s income comes from PEMEX’s operations. We do not own the production. The production belongs to the people. Between 2004 and 2009, we had a decline in our reservoirs in terms of maximizing their value, particularly in Cantarell. Between 2009 and 2013, we have been able to stabilize production at 2.5m – 2.6m barrels of oil. For the future, we plan to increase production to 3m barrels of crude oil per day during this 6-year administration. We plan to increase production after 2018 as well, to about 3.3m - 3.5m barrels of oil per day, depending on the developments and discoveries that we have been recently announced.

What are PEMEX’s most important sites and activities for exploration and production (E&P)?

MORALES-GIL: We have been working in the Southeast basins, particularly in the state of Tabasco, and in the Bay of Campeche. Those are the two basins we are tackling and they contribute to most of our production. More than 80% of our production comes from those basins. We are moving north as well, in terms of onshore, specifically in Veracruz to increase the production of oil, but also in Chicontepec, and in Tamaulipas as well. We plan to continue with this approach. We plan to continue to develop resources, as well as the discoveries in the deep waters off Mexico. That is our geographic approach to diversify our exploration and production (E&P) activities. One critical issue is going to be shale gas, and resources north of Veracruz, Tamaulipas, and Quila.

PEMEX is unique because it operates in every part of the energy chain. How do you see this as a competitive advantage?

MORALES-GIL: It is a competitive advantage to have guaranteed supply for our refineries, and guaranteed supply for our gas plants and our petrochemical processes. We have activities in our drilling division that allow us to have part of our basic needs covered by the rigs we own. The rest is contracted out. We contract all the other services that we need, such as vessels, helicopters, and semi-submersibles for deep water. This allows us to have good synergies with contractors. There is a good balance between what we do, and what we contract.

To what extent does the energy sector contribute to GDP in Mexico?

MORALES-GIL: The energy sector is an important contributor to Mexico’s GDP. In the last years, we have made up about 10% of total GDP. We also make up about 30% of government income. That is our macro participation. It is a very significant contribution. It is a contribution that can be increased depending on the results that we receive, and depending on the markets around the world. We are working very hard to maintain this contribution to GDP.

What is your outlook for energy prices going forward?

MORALES-GIL: I think there is a floor for oil prices. We do not expect it to fall below $80 a barrel. I think $80 is a reasonable floor for the level of activity that the well industry is taking on. We say this because most of the unconventional projects, the low probability projects, and the deep-water projects, are very high in cost. All included, the cost after tax is around $75 - $80 per barrel. If the price would drop below that, those projects would be no longer financially possible. This will reduce the supply of oil, which will in turn bring prices back up. This is the cycle around the equilibrium point of supply and demand. That is why we believe this equilibrium point is about $80. For gas, we expect small increases in the following 2 years, to the order of $5.50 - $6, above the $4.20 that we have today.

What partnerships is PEMEX currently involved in and what joint ventures are on the horizon?

MORALES-GIL: We have agreements with most of the major energy companies, such as Petrogras, British Petroleum, Exxon, Shell, Chevron, and many others. We think that PEMEX should be allowed to form commercial partnerships and alliances. This is one of the things we are aiming for. It is a way to manage and distribute risk in the industry. That is one thing we are looking towards in the future.