National Oil Companies and the Energy Transition in Latin America: Lessons from Petrobras
Webinar
The event was held in Spanish and Portuguese, with simultaneous interpretation into English.
This webinar explored the key role of national oil companies (NOCs) in Latin America’s energy transition, at a time when their economic, socio-environmental, and climate importance impacts are undeniable. But their role is rarely front and center in public debates on sustainable development and climate action.
Latin America’s NOCs are expected to produce nearly 60% of the region’s oil and gas this year, in line with 2024 levels. Their political relevance is significant, and their fiscal contributions and role in the balance of payments are key for many economies. They not only directly influence energy decisions, but also shape Latin America’s ability to meet its climate goals and advance toward a just transition.
NOCs are currently focused on maintaining and expanding production in this decade and beyond, directing significant investments toward exploration and production upstream. However, this strategy leaves them highly exposed to financial losses in a global context that is moving toward decarbonization.
Despite their diversity, Latin America’s state-owned oil companies share common challenges that highlight the importance of a regional dialogue on their role in the energy transition. As an entry point for a regional discussion, the webinar will focus on the case of Petrobras—given Brazil’s role as host of COP30 and its influence in shaping a more ambitious development and climate agenda for Latin America.
Speakers:
- Suely Araújo, Observatório do Clima, on the report ‘The Petrobras We Need,’ which presents a roadmap with concrete proposals for a more sustainable future for the company.
- Ricardo Fujii (WWF-Brazil), on the report ‘Brazil at a Crossroads’ (WWF-IISD), which analyses the social, economic and climate implications of Petrobras' expansion.
Commentator:
- Isabelle Rousseau, Professor and Researcher, Founder and General Coordinator of the Energy Programme, Colegio de México
- Amylkar David Acosta Medina, Professor and Researcher at Universidad Externado de Colombia; Former Minister of Mines and Energy of Colombia
Introductory remarks: Ana Carolina Gonzales, NRGI
National Oil Companies and Just Transition: Perspectives from Oil-Producing Regions in Latin America
Webinar
The event was held in Spanish, with simultaneous interpretation available in English
This webinar brought together speakers who work in oil and gas-producing regions in Latin America to discuss how to advance just and inclusive energy transitions, particularly in contexts where national oil companies (NOCs) play a central role.
In Latin America, NOCs are responsible for much of the region’s hydrocarbon production and are key to planning and implementing a responsible phase-out that considers the context of national economies and local communities. Beyond revenues and jobs, in many regions these companies also provide essential services like health, education, and basic infrastructure — a role often overlooked in national debates.
As the global debate on energy transition progresses, oil and gas producing countries face the challenge of rethinking their development models. However, in many cases, those who experience the impacts of this transformation most directly —women, youth, Indigenous peoples, and informal workers— are often left out of decision-making processes.
The webinar explored the role of NOCs in enabling a just transition in producing regions, addressing questions such as:
- What responsibilities do they have toward the local areas where they operate?
- What role should they play in ensuring that transitions benefit local communities?
- How can they contribute to more equitable and sustainable economic transformation?
- And in a world that demands less oil and gas, what local benefits could be lost?
Speakers:
- Ana Carolina González Espinosa, Senior Director of Programs, NRGI
- Katya Puga Cornejo, Director of Energy, México Sostenible
- Cássio Carvalho, Policy Advisor, Instituto Estudios Socioeconómicos (INESC), Brasil
This event was organized during Climate Week NYC.
Governing Risk: Rethinking the Relationship Between Ecopetrol and the State in the Energy Transition
Webinar
Natural Resource Governance Institute (NRGI) presented findings from “Governing Risk”, a study analyzing the challenges Ecopetrol faces in the context of the energy transition and proposing governance principles to strengthen coordination between the company and the State.
This event brought together diverse stakeholders to reflect on how to manage transition risks and move toward a fair economic and energy diversification for Colombia.
Pathways for Transforming National Oil Companies Amid the Energy Transition
Labadi Beach, Accra
Globally, increased pressure to transition from fossil fuels to low-carbon economies aligned with climate commitments puts fossil fuel-producing economies at risk. This exposes governments and national oil companies (NOCs) to market risks associated with declining fossil fuel demand, reputational risks, technological shifts, and other transition risks if they are inadequately managed. Given the dependence of economies such as Nigeria on its fossil fuels for revenue and energy, the transformation of its NOC, the Nigerian National Petroleum Corporation (NNPC), at a pace that delivers a just and sustainable economic and energy future is crucial.
At this event, experts will provide clear, forward-looking strategies for transformation that outline proactive steps NNPC and the Nigerian government can adopt in response to emerging transition pressures and risks as they materialize. They will share pathways and recommendations for a just transition gleaned from research on successful NOC transformations and provide opportunities for cross-learning between NOCs that have adopted successful transformative strategies and other NOCs embarking on a similar journey of transformation.
Key stakeholders
Early-stage NOC just transition reformers such as NNPC and GNPC
Civil society organizations
Private sector
Donor organizations
Speakers
Tengi George-Ikoli, Country Manager, Nigeria, NRGI
- Giovanni Tagliani, UCL Institute for Innovation and Public Purpose (UCL IIPP)
Andrea Furnaro, Senior Policy Analyst, NRGI
Ikechukwu Aturuobi, Manager, Sustainability Partnerships and Alliances, NNPC
Martha Lucía Barón, Strategy Leader at the Executive Vice Presidency of Energy for Transition, Ecopetrol
Vincent Ogbu, Lead, Sustainability Strategy Policies and Standards, NNPC
Pemex and the Energy Transition: Timely Responses to Growing Threats
The energy transition requires timely and effective responses to ensure a sustainable future for everyone.
Key messages
- An energy transition that progressively phases out fossil fuels is needed to avoid climate catastrophe. Nonetheless, such a transition will harm oil-producing countries and their state-owned businesses, such as Mexico and Pemex. In the International Energy Agency’s Announced Pledges Scenario, an estimated USD 10 billion of Pemex investments would not break even. This would harm Mexican society: government revenue would fall, and Mexican businesses in the oil industry, such as those in the states of Campeche and Tabasco, would suffer.
- The energy transition is increasingly likely to result in a progressive and lasting decrease in global demand for oil. Although Mexico’s domestic oil market is significant, were Pemex to produce only to meet domestic demand, this would not sufficiently protect it or Mexico from the fall in global export demand.
- The energy transition may exacerbate what is already a difficult financial situation for Pemex. It is the world’s most indebted state oil company, with high costs in its refinery system, its labor and pension commitments, and several upstream projects. These challenges weaken the company’s position vis-à-vis the impacts of the energy transition.
- Oil extraction in Mexico has decreased over time. Despite substantial government financial support, Pemex has been unable to reverse the significant downward trend, and this is unlikely to radically change.
- Without sufficient profits, Pemex’s debt will grow. Its creditors have thus far been willing to loan it money, expecting continued government support. However, as more creditors worry about energy transition risk and decarbonize their investments, such willingness to lend is reducing. Interest rates are already rising for Pemex and likely also to increase for the Mexican government. This trend will make debt costs prohibitive for the company, trigger a spiraling of financial problems and increase the costs of government support.
The global energy transition is necessary to avoid the worst impacts of the climate crisis. However, it also brings risks for fossil fuel producer countries and national oil companies (NOCs), such as Mexico and Petróleos Mexicanos (Pemex). The International Energy Agency (IEA) estimates that if governments around the world meet the climate commitments they have set, global demand for crude oil will drop by half by 2050. This won’t be sufficient to meet the targets in the Paris Agreement, but it is concerning for oil companies and oil-producing governments.
The energy transition comes at a time when Pemex already faces challenges. Its oil production has fallen by nearly half since 2010. As a result, Mexico is today a net importer of oil products. To boost its “energy sovereignty” as defined by the Andrés Manuel López Obrador administration, and to ensure a diversified and secure oil supply, Pemex has invested significant resources in its national refinery system. The company also carries important financial labor liabilities linked to funds committed to its workers’ pensions. Considered the most deeply indebted oil company in the world, Pemex stays afloat because of substantial government support. Pemex’s debt exceeds USD 100 billion, equivalent to 5.6 percent of Mexico’s gross domestic product (GDP) for 2023.
On top of this, a significant portion of the government’s revenue comes from oil revenue. In 2023, oil revenue accounted for 15 percent of its total budgeted income. Of this total, 10 percentage points (MXN 736.56 billion) came from Pemex revenue. If we include the contribution Pemex makes to the Mexican Oil Fund, Pemex’scontribution to the country’s 2023 budget revenue is 22 percent. Nonetheless, as this report will explain, Pemex itself has reabsorbed a large portion of this contribution through financial support from the government.
These factors put Pemex in a difficult bind in facing the global energy transition. The response from Pemex and the government will be crucial for the sustainability of this state-owned enterprise. The response will equally be critical for Mexico’s public finances,6 its energy security, and the 520,000 people Pemex and its associated industries employ—especially in states like Campeche and Tabasco, where Pemex extracts most of its oil (50 percent and 41 percent of total company production respectively).
The decisions Mexico’s new government makes around Pemex will be pivotal, as will be proposals for how the company can face the enormous challenges ahead, including the energy transition risks the new administration faces. Mexico’s change of government in October 2024 represents an opportunity for citizens to demand a commitment from their political leaders to focus on the challenges Pemex faces in the context of the transition and on progress toward the country’s energy and decarbonization goals.
This report contributes to an understanding of the current situation and recommends three main focuses of discussion and action for Pemex, the Mexican government and policy-makers
World's most indebted oil firm is headache for new Mexico leader
Mexico’s President Sheinbaum Must Reform National Oil Company Pemex
Last week, Claudia Sheinbaum started her six-year term as Mexico’s president. Among great expectations for change, many are puzzling over how she might honour her background as a climate scientist while also upholding the legacy of her predecessor and ally Andrés Manuel López Obrador.
His administration doubled down on fossil fuel production and unconditionally picked up the tab for Pemex – Mexico’s national oil company – despite its debts exceeding $100 billion dollars, about 6 percent of Mexico’s gross domestic product.
In her inauguration speech to Congress last Tuesday, Sheinbaum said: “National consumption will continue to be the fundamental objective of Pemex’s oil production, limited to production of 1.8 million barrels per day. We will promote energy efficiency and the transition to renewable energy sources to meet the growth in energy demand.” Can she and Mexico have their cake and eat it too?...
Mexico’s new president must reform national oil company Pemex
Closing Implementation Gaps: Recommendations for Pemex to Meet its Emission Reduction Goals
Key messages
- The sustainability plan from Mexico’s national oil company, Pemex, lays out how the company hopes to bring down emissions of methane and other greenhouse gases (GHGs) associated with the production of oil and gas. While this is an important step forward, there are good reasons for skepticism over whether the company will meet these goals.
- Pemex has made multiple past commitments to bring down its emissions, and these have been backed by requirements in the Mexican legal framework, yet data show that the company has been failing to manage its GHGs.
- Runaway GHG emissions are more likely than ever to have consequences for Pemex. Changing capital market preferences, increased scrutiny in consumer markets, and the continued rise of carbon pricing mean that excessive emissions will generate financial costs for the company.
- Meanwhile, a revolution in the quantity and quality of third-party data on GHGs means that investors, customers, regulators and accountability actors are able to monitor company activities more closely than ever before.
- The entry into office of the newly elected government in October 2024 presents an opportunity for Pemex to seriously address GHG emissions.
In March 2024, the Mexican national oil company Pemex published a new sustainability plan laying out how it hopes to bring down emissions of methane and other greenhouse gases (GHGs) associated with the production of oil and gas.
While this is an important step forward, there are good reasons to be skeptical over whether the company will meet these goals. Pemex has made similar plans in the past, which have not been implemented. In this brief, we explore Pemex’s recent emissions history and reflect on why the costs of not following through on these latest commitments may be higher than ever before for the company and the citizens of Mexico. As a new administration comes to power in October 2024, we suggest five actions that Pemex and the government can take to ensure that the company meets its latest goals to reduce emissions of methane and other GHGs.
Swelling pressure to reduce methane
Pemex’s sustainability plan comes as a combination of market forces and global climate commitments linked to the energy transition are forcing oil and gas producers to tackle their GHGs. Producers cannot escape the fact that the use of oil and gas as fuels creates around 30 percent of total GHGs generated every year. For the industry as a whole, this means that there is no way to address the problem of GHGs without simply producing less. In this context, companies that want to survive will need to diversify away from fossil fuels, or position themselves with sufficiently low-cost assets to remain as one of the few competitive “last men standing”. However, as we explore in a sister brief, this latter option would be difficult for Pemex, given its high costs, declining reserves and high debt.
On the path to right-sizing, oil and gas companies also face pressure to address the operational emissions that stem from their production and distribution activities. Also known as scope 1 and scope 2 emissions (see box 1), these make up a further 10 percent of total global GHGs. At this scale, their magnitude alone is enough to put them in the spotlight. But operational GHGs in oil and gas are drawing special scrutiny thanks to growing consensus among climate experts that addressing them is one of the most straightforward and cost-effective options the world has to reduce global GHGs by 2030. Oil and gas operational GHGs largely stem from venting and improper flaring of excess or unwanted gas, and so-called “fugitive” emissions released from infrastructure leaks in pipelines, refineries and other downstream facilities.
About half of these GHGs are methane, which is the main component of gas.1 This represents a significant wasted economic opportunity for Pemex and the Mexican people, given its potential for sale or use as an energy source. But it also brings grave climate impacts. Methane is a particularly potent GHG, with a warming potential up to 80 times higher than carbon dioxide over a 20-year period. There is therefore broad consensus among governments, international institutions and investors that rapid and sustained reductions in methane emissions are key to limiting global warming in the short term. This is particularly true for the upstream oil and gas sector, which is responsible for around 25 percent of all man-made methane.
Summary of recommendations
We make five recommendations that the company and the new administration can implement to help Pemex stick to its plans:
- Targets. Pemex should establish short-term targets to track and demonstrate progress towards its medium- and long-term goals.
- Transparency. Pemex should publish transparent monitoring data to show progress towards short-, medium- and long-term targets. This data should be sufficiently granular to be used by local stakeholders, including civil society, communities and government.
- Engagement. Pemex should nurture a critical mass of informed stakeholders that can build momentum and maintain pressure on the company and the Mexican government to stick to their goals.
- International initiatives. Pemex should seek support and promote public accountability through membership of key international initiatives on methane and other GHGs.
- Enforcement. The Government of Mexico should empower enforcement authorities to stand up to Pemex. The regulators, currently Comision Nacional de Hidrocarburos, and the environmental regulator, Agencia de Seguridad, Energía y Ambiente, should have sufficient autonomy, capacity and budget to do so. They should be able to levy fines that are large enough to serve as a deterrent.
Financing and Regulating NOC Just Transitions Away from Oil and Gas
New York City, U.S.
At COP28, Parties committed to an equitable transition away from fossil fuels. Given that national oil companies (NOCs) produce roughly half of global oil and gas output, manage 40 percent of investments in the sector and two thirds of the planet’s hydrocarbon reserves, they have a critical role to play.
This event examined the levers that financial actors and regulators have available to enhance the credibility of NOC transition plans, and showcased research from Carbon Tracker, CCSI, IISD and WBA.
Featuring NRGI's
Patrick Heller
Chief Program Officer