Cycles&

Trends

2011-2012

February 2012

An Overview to EnergyAn Overview to Energy Sector in Sector in MexicoMexico

Chapter II

Energy Sector

Index

• Oil & natural gas reserves• Production• Exports• Scenarios• Investments• Pemex strategies

Chapter II

Energy Sector

At January 1st, 2011, hydrocarbon proven reserves are 13,796 billion barrels of crude oil, 74% corresponds to crude oil; 9% to condensates and plant liquids, and the rest, 17% , to dry gas.

Oil & Natural Gas Reserves

28.8

43.1

13.8

15

14.3

0

5

10

15

20

25

30

35

40

45

50

Proven Probable 2P Possible 3P

Reserves at January 1st , 2011 (Billion boe)

R

Reserves Evolution

Oil & Natural Gas Reserves

12 11.3 10.3 13 13.1 13.4 14.2 14.6 14.6 14.7 14.8 14.3

21.2 21.3 20.8 17 16 15.8 15.8 15.3 15.1 14.5 14.2 15

25.1 23.521.9

20.1 18.9 17.6 16.5 15.5 14.7 14.3 14 13.8

0

10

20

30

40

50

60

70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Possible Probable Proven58.2

56.253.0

50.048.0

46.9 46.4 45.4 44.543.6 43.1 43.1

Hydrocarbon reserves evolution(Billion barrels)

From 2010 to 2011, crude oil reserves 3P increased by 62 MMboe, mainly due incorporation of 878 MMboe exploratory crude oil. Proven reserves decreased by 259 MMboe as result of production of 940 MMboe in 2010.

Oil & Natural Gas Reserves

10.1 10.1 9.7

10.4 10 10.7

10.4 10.210.4

0

5

10

15

20

25

30

35

2009 2010 2011

Possible Probable Proven

30.9 30.5 30.6

Evolution of crude oil reserves(Billions of barrels)

From 2010 to 2011 3P reserves of natural gas increased in 39 Billion cubic feet, due mainly discoveries of 2,724 billion cubic feet of gas. In this way, it was possible to offset a significant production volume of 2,562 billion cubic feet that were extracted during 2010.

Oil & Natural gas reserves

22.6 23.7 23

20.1 20.7 20.9

17.6 17.316.8

0

10

20

30

40

50

60

70

2009 2010 2011

Possible Probable Proven

60.4 61.2 61.3

Natural Gas Reserves Evolution

(Billion cubic feet)

Between 2007-2010 exploratory activities have allowed incorporate sustained volumes annually of reserves up to 1,000 MMboe, this situation has made possible fulfill commitments of incorporate reserves by exploration .

Oil & Natural Gas Reserves

554.1377.8

569.7

894.8 894.8

229.1 492.6

548.6

490.3312.1

182.9182.8

363.8

388.9

230.8

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2007 2008 2009 2010 2011

Possible Probable Proven

966.11,053.2

1,482.1

1,773.9

1,437.8

Evolution of hydrocarbon discoveries

(MMboe)

Recovery rate of proven reserves will reach a value of 100% in 2012, due reclassification of probable reserves to proven reserves, these will come from the development of projects such as Ku-Maloob Zaap, Crudo Ligero Marino, Bellota-Chinchorro and Chicontepec, among others.

Oil & Natural Gas Reserves

0

10

20

30

40

50

60

70

80

90

100

% 25.5 22.7 26.4 41 50.3 71.8 77.1 85.8 100

2004 2005 2006 2007 2008 2009 2010 2011 2012

Evolution of recovery rate of proven reserves

(%)

In Mexico, oil production has decreased since 2005. Main reason is declining of Cantarell Asset. This field had its maximum production in 2004 and then began a descendant trend in a constant way.

Crude Oil Production in Mexico, 1900-2025 (Thousands of barrels per year)

Production

In 2011 Pemex achieved to consolidate stability in crude oil production. Pemex modified descendant trend during period 2007-2009, when registered an accumulative total declining of 475,000 barrels daily.

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0 Heavy Light Ultra light

Ultra light 156.9 134.8 135.3 144.1 180.4 198.6 210.4 269.7 320.0 336.0

Light 846.6 810.7 789.6 802.3 831.5 837.7 815.5 811.8 834.4 794.0

Heavy 2,173.7 2,425.4 2,458.0 2,387.0 2,243.8 2,039.4 1,765.6 1,529.0 1,422.0 1,419.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Crude Oil Production by type 2002-2011(Thousand barrels per day)

3,1773,370 3,382 3,333 3,255

3,075

2,7912,601 2,576 2,550

Production

Reversing decline in oil production in recent years was possible primarily by increasing production in Ku-Maloob Zaap, Litoral Tabasco, Crudo Ligero Marino and Ixtal-Manik projects. They have partially compensated decline in Cantarell.

Production

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Ku-Maloob-Zaap

Cantarell

Oil Production of the three main Assets

(MMboe)

Litoral Tabasco

Last year Pemex Exploration & Production showed a contraction in extraction of natural gas associated and non-associated, due the declining production in the main regions: Marine, South and North.

Production

0.0

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

7,000.0

8,000.0

Gas nonassociated

Gas associated

Gas non associated 1,271.7 1,305.4 1,379.2 1,563.3 1,863.9 2,266.1 2,613.0 2,598.8 2,550.3 2,477.5 2,205.0

Gas associated 3,239.0 3,118.1 3,119.2 3,009.6 2,954.1 3,090.0 3,445.4 4,319.8 4,480.3 4,542.5 4,390.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Natural Gas Production by type, 2002-2011

(MMcfd)

(include nitrogen)

On 2011, Pemex achieved a stable crude oil export platform. Lower international sales during 2008 and 2009 are explained by the global economic slowdown that led to a reduced demand of energy.

Exports

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

1,800.0

2,000.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

IstmoOlmeca

Maya

Exports volume crude oil

(Thousand barrels daily)

1,755

1,705 1,755

1,843 1,870 1,8171,792

1,686

1,403

1,222

1,361 1,338

Pemex achieved a significant increase of 37.4% in revenues from foreign sales of crude oil during last year, this due the high price (101 dollars per barrel) registered by Mexican oil in the international market.

Exports

14,552.9

11,927.713,392.2

16,676.3

21,257.9

28,329.4

34,706.8

37,937.5

43,341.5

25,605.4

35,985.0

49,322.0

0.0

5,000.0

10,000.0

15,000.0

20,000.0

25,000.0

30,000.0

35,000.0

40,000.0

45,000.0

50,000.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Value of Crude Oil Exports

(Million dollars)

Pemex registered a surplus of 24,996 million dollars (MMUSD) in its trade balance of crude oil, petroleum products, petrochemicals and natural gas on 2011. This represent an increase of 28% compared with previous year.

Exports

0

10,000

20,000

30,000

40,000

50,000

60,000

2006 2007 2008 2009 2010 2011

ExportsImportsBalance

Pemex Annual Trade Balance (million dollars)

This year Pemex will continue with its optimization program in all its processes and associated services in order to strengthen areas that create value to the company, identifying those areas that require new strategies to perform efficiently its activities.

Scenario 2012

2,559.9 Mbd

1,331.3 Mbd1,175.7 Mbd

445.1 Mbd

6,165.7 MMpcd

1071.4 MMpcd

Crude Oilproduction

DomesticMarket

InternationalMarket

Petroleum Products imports

Natural Gas production

Dry gas imports

Pemex Strategy for 2012

(Main goals)

Major resources for investment expenditure segment allow fulfill with maintenance and infrastructure development programs, in order to continue with modernization of the company, while reduction in current expenditure indicates a minor bureaucracy in Pemex operation.

Scenario 2012

301,255,000,000, 68%

141,230,386,919, 32%

Pemex Budget by Economic Classification, 2012(pesos & percentage structure)

Current Expenditure Budget

Scenario 2012

40,213,237,592

60,059,251,227

7,328,309,969

772,689,260

32,856,898,871

0

10,000,000,000

20,000,000,000

30,000,000,000

40,000,000,000

50,000,000,000

60,000,000,000

70,000,000,000

Public Services Public Goods Budget support& improving efficiency

Support public function& management

improvement

Pensions &retirements

Current Expenditure Budget, 2012

(Pesos)

Investment Expenditure Budget

Scenario 2012

301,

255,

000,

000

274,

132,

762,

537

213,

527,

446

16,0

87,1

35

3,65

8,78

7,24

8

17,4

07,3

23,7

89

3,19

3,59

8,57

7

785,

996,

808

1,84

6,91

6,46

0

0

50,000,000,000

100,000,000,000

150,000,000,000

200,000,000,000

250,000,000,000

300,000,000,000

350,000,000,000

Inve

stm

ent

Exp

endi

ture

Hyd

roca

rbon

s

econ

omic

infr

astr

uctu

re

Soc

ial

Infr

astr

uctu

re

Est

ate

Oth

er p

roje

cts

Infr

astr

uctu

rem

aint

enan

ce

Pre

-inve

stm

ent

stud

ies

Acq

uisi

tion

Pro

gram

s

Oth

er

inve

stm

ents

Breakdown

Pemex Investment Expenditure Budget, 2012(Pesos)

Total annual expenditure programmed for Pemex in 2012 amounts to 442,485.4 million pesos, while non-programmed is 34,839.6 million pesos. Pemex Exploration & Production receives 291,075.5 million pesos from programmed expenditure and 34,475.5 million pesos from non-programmed. PEP becomes subsidiary that receives more resources..

Total programmed expenditure, investment expenditure by subsidiary (Million pesos & percentage)

17,835 16,53829,346

87,694

291,075

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

PEP REF PGPB PP Corporativo

REF19.8%

PGPB4.0%

Corporativo6.6%

PP3.7%

PEP65.8%

Scenario 2012

Strategic Objectives

Based on Business Plan 2012-2016, Pemex Exploration & Production update its strategic objectives for this period as follows:

Maintain an average of oil production between 2.6 to 2.9 MMbd

Maintain an average of gas production between 5.8 to 6.1 MMMcfd

Replace 100% of proven reserves

Maintain production costs in the first quartile and optimize discovery and development costs in order to reach first quartile

Achieve the goal of zero accidents

To be considered as a socially responsible company

Scenario 2012

Investment Programs & Projects

Scenario 2012

43.4

30.7

20.7

12.7

6.5

49.5

45.8

39.3

18.3 18.1

13.5

5.6

20.6

52.8

0

10

20

30

40

50

60

Cantarell GasStrategicProgram

Ku-Maloob-Zaap

ATG Burgos Antonio J.BermúdezComplex

Jujo-Tecominoacán

2011

2012

PEP, Investment Programs and Projects, 2011-2012(Thousand Million pesos)

Investment Programs & Projects

Scenario 2012

5.8

4.2

7

6.1 6.1

2.8

5.4

4.9

2.9

2.5

4.5

6.6

4.8

3.2

3.02.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Chuc Delta delGrijalva

Yaxche Caan Bellota-Chinchorro

Poza Rica Arenque El Golpe-Puerto Ceiba

20102011

PEP, Investment Programs & Projects, 2011-2012(Thousand million pesos)

Investment Programs & Projects

Scenario 2012

2.1

1.1

3.33.4

2.4

1.61.4

0.60.8

0.7

0.50.6

1.0

1.9

2.3

1.2

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Ek-Balam Tamaulipas-Constituciones

Cactus Sitio-Grande

Och-Uech-Kax Ayin-Alux Carmito-Artesa Cárdenas Lakach

20112012

PEP, Investment Program & Projects, 2011-2012

(Thousand million pesos)

During current administration, investment budget has increased 100%. In 2011, Cantarell projects, Gas strategic program, Ku-Maloob-Zaap, Aceite Terciario del Golfo, Burgos and Antonio J. Bermúdez exert most of total investment.

Investments

65,525 67,471 67,657

94,123

116,757 122,161

143,600

164,629

198,247

251,882268,599

286,338

350,000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Pemex Investments(Billion pesos)

Long-term investments of Pemex Exploration & Production are focus on maintain crude oil production above 2.5 MMbd, gas extraction above 6,100 MMcfd, and reserve replacement rate exceeding 100%.

Investments

0

5

10

15

20

25

30

Exploration 3 3 3 4 4 5 5 5 5 5 6 6 6 6 6

Production 17 18 19 18 19 18 18 18 17 18 17 17 17 17 18

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Exploration & Production Esteemed Investments(Billion dollars)

On Business Plan 2012-2016, Pemex forecast a growth rate of 2% regarding crude oil production during period 2012-2016, projection includes implementation of integral contracts for exploration & production.

Investments

2,6062,628

2,675

2,731

2,821

2,450

2,500

2,550

2,600

2,650

2,700

2,750

2,800

2,850

2012 2013 2014 2015 2016

Crude Oil Production, 2012-2016

(Thousand barrels per day)

For period 2012-2016, oil exports will maintain stability, growth rate for reference period is of 1%, coupled with high prices projected, will maintain high income rates in the country.

Scenario 2011-2016

1,221

1,2521,260

1,314

1,271

1,160

1,180

1,200

1,220

1,240

1,260

1,280

1,300

1,320

2012 2013 2014 2015 2016

Crude Oil Exports, 2012-2016(Thousand barrels daily)

The Energy Information Administration (EIA) reviewed oil production projections in Mexico according different scenarios; in referent scenario for 2011 forecast a decline annual rate of -2.4% for period 2008-2035, projection for 2010 rate was of -2.9% between 2007-2035.

Scenario 2012-2035

0.9

1.8

2.7

3.6

4.5

Reference

High oil prices

Low oil prices

High economic growth

Low economic growth

Reference 3.7 3.5 3.2 3.0 2.9 2.8 2.3 1.8 1.4 1.5 1.7

High oil prices 3.7 3.5 3.2 3.0 2.9 2.8 2.3 1.7 1.4 1.6 1.8

Low oil prices 3.7 3.5 3.2 3.0 2.9 2.8 2.4 1.8 1.5 1.6 1.7

High economic growth 3.7 3.5 3.2 3.0 2.9 2.8 2.4 1.8 1.4 1.5 1.7

Low economic growth 3.7 3.5 3.2 3.0 2.9 2.8 2.3 1.8 1.5 1.6 1.8

2006 2007 2008 2009 2010 2011 2015 2020 2025 2030 2035

Mexico: liquid hydrocarbons production scenarios (million barrels daily)

Historic Esteemed

Pemex has outlined the following objectives & strategies

Main initiatives by subsidiaries

Exploration & Production

Refining

Gas & PQB

Petrochemical

•Increase incorporation of reserves •Maintain production platform (Cantarell) •Development of complex fields in an efficient way (ATG,AP) •Reactivate marginal fields – Incentivated Contracts •Increase and maintain use of gas

Increase process and transport capacity, according with growth in primary production and demand

•Increase reliability and profitability of the National Refining System •Deep conversion projects•Meet gas & diesel standards•Increase import capacity and strengthen storage & distribution capacities

•Increase efficiency of profitable chains •Stimulate participation of private sector in new projects development

Strategies

Cross-cutting initiatives

Baj

o c

ont r

ol d

e Pem

ex

Security

Reliability

Profitability and efficiency

Sustainability

•Consolidation and continuous improvement of SSPA

• Sustainability and Environment Protection

•Operational Reliability

•Control of fuels illicit market

•Best practices in Projects development

•Integral Business Model of supplies

•Human Resources Strategy

•Strategic Technological Program

•Suppliers Development

•Management Processes System

Strategies

Prioritized initiatives: importance vs. progress

Imp

ort

an

ce

Med

ium

Hig

h

Main initiatives

• Reserves • Crude oil production • Gas Production

• Chicontepec • Deep waters• Minatilán

Operative reliability

Human resources

Fuels quality

Security

Gas production

New Refinery

Oil production

Logistic

Reserves

Environmentalr Protection

Use of gas

• New Tula Refinery. • Salamanca • Fuels quality • Petroleum logistic • Alliances • Human resources

Structural issues

Deep waters

Alliances

Minatitlán Chicontepec

Energy • Operative reliability • Illicit market

• Environmental Protection • Energy reform • Corporate governance • Structural issues:

– Fiscal regime – Labor liabilitiesa – Subsidies – Citizen bonds emission

Salamanca Corporate Governance

Illicit marketreform2008

– Debt structure diversification -

Advance + Líneas de negocios Transversales Estructurales

Strategies

Low

Medium

High

High

IC

IC IL

IC IL TC

Medium

IC IL

IC IL TC

TC

Low

IC IL TC

TC

TC

Com

ple

xit

y

Develop complex fields and reactivate marginal fields

In short-term, Pemex must use different schemes in order to develop internal capacities in substantive areas

New schemes proposed are: Integral contracts (IC) Integral field laboratories (IL) Transactional contracts (TC)

Internal capacity

Internal capacity : • Human resources • Technology • Process Complexity: • Scale • Technological challenges • Market service

Strategies

Deep waters Chicontepec Matures fields (Reactivation)

Rates US$/b) Santuario Magallanes Carrizo

Maximum 7.97 9.78 12.31

Winning bid

5.01

5.01

9.40

2011 2012

I II III IV I II III IV

Mature Fields. North Region

Chicontepec

Deep Waters

Reserves 3P (MMboe)

104

Current production (bd)

Original volume (MMboe) 1,465

40 51

Magallanes Santuario Carrizo

461 321

Magallanes Santuario Carrizo

6 fields grouped in 3 blocks

Reserves 3P of 195 MMboe; Average surface: 312 km2.

Award: August18, 2011

First round

(2011):

Mature Fields in the South Region

Next Bid Calls (2012)

Reactivate marginal fields: Incentivated Contracts

Strategies

This report was prepared by: Sergio Rivas F.

Office: +52 55 10 56 08 05Mobile: +52 1 55 18 00 14 16Mobile: +52 1 55 59 09 68 15

Please feel welcome to contact Sergio Rivas F. (E-mail: sergio@primerenfoque.com.mx) for any

questions concerning this report.