May 2013

Moving towards Sustainability in the

Mexican Petroleum Industry

Carlos Morales Gil General Director, PEMEX Exploration & Production

The energy that moves the

world

3

90% of Mexicos energy supply comes from hydrocarbons

Oil

34%

Hydroelectric

2% Biomass

8%

Solar, wind and

biofuels1%

Coal

23%

Nuclear

6%

Gas

26%

Worldwide energy consumption Energy consumption in Mexico

Oil

65%

Gas

23%

Hydroelectric

6%

Biomass

3%

Coal, nuclear,

solar 3%

60% hydrocarbons

Source: Outlook for Energy: A View to 2030 Source: Estrategia Nacional de Energa, SENER 2013

90% hydrocarbons

Ranking

4th

17th

International comparison

Crude oil production

3.16 MMbd a

Crude oil reserves (1P)*

10.025 MMMb

Natural gas production

7.03 MMMcfd

Natural gas reserves (1P)*

17.22 MMMMcf

Refining capacity

1,540 Mbd

Sales

80.6 billion dollars

a Includes gas liquids * Las Reservas de Hidrocarburos de Mxico 2012,

January 1, 2012.

* PIW 2010 Rankings, December 2011. Petroleum Intelligence

Weekly

9th

33rd

14th

11th

4

PEMEX ranks high in the world

0500

1,000

1,500

2,000

2,500

3,000

3,500

60 62 65 67 70 72 75 77 80 82 85 87 90 92 95 97 00 02 05 07 10

Thousands of barrels per day

Chiapas-Tabasco Mesozoic

Cantarell

Ku-Maloob-Zaap

Other offshore fields

Tampico-Misantla Basin

Production

plateau

Cantarells plateau

Production increases at Ku-Maloob-Zaap, Ixtal, Crudo Ligero Marino

Revitalization of mature fields (bano, Delta del Grijalva, 5 Presidentes)

Integrated E&P Contracts

5

PEMEX has been a reliable oil supplier

for Mexico and abroad

3P reserves

(only new discoveries)

Millions of barrels of crude oil equivalent

1P reserves

-500

0

500

1,000

1,500

2,000

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

Replacement

Production

14%

Replacement rate of existing projects

59%

108%

66%

102%

129%

45%

-19%

26% 26%

50%

77%

86%

104%

101%

128%

104%

Source: BDI,

POT-I 2012

Production and 1P and 3P reserves

replacement rates

Replacement of proven reserves is

the foundation for the future

6

Management of the strategy

[

GOALS

2013 - 2017

Maintain average oil production between 2.5 and 3.0 mmbd

Maintain average gas production between 5.7 and 6.2 mmmcfd

Replace proven reserves at or above 100%

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

them up also into the first quartile globally

Achieve zero accidents

Be perceived as a socially responsible company

Increase reserves inventory through new

discoveries and

reclassification

Increase hydrocarbon production

Increase and improve execution capacity

Optimize investment

Optimize operating expenses

Optimize production operations,

distribution and

commercialization

Continue to implement best practices in HSE

Strengthen good relations with the

community

Modernize technology management

Acquire and develop talent

Focus on business

Improve project planning, execution and control

Growth Corporate responsibility Operating efficiency Modernization of management

7

Strategic Plans reflect the vision [

Reserv

es

New

field

s

Exis

tin

g f

ield

s

Strategic challenges

1. Increase the reserves replacement rate

2. Increase the exploration success rate

3. Increase the recovery factor

5. Reduce the decline rate

4. Reduce costs

People

Processes Technology

Knowledge

management

8

Knowledge management:

essential to face challenges

6. Accelerate the development

of new production

E&P head

office

Business units that support the operation

Management of

Technical

Resources

Business

Development

HSE Auditing Project Services

Distribution &

Commercialization Exploration

Field

Development

Produccin Produccin Produccin

Production NE Offshore Region

SW Offshore Region

South Region

North Region

Administration &

Finances

Planning &

Evaluation

Maintenance & Logistics

Drilling Unit

Organization focusing on value creation

Main opportunities for

improvement

I. Focus on projects

IV. Flexibility in the

assignment of resources to

projects

III. Efficient allocation of

resources

II. Technical quality

9

Resources and reserves:

starting point for projects

Unconventional (shale gas)

Basin Cumm.

prod.

Reserves Prospective

resources

1P 2P 3P Conv. Unconv.

Southeast 45.4 12.2 18.2 25.1 20.1

Tampico

Misantla 6.5 1.0 7.0 17.7 2.5 34.8

Burgos 2.3 0.4 0.6 0.8 2.9 15.0

Veracruz 0.7 0.2 0.2 0.2 1.6 0.6

Sabinas 0.1 0.0 0.0 0.0 0.4 9.8

Deep

Waters 0.0 0.1 0.2 0.7 26.6

Yucatan

Platform 0.5

Total 55.0 13.9 26.2 44.5 54.6 60.2

Billions of barrels of crude oil equivalent

Oil and gas basins

Exploration

projects

Production projects

28.4

11

Resources and reserves:

starting point for the projects

Delineation Design

Exploitation/

Reservoir

management

Distribution and

Commercialization Reserves

incorporation

Evaluation

of the

petroleum

potential

Production Development Exploration

Build facilities

Drilling

PROJECTS

12

The exploration and production process demands

deep knowledge of multiple disciplines

E&P project portfolio

22 light oil 4 heavy oil 3 gas

2 gas

7 shallow water 6 deep water 7 onshore

Exploration

Production

Integrated

The investments aim to increase oil and gas production and to continue increasing the proven and 3P reserves replacement

rates

80 Projects Integrales

Production

Exploration

Facilities 30

2

Exploration 20

Production 29

[

[

13

Reservoir declines

Recovery factor

Production

Costs

Reserves replacement

Development times

Maximization

of economic

value

Proyectos

Execution capacity

Investment

Technology

Human

Resources

PROJECTS

[

[

The project is foremost in the generation of value

14

Anlisis de cartera Documentacin de

proyectos

Reliable documentation

Quantify expenses and

benefits

Quantify the uncertainty of

key variables

Alternative evaluation

methodologies

Stochastic

analysis

Quality of the

information

Integration of

profitable/strategic

projects

Strategic elements and

opportunities to optimize

Maximization of economic

value

Analysis and allocation of

tecnical and financial

resources

Allocation of

resources

Portfolio

optimization

Defining the

critical

elements of the

model

Portfolio

integration

Deterministic

economic

evaluation

Assessment of

flexibility

Continuous and efficient allocation of resources

during the life of a project

15

Project documentation Portfolio analysis

Contracting

With financial resources

With technology and human resources

Transactional contracts

Without technology and human resources

Comprehensive contracts without

financing

Without financial resources

Comprehensive contracts with

financing Financial resources

Goods and

services

Technology and human resources

Execution capacity

Example

Cantarell Ku-Maloob-Zaap Litoral de

Tabasco

Burgos Chicontepec Complejo A.J.

Bermdez

Jujo-Teco

Deep water Chicontepec Mature fields

Scope of the contract

16

PEMEX E&P has established contracting

strategies per project, asset and region

Technology and human

resources

18

Technology strategy

Forcing the pace of innovation in those few critical technologies where the industry cannot be relied upon to do so (2 areas)

Intelligent Buyer

Flag- ships

We developed the concept of a three-tier hierarchy, but based around probability of market innovation and need for specialist adaptation (rather than competitive advantage or importance, used by IOCs)

Adapter Following the pace of innovation in selected critical technologies where specialist adaptation is required (6 areas)

To achieve excellence in all key attributes, PEMEX needs to be an intelligent buyer (80-90% of technology needs)

Requires excellent capabilities, but very different from those needed for invention or lab R&D

19

Delivering the strategy: manage technology development & demonstrate value

1. Create the link between asset needs and technology

development

2. Maintain the link throughout development and deployment

3. Evaluate performance of technology delivery and

demonstrate value

20

Re-cap of technology strategy

Intelligent

Buyer

Fluid characteristics

Drilling equipment and chemicals

Processing facilities

Shale gas

Artificial lift

Flow assurance

Water handling

Pipeline and riser systems

Sand control

Completion equipment

Petrophysics

Stimulation and acid injection

Drilling & completions

Facilities Production operations

Subsurface

EOR/ IOR in naturally fractured

carbonates

Offshore extra-heavy oil

Flagships

Deepwater technology

Reservoir imaging

Difficult sandstone reservoirs

Reservoir monitoring

HPHT drilling and completion

Gas reservoirs near critical point

Adapt & Deploy

Only two flagship areas (at present), plus six adapt & deploy technology themes. In everything else, PEP seeks to become a (better) Intelligent Buyer

Projects

Recruit Succession

plan

Evaluate

Assign

Plan

Governance model

When should we

retain or replace

talent?

To whom should we

assign the projects?

How should we

measure and

recognize

performance?

How can we

teach skills?

How can we access talent?

What do the

projects call

for?

Talent management: the key to success

Recruit 200 recent graduates in earth

sciences and petroleum

engineering per year

900 specialists in

geosciences

1200 specialists in petroleum engineering

Retain 30 specialists and

experts yearly and replace all personnel ready for retirement

Application of the skills model in the

E&P value chain

30 professionals doing graduate work

abroad and 26 in

Mexico

Increase skill levels from 2.16 to 2.50

21

1 2 3 Develop

4

5

6

Training portfolio

22

Mentoring

Workshops

Integrated Training

Programs

Graduate

studies

41 masters 15 doctoral

Self-study

Traditional courses

Training

Developments in progress

Exploration results on the right track

11 1435

68

119132

147 148 150158

98

69

2810

1