Business Plan 2012-2016

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Business Plan of Petrleos Mexicanos2010-2024

- Executive Version -

June 1st 2010

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Contents

Background

Course of Action and Strategies

Upstream

Downstream

Distribution and Marketing

-

Expected Results

Annexes

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Introduction

PEMEX, in contrast to international oil companies, must strike a balance betweenthe different roles that it plays in the domestic economy to be successful inachievin its business oals these roles involve multi le actors and stakeholdersinfluencing strategic decisions.

PEMEX is the main player in the domestic energy and petrochemicals marketsand, as a state-owned company, is subject to a stringent regulation; it thereforerequires flexibility in order to compete in a global market.

This business plan seeks to provide for PEMEXs long-term sustainability in an

environment where it is the main energy provider in the country and plays the . ,

is the main contributor to the governments fiscal revenue and is responsible forthe supply of the countrys main petroleum products.

PEMEXs strategy seeks a balance between the factors discussed above and the

long-term sustainability of the company through programs to: increase efficiencyin all areas of the company, increase and create economic value, protectcommunities and the environment, and develop technical, administrative andtechnological competencies -both internally and among PEMEXs suppliers.

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PEMEXs Long Term Sustainability

Federal Government with explicitand clear goals and objectivesregarding PEMEX

Competitive fiscal regimeAlternative sources of income

Public Finances Public Policy

Policy behind subsidies must be

transparent

Corporate governanceAutonom in strate ic business

Regulation

Energy Security

Investment in oil & gasexplorationNew market designInvestment in refining and

decisionsFlexibility and autonomy infinancial, budgetary and operatingissues of the business

Equilibrium

Growth and value creation

s r u on o o pro uc s

Long-Term Sustainability of PEMEX

Strategic focus and business processorientation

Operational excellence

Efficiency in project execution

Industrial safety

Alignment of objectives between PEMEX and its Union

Enhance flexibility and productivity in labor practices

Infrastructure modernization

Flexibility in procurement processes

Technological Development (R&D) capabilities

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There are four stages in the Mexican oil industrys history.PEMEX itself first emerged in 1939 following the Oil Industry Expropriation

announced by former President Lzaro Crdenas del Ro in 1938.

4,000

Internal MarketDevelopment

Export Orientation of PEMEXForeign Companies

Mboed1

Maxi mum oilproduction

Cantarelldeclinebegins

3,000

3,500

Maalob 1fi eld is

PIDIREGAS3

begin

Cant arell s

nitrogeninjection

2,000

2,500

PetroleumWorkers

Union i sconstituted Oil industry

discovered-2nd lar gestoil field in

Mexico

PEMEXact ivit ies areorganized in 4

subsidiaryentities

2004: Fir st explorat ionwell i n deep waters -

Pozo: Nab 1Water depth: 681

meters

Crude oil import s:

1956-1959: 1.5 Mbpd4

1963-1964 : 1.0 Mbpd

500

1,000

,

Mexi co becomest he world s 2ndleading producer

of crude oil

nationalization PEMEX iscreated The fir st

collectivecont ract is signedbet ween PEMEX

and it s Union

Cantarellfi eld is

discovered

Natural gasmarket is

liberalized

Increase in producti on of associat ednatural gas in Cantarell and non-

- .

0

1904 1910 1916 1922 1928 1934 1940 1946 1952 1958 1964 1970 1976 1982 1988 1994 2000 2006

Crude Oil Production Nominal Capacity of SNR Natural Gas Production

associat ed gas in Burgos

2

Mexican oil industryconsolidation(1939-1970)

Growth andstability

(1971-1996)

2nd stage ofdevelopment(1997-2008)

Origins of Mexican oilindustry (1864-1938)

6(1) Thousand barrel s of oil equivalent per day. (2) Nat ional Refi ning System. (3) Long-t erm Product ive Infrast ruct ure Proj ects. (4) Thousand barr elsper day.

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As the main actor in its industry, PEMEX must maximize the value ofhydrocarbons and meet the demand for petroleum products. PEMEX became the

most important Mexican company during its growth stage, but today is facingcritical issues that must be timely addressed.

Legal

Generate economic value through the operations of the Mexican oil industry. The central leadership and strategic direction of the oil industry. Exclusivity in oil exploitation and production, importing and distribution of petroleum products within

the country. Submit PEMEXs business plan in accordance with the countrys energy policy, consisting of the:

, , .

Importance Largest supplier of energy necessities of the country. Largest value generator for the Mexican society in the energy sector. Most important company in the country in terms of sales and demand for goods and services. Contributes nearly one third of the Federal Governments tax revenues.

Downward trends in reserves and production. Maturing oil fields. Performance gaps that reduce profitability. High labor liability and productivity gaps.

Currentsituation1

. Little activity in R&D and lack of own advanced technology.

Challenges

High capital requirements. Projects of exploration and production (E&P) of high complexity and requiring new technologies. Rapid growth in demand for motor fuels with new quality specifications that generate low environmental

impact. Decreased demand for residuals and increased demand for natural gas. High volatility of prices and margins.

performance and maximizing economic value in all its activities, within a framework of

security, reliability, profitability and sustainability.7(1) A more complete diagnosis is available at in http://www.sener.gob.mx/webSener/res/Misc/Diagnstico%20Situacin%20Pemex.pdf

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Contents

Background


Upstream

Downstream


-

Expected Results

Annexes

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Business Plan Description

This Business Plan is the roadmap for PEMEX to achieve its operational andfinancial sustainability in the long term, taking into account its current situationand dia nosis thereof and forecasts of the markets.

PEMEXs Business Plan addresses 23 main challenges, relating to different aspectsof the company, such as: operational, administrative and financial efficiency, itsobligation to satisfy Mexicos energy needs, its need to sustain and increasecurrent levels of production, and the responsibility to carry out a sustainable andsafe operation. These challenges show our commitment to the Mexican society, theenvironment, and the long-term sustainability of the company.

, ,each with its own series of objectives, goals and specific strategies:

1.Growth

.

3.Corporate responsibil i t y

4.Management t ransformat ion

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In order to maximize PEMEXs economic value, this Business Planconsiders several strategies organized into four course of action.

EfficiencyImprovement of the performance of all operations through a

more educated labor force and by implementing best practices

in all business processes as well as reducing red tape

GrowthSatisfaction of the

growing national

demand for Maximize economic value in a

Corporate

ResponsibilityImprovement of

PEMEXs reputation

petroleum products,

achievement of

increases in reservesand production of oil

sustainable manner

Upstream Downstream

an re a ons ps

with stakeholders,

as well as

incorporation of

& gas, and use of

R&D to develop

competitive

advantages

Distribution and Marketing Cross-Functional Issues

social responsibility

criteria in all

operations

Management ModernizationTaking advantage of the new regulatory framework defined by

the Energy Reform to increase management autonomy,

accelerate PEMEXs operations and implement a results-

oriented culture

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Elements of Analysis in the Business Plan

For each element of the value chain: Upstream (E&P), Downstream (Refining, GasProcessing and Petrochemicals), Distribution and Marketing, and Cross-FunctionalIssues (Finance, Human Resources, Safety, Development and Execution of InvestmentProjects, etc.) this Business Plan contains the following elements:

Diagnosis, market analysis and a Strengths, Weaknesses, Opportunities andThreats (SWOT) analysis.

Main challenges derived from the above analysis

Specific strategies to face the main challenges of the business

DiagnosisStrengths &weaknesses Main

Strategiesto face the

Marketanalysis

Opportunities& threats

of thebusiness

challengesof the

business

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Contents

Background


Upstream

Downstream


-

Expected Results

Annexes

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The main Ustream challenges are the decline of reserves and production ofoil & gas, the need to increase exploratory and recovery success, maintain

costs at a competitive level and gain access to mainstream technology

Diagnosis SWOT Analysis

Significant volume of prospectiveresources.

Decline of oil reserves andexploratory success.

trengths

Access to reserves.

Current infrastructure allows oil and gasproduction increases within shorttimeframes.

Decline of crude oil production,concentration of production inmature fields and low recovery

factor.

S Short development and production

cycles in onshore fields.

Low development and production costs. ncrease n cos s an comp ex y o

Upstream investment projects.

Technological obsolescence andlimited access to mainstream

es

Decline of reserves and production of oil& gas.

Portfolio of exploratory opportunities.

Weaknes

with low average volumetric estimations. Portfolio of production projects in latter

stages of maturity.

Lack of com etence in critical

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technologies for E&P.

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The main Upstream opportunities and threats are PEMEXs new contractingschemes (incentivized contracts), and uncertainty in future oil & gas prices

and demand as well as in perforation equipment and services costs.

Im roved ro ect execution

Market Analysis

Application of the new and improvedcontracting scheme derived from the

SWOT Analysis

capacity derived from the new

regulatory scheme applicable toPEMEX.

Expected recovery of oil demand, portuni

ties Energy Reform.

Internalization of PEMEX activities,through the acquisition of assets orparticipation with other companies in

despite uncertainty about theperiod in which this will occur.

Expected increase in crude oilprices.

Ospec c pro ec s.

Income diversification through newbusinesses.

Expected increase in perforationequipment and services costs.

Development and growingartici ation of renewable ener ts

Budgetary adjustments, due to lowerincome because of reduced production.

Financial markets offering limitedfinancing availability.

sources, but with limited impact oncrude oil demand. Thre

a Delays in project authorizations due tothe transition to the new fiscal regime.

Hydrocarbons price volatility that mightimpact the profitability of projects.

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The current situation and the SWOT analysis thereofpresent three main challenges for the Upstream business.

Challenge 1: Increase hydrocarbon reserves to ensure PEMEXs long-term sustainability.

Challenge 2: Sustain and increase hydrocarbon production to satisfy the energy needs of thecountr .g

es

Challenge 3: Maintain efficiency levels at international standards to improve profitability ofthe Upstream business, taking into account factors such as current technologicalobsolescence, the difficulty of acquiring state-of-the-art technology, problemsand delays in the execution of investment projects, the volatility of energya

inChalle

prices, and the uncertainty in the growth expectations of the business.

ents

.

Accelerate the delineation of discoveries, to reduce the uncertainty of their development.

Increase recovery factor in mature fields.

Successfully implement the new incentivized contracts scheme.

KeyElem Increase the reliability and availability of compression equipment.

Increase capacity of sour gas injection in oil fields.

Reduce operating and administrative costs.

Implement the new costs system.

Optimize the portfolio of investment projects.

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Strategies in Exploration and Production

Strategies

Challenge 1: Increase hydrocarbon reserves to assure PEMEXs long-term sustainability.

1. Increase crude oil reserves in shallow waters and onshore.

2. Increase the portfolio of exploratory opportunities in non-associated gas fields.3. Increase the probability of commercial success in deep water projects.

4. Accelerate delineation activities to increase reserves.

Growth

5. Update exploitation schemes for producing fields (development and mature fields). 1 -

Challenge 2: Sustain and increase hydrocarbon production to satisfy the energy needs of thecountry

7. Reactivation of marginal, abandoned and to-be-abandoned fields.

8. Speed up the development of recently discovered fields, to achieve timely productionof crude oil and non-associated gas.

iciency

9. Reduce gas flaring.

Challenge 3: Maintain efficiency levels at international standards to improve profitability inthe Upstream business

Eff

. , ,transportation of hydrocarbons.

16(1) Aceite Terciario del Golfo

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Contents

Background


Upstream

Downstream


-

Expected Results

Annexes

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The main Downstream challenges are poor operating performance, lackof reliability in production due to delays in maintenance, and lack of

flexibility in the production and logistics infrastructure.

PR1: Dominant market position andintegrated refining infrastructure.


Stagnant refining capacity. Operating performance below the

: e n n n ras ruc ure wdeep conversion projects in-

progress. PGBP2: Operational discipline. PPQ3: Market knowledgeSt

rengt

hs

industry average. Delays in maintenance and

equipment substitution. Investment levels in the

Committed and efficient laborforce.

PR: Substantial financial burden andpe roc em ca s us ness e owthose of the leading integratedcompanies.

Obsolete infrastructure with asmall scale that limits

technological obsolescence. PR: Inadequate infrastructure to supply

the domestic market for petroleumproducts.

PR: Need for unscheduled maintenancesses

competitiveness.wor s.

PR: Low energy efficiency. PGBP: Lack of flexibility in infrastructure

which generates under-utilization. PPQ: Lack of long-term vision.

Weakn

PPQ: Operates in a non-profitable businesschain with obsolete infrastructure.

18(1) Pemex-Refi ning (2/) Pemex-Gas & Basic Petr ochemicals (3) Pemex-Pet rochemicals

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The main Downstream opportunities and threats are market volatility,uncertainty of wet gas availability from PEP1, higher demand

of petroleum products, structural changes in the natural gas and LPG2markets, and low market share in petrochemicals.

Imbalance between national supply and PR: Government funds supporting thedevelopment of green technologies.

Market analysis SWOT Analysis

s Accelerated growth of distillates

demand and decline of fuel oil demand. Investments in refining capacity

associated with industrial cyclical

PGBP: Open market and business developmentwith customer orientation, alliances andpartnerships.

PGBP: Increasing the utilization of processingcapacity.

pportun

itie

marg ns. Stricter quality specifications for

petroleum products due to

environmental concerns. Hi h volatilit in the etroleum

PR: Introduction of new technologies in thetransportation market with impact on distillates

alliances.O

products market (reduction in refiningmargins in the short term).

Reduction in LPG demand due tostructural changes in the market.

eman an potent a era zat on o petro eumproducts market.

PR: Better prospects of the Mexican market forpetroleum products in the medium term.

PR: Stricter environmental specifications forats

eac va on o e ex canpetrochemical industry through theparticipation of third parties in theEthylene XXI project.

.

PR: Growing demand for petroleum products inforeign markets and volatility of crude oil prices.

PGBP: Eventual changes in the structure of gas andLPG markets, reserves, accidents and volatility ofinternational prices.

Thr

19

PPQ: Low operational, managerial and financialflexibility to compete in the open market.

(1) Pemex-Explorat ion and Product ion. (2) Liquefi ed Pet rol eum Gas

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The current situation and the SWOT analysis thereof presentfour main challenges for the Downstream business.

Challenges

Challenge 4: Achieve world class operating performance by attending to the delays in maintenanceprograms and placing greater emphasis on operational discipline and use of best practices.

Challenge 5: Guarantee the supply of petroleum products to the Mexican market at the lowest cost,

taking into account market volatility, the current low profitability of the refining business,and the stages of design, approval and execution of refining projects.

Challenge 6: Process all the wet gas supplied to PGBP by PEP, taking into account that the oil and gasfields are far from the GPCs1, an expected increase in natural gas demand and its reductionin natural gas imports, and also the obligation to supply ethane to PPQ and Ethylene XXIproject.

Challenge 7: Increase the profitability of the petrochemical processes, considering financing and

Efficient execution of investment ro ects

Key Elements

u getary constra nts an tec no og ca o so escence.

Expedited and sufficient availability of financial resources Increase the reliability, operational efficiency and availability of processing equipment

Alignment of demand and supply trends

Compliance with environmental regulations

Access to cutting edge technology

20(1) Gas Processing Cent ers

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Downstream Strategies

Strategies

Challenge 4: Achieve world class operating performance11.Execute an institutional program to achieve operational excellence at Pemex-Refining.e

ncy

Challenge 5: Guarantee the supply of petroleum products to the Mexican market at the lowest cost14.Deep conversion project for the Minatitln refinery to increase distillate production from residuals.

12.Execute an institutional program to achieve operational excellence at Pemex-Gas and Basic Petrochemicals.

13.Execute an institutional program to achieve operational excellence at Pemex-Petrochemicals.E

ffici

15.Deep conversion project for the Salamanca refinery to reduce residuals and increase distillateproduction.

16.Build a new refinery in Tula to process residuals from the existing refinery.

17.Select the lowest-cost alternative for supply of petroleum products.

Growth

. .

19.Optimize the utilization of crude oil in the National Refining System.

Challenge 6: Process all the wet gas supplied to PGBP by PEP

20.Increase processing capacity for the wet gas supplied by the Aceite Terciario del Golfo project.

21.Increase processing capacity for the wet gas supplied by the northern region of the country.

22.Increase processing capacity for the wet gas supplied by shallow waters and onshore areas in the centraland southern regions of Veracruz.

23.Ensure the supply of ethane for the Ethylene XXI project through the construction of new wet gasprocessing infrastructure.

Challenge 7: Increase the profitability of the petrochemical processes24.Rehabilitation of the Cosoleacaque ammonia plants to meet the requirements of the Energy Reform.

25.Implement technological upgrades to the aromatics reforming plant at Cangrejera.

21(1) Ult ra l ow sulfur

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Contents

Background


Upstream

Downstream


-

Expected Results

Annexes

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The main challenges in Distribution and Marketing (D&M) arelow levels of costumer orientation, difficulties in

meeting contractual specifications for crude oil and natural gas,and saturation and lack of flexibility in logistics infrastructure.

Dominant competitive position as crude


Difficulties in meeting contractual

specifications for crude oil andnatural gas.

Saturation and lack of flexibility in

oil supplier on the Gulf of Mexico coast.

Exclusive hydrocarbon exploration andproduction rights within Mexico. PGBP: Successful experience in dealingSt

reng

ths

logistics infrastructure forpetroleum products.

High distribution costs for

petroleum products.

.

logistics infrastructure for naturalgas and LPG.

Lack of focus on customers anddeteriorating reputation of

Lack of a consumer-oriented culture inpetroleum products.n

esses

PEMEX. High nitrogen content in naturalgas.

Inadequate petroleum products pricingmechanism.Wea

k

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The main opportunities and threats in D&M are meeting the total demandfor petroleum products in the domestic market, potential increase

in the participation of third parties in the D&M businesses of naturalgas and LPG, and the small market share of PPQ in the domestic market.

Obligation to satisfy all demand for

Increase market share of PPQ in the Mexican

Market Analysis SWOT Analysis

. High market volatility that generates

price and margin uncertainty. Potential increase in the participation of

third parties in the supply and

pe roc em ca s mar e roug s ra eg calliances.

Existence of niches in the crude oil market. Open market for natural gas, and commercial

develo ment focusin on the consumer.tunities

distribution of LPG. Regulatory change affecting first-hand

sales of natural gas, forcing the sale of

imports due to logistical convenience ata regulated price, and preventing the

Strategic alliances and partnerships with thirdparties for transportation and marketing ofnatural gas and LPG.

Growing demand for natural gas.

Oppo

passing along of real costs to endcustomers.

Limited participation and increasedcompetition in the domestic

PPQ lacks of sufficient flexibility to compete inan open market.

Low market share in the Mexican marketfor ethane, propylene and aromaticsderivatives.

Price regulation and natural gas regulatorypolicy.

Structural change in the Mexican LPG marketthat has led to a reduction in demand in theresidential sector.

Threats

24

Growth of imports of natural gas by the CFE1

and private parties.

(1) Federal Electr ici t y Commission

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The current situation and the SWOT analysis presentthereof three main challenges for the D&M areas.

Challenge 8: Reduce logistics costs, considering the saturation of current infrastructure, limited

Challenges

ava a y o nanc a resources an e rea pos e y pr va e par es a y oinvest and participate in infrastructure for distribution of hydrocarbons.

Challenge 9: Ensure that all products comply with contractual specifications in terms ofvolume, time and quality, considering the saturation of current infrastructure andlimited availability of financial resources.

Challenge 10: Increase customer satisfaction, considering the historical lack of customer focus.

On-time availability of financial resources.

Key Elements

mp emen a pr ce mec an sm a recogn zes rea cos s.

Ensure competitive conditions for PEMEXs clients in the provision of transportation andstorage serv ices in association with private parties.

Understand and meet PEMEXs customer needs.

Efficient planning and execution of investment projects and customer service initiatives.

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Distribution and Marketing Strategies

Challenge 8: Reduce logistics costs

Strategies

cy

. pt m ze petro eum og st cs

27. Increase capacity and flexibility of the National System of Natural Gas (PGBP)

28. Optimize logistics and backup capacity in LPG distribution (PGBP)Efficien

Challenge 9: Ensure that all products comply with contractual specifications interms of volume, time and quality

29. Build infrastructure to control and/or eliminate nitrogen content in natural gas.

and distribution of, and compliance with specifications for hydrocarbons

Challenge 10: Satisfaction of customer needs

rowth

.

32. Modernization of the trading processes at PPQ33. Implement a CRM1 system in natural gas and signing of long-term contracts in

bundled natural gas sales

34. Alignment of the LPG trading processes with the new regulatory framework (PGBP)

26(1) Cli ent Rela t ionship Management

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Contents

Background


Upstream

Downstream


-

Expected Results

Annexes

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The main challenges in Cross-Functional Issues are low efficiency and reliability ofbusiness processes, a limited results-oriented culture, high labor liabilities,

technological obsolescence and a fiscal regime that distorts investment decisions.

Positive results in security, industrial safety andenvironmental protection. Technically trained and experienced personnel


Multiple efforts to improve operational performancewith neither substantial impact nor sustained results.

Inefficient business processes, lack of standardizationand lack of continuous-improvement process.

Inefficient procurement processes.

. Market knowledge.

New financing alternatives derived from theEnergy Reform (Citizen Bonds). PEP: Access to financial resources.

Streng

ths

Lack of local industrial integration with PEMEX. Planning and execution projects below international

standards. Labor productivity below international standards. Limited availability of qualified personnel.

experience.

Lack of alignment among business objectivesand ersonnel oals. Lac o a corporate resu ts-oriente cu ture. Lack of alignment among business objectives and

personnel goals. Technological obsolescence and lack of technological

development in PEMEXs core businesses.

Limited corporate vision and lack of economicorientation.

Technological obsolescence. Lack of value generation and results-oriented

culture.esses

. Growing labor liabilities. Increase in leverage levels and opportunities to

reduce financing costs. Fiscal regime that has not achieved its goal of

Excessive internal regulation. Low integration and sophistication with

domestic suppliers of equipment and services.Excessive procurement regulation and cases ofcorruption.

Weak

n

28

. Static and reactive planning mechanisms, which

do not consider alternative scenarios and risklevels.

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The current situation and the SWOT analysis thereof presentthirteen main challenges for the Cross-Functional areas.

Keys for Success

Capital allocation on time and according to plan Development of human resources

Challenges

Challen e 11: Ensure a safe reliable rofitable and sustainable o eration takin into account the on oinprocesses of standardization, systematization and application of best practices, along with and theneed to strengthen the environmental management of investment projects and to gain socialacceptance for operations in local communities.

Challenge 12: Execute investment in infrastructure projects on schedule, in accordance with budgetaryrovisions and reach lanned tar ets out erformin a oor historic record and considerin currentadjustments in the project management division.

Challenge 13: Add value through an efficient procurement process, considering that PEMEX has lost its purchasingadvantage because of its scale, and its limited business relationships with suppliers and contractors.

Challenge 14: Recruit and maintain the right technical and administrative personnel to execute our business plan,

PEMEXs relationship with the Union.Challenge 15: Increase the efficiency of business processes, bearing in mind PEMEXs current lack of standards, best

practices and continuous improvement systems.

Challenge 16: Implement corporate governance processes to operate effectively and efficiently, given the

29

opera ona , ec n ca an commerc a au onomy o e su s ary en es, an e r ac oaccountability.

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Based on the current situation and analysis of the opportunities and threatsin Cross-Functional areas, we identify thirteen main related challenges

(continued).

Challenges

Challenge 17: Support business growth and improvement through development of technology, to overcome.

Challenge 18: Moderate the growth in labor liabilities generated by the current PEMEX pension regime.

Challenge 19: Combat the illicit fuels market considering the extent of our pipeline network and limited monitoringresources.

Challenge 20: Set pricing adjustments to adequately reflect market indicators, allow better operational andinvestment planning and avoid potential losses.

Challenge 21: Propose adjustments to the taxation regime to increase financial resources for PEMEX, taking intoaccount the high dependence of the Federal Government on PEMEX revenues.

Challenge 22: Successful execution of the Business Plan in order to realize PEMEX

s vision.cost and maintain a healthy debt level.

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Cross-Functional Issues Strategies

Corporate

Responsibility

35. Consolidation and continuous improvement of the SSPA1

36. Implementation of the Sustainability, Development and Environmental Protection strategy

48. Implementation of the illicit fuels market strategy

fficienc

y 37. Implementation of the Pemex Reliability system

38. Implementation of the Pemex Profitability system

39. Implementation of a divestment program

40. Im lementation of the Institutional S stem for Pro ect Mana ement SIDP

ategies

E

ent

41. Design and implementation of an integrated and company-specific procurement businessmodel

42. Implementation of the human resources strategy

St

ofmanage

tices

43. Implementation of the Process Management System (SGP)

44. Increase governability of the corporate body and accountability of the subsidiary entities

45. Implementation of the Strategic Technology Program

46. Implementation of the knowledge administration system

47. Evaluate adjustments to the current pension regime

dernization

pra

49. Propose new pricing mechanisms to the SHCP2

50. Analyze and propose adjustments to the taxation regime

51. Implementation of the Strategy Management System

52. Emission of Citizens Bonds to diversify financial resources and increase transparency of the

M

31

53. Implementation of a diversified liability structure

54. Implementation of an incentive system

(1) Healt h, Safety and Environment al Prot ect ion System(2) Ministr y of Finance and Publi c Credit

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Contents

Background


Upstream

Downstream


-

Expected Results

Annexes

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The two main pillars of PEMEXs strategy are Efficiency and Growth

Value maximization is achieved when gaps are closed along both axes.

In general, Efficiency initiatives depend on internal, political and statutory factors, while Growth

initiatives depend on the market and the availability of resources. The value of the latter can be

maximized onl if the former are im lemented.

nt)

Results:Value

The o erational as well as financial

mprovem

ax m za on

Deals with gaps in: Reliability

Performance

results of PEMEXs strategy, are a

function of the Efficiency initiatives and

of the selected Growth projects,

de endin on the market and on

(processi

Management

budgetary feasibility.

Maximizing the value of the company

requires the execution of both,

Deals with gaps in: Reserves Production Demand

Efficienc

,

Growth projects to meet marketrequirements. Executing initiatives

along only one axis is not enough.

Growth (reserves and infrastructure)

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The execution of the Efficiency initiatives definedin the strategy maximizes PEMEXs value.

Successful execution of the Efficiency initiatives, will help the company to achieve high

operational standards and maximize the value of its infrastructure projects.

The above im lies that a reductions are achieved not onl in current o erations, but also in

the future through improvements in the planning, execution and operation of the Growth

initiatives.

In current operations: In Growth initiatives:

Impact of the Strategy

Outstanding operationalEfficiency and reliability

Improvement inoperational planning andcoordination

Continuousimprovement inplanning, managementand project financing

Business as usual Efficiency Growth Strategy

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The annual average investment required to implement andapply the Strategy is Ps. 369 MMM1, with the highest

investment levels between 2012 and 2014.

Annual Investment(Ps. MMM1)

263

376 443 421 436 379 338 331 343 359

Corporate

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

PEPPR

PGBP

Average Investment1

2010-2019

PEP 289

PR 68

PGBP 7

PPQ 5

Total 369

35(1) Bil li ons of constant 2009 pesos.

Th B i Pl d h i l f i

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The current Business Plan demonstrates the economic value of certainstrategies aiming to closing performance gaps; however, there

is also further potential that must wait to be detailed.

Actions to close theidentified gaps

Estimate of the gaps in valueNet Return (Billion pesos/year)

The economic value of the

strategies aiming to closeoperational gaps and toimprove project execution

Net Return

(Billion pesos/year, average 2010-2024)

has been quantified. Theresults shown in the graphat left present such

estimations.

1,019280

,

1,282

,additional potential to becaptured in order toreverse losses in theSubsidiary Entities.

OperatingResults

(Business as

Quantified andDetailed

Improvement

OperatingResults

(Potential

Gaps to beDetailed (to

reverse losses

108

Taxes,Depreciation, Financial

Net Return

17

Net Return(PotentialEstimated)

125

It is necessary to detail thestrategies to close suchgaps and to rank thoseexisting in order to

usual +

Growth)

IT-OE(1): 27

E&P-OE(2): 106Proy(3): 146

Quantified) in Subsidiary

Entities)

Cost and

PensionLiabilities

their value.

36

(1) IT-OE: Operational Efficiency in Industrial Transformation(2) E&P-OE: Operational Efficiency in Exploration and Production(3) Proy: Improvement in the execution of investment projects

I d t th ti lt f t i S b idi E titi

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In order to reverse the negative results of certain Subsidiary Entities,elements remain to incorporated into the Business Plans strategies that

have the potential to capture an additional nearly Ps. 108 MMM per year.

Increasing energy efficiency of processes

Increasing high-value product yields

Improving transportation logistics

OperationalEfficiency

,

Reversingoperatingresults Management

Reducing management expenditures

Increasing labor productivity

Executing and operating deep conversion projects and petrochemical

plants efficiently

ev s n ax-pay n mec an sms

Revising pricing mechanisms

. Integrating the ethylene and propylene chains, taking advantage of

facilities of globally compete scale

Adjusting the cost cap

Changing thefiscal regimeto promoteinvestment

regime, which cap is currently set at Ps. 6.50 per barrel of crude oil and Ps. 2.70 permillion cubic feet of natural gas, each in nominal 2005 pesos.

Establishing a differentiated regime for fields with significant reserves and those that are

For fields in deep waters, provision for a grace period for tax payments (tax holiday)

Lowering the tax rate

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Contents

Background


Upstream

Downstream


-

Expected Results

Annexes

38

h i l f hi B i Pl

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The main elements of this Business Plancan be grouped into four themes:

IV. PEMEXs sustainability

Achieve world classo eratin erformance

Maintain and increasecurrent levels of crude oil

Satisfy national demand foretroleum roducts at theje

ctives

I. Improvement of thecurrent operating andfinancial conditions

Increase the reserves-re lacement ratio

II. Reliable supply ofhydrocarbons for thecountry

III. Maintain and increasecurrent levels of crudeoil and gas production

Increase productivity Increase the efficiency of

administrative processes

and gas productionlowest possible costs andcomplying with

environmental regulations.Ma

inOb

Effective implementation Deep conversion projects in Efficient development of Increase reserves of crude oil in

Minimize environmental impact ofPEMEXs activities and projects

Achieve recognition as a sociallyresponsible company

P

rojects

sp

ects

o t e: Operating,administrative andfinancial improvement ofPEMEX program

Development of PEMEXshuman capital

t e Nationa Re ining System Expansion of gas refining and

processing capacityOptimization of logistics

systems Production of Ultra Low Sulfur

comp ex ie s ATG anextra-heavy crude oil)

Optimization of exploitationschemes

Apply enhanced recoverytechniques to oil and gas

s a ow waters an ons ore. Increase exploratory success rate

in deep waters Consolidation and continuous

improvement of SSPA Implementation of the

Strategi

and

Alignment of personal,Union and overallenterprise objectives

fuels Development of personnel

competenciesUpdating, assimilation and

development of newtechnology

fields Increase PEMEXs project

execution capacity throughparticipation of third parties

On-time application of newtechnology

environmental protection strategy Implement more effective control

mechanisms to prevent theft ofpetroleum products

nGoals

Achieve positive results innet profit in the fourSubsidiary Entities by 2012

Position the National RefiningSystem within the 2nd quartile in

Achieve a proved reserves-replacement ratio of 100% by2012 and above 100% by 2013

Maintain a world class position inindustrial security and safety

Production of 2.7 MMbpd ofcrude oil by 2012 and 3.3MMbpd of crude oil by 2024

Production of 6.3 MMMcfpdof natural gas in 2012 and

Ma opera ona e c ency accor ng

to international standards Reach the goal of 0.6% gas flaring

by 2024

8.0 MMMcfpd in 2024

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Contents

Background


Upstream

Downstream


-

Expected Results

Annexes

40

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Senior Management

Board of Directors

General Direction-

Chief Executive OfficerDr. Juan JosSurez Coppel

Internal ControlOffice of the

Corporate Direction of Corporate Direction ofCorporate Direction of

o yMr. Gust avo Ernest oRamrez Rodr guez

enera ounseMr. Jos Nstor

Garca Reza

Operations-Chief OperatingOfficer

Mr. Car los Murr ieta Cummings

Information Technology andBusiness Processes

Mr. Mauri cio Abraham Galn Ramrez

Finance-Chief FinancialOfficer

Mr. Carlos Trevio Medina

Administration

Mr. Est eban Levn Balcells

Exploration andProduction

Mr. Car los ArnoldoMorales Gil

RefiningMr. Miguel Tame Domnguez

Gas and BasicPetrochemicalsMr. Jordy Herrera Flores

PetrochemicalsMr. Rafael BeveridoLomeln

International Trade(PMI)

Mrs. Mara del RocoCrdenas Zubiet a

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Board of Directors

Government Representatives

Chairwoman Alternate

Dr. Georgina Y. Kessel MartnezSecretary of Energy

Mr. Mario Gabriel BudeboUndersecretary of Hydrocarbons of the Ministry of Energy

Mr. Ernesto Javier Cordero ArroyoSecretary of Finance and Public Credit

Mr. Dionisio Prez-Jcome FriscioneUndersecretary of Expenditures of the Ministry of Finance and Public Credit

Dr. Alejandro Mariano Werner WainfeldUndersecretary of Finance and Public Credit

Dr. Ignacio Quesada MoralesAdvisor of the Secretary of Finance and Public Credit

Mrs. Patricia Flores Elizondo Mr. Antonio Vivanco CasamadridHead of the Presidents Office Chief of Staff of the President s Office

Mr. Gerardo Ruiz MateosSecretary of Economy

Mr. Felipe Duarte OlveraUndersecretary of Competitiveness and Regulation of the Ministry of Economy

Mr. Salvador Vega Casillas

Secretary of Public Function

Mr. Rafael Morgan Ros

Undersecretary of Control and Auditing of the Public Administrationepresentat ves o t e etro eum or ers n on

Board Members and Union Representatives Alternates and Union Representatives

Mr. Ricardo Aldana Prieto Mr. Hctor Javier Saucedo Garza

Mr. Fernando Pacheco Martnez Mr. Jess Gerardo Gonzlez Salgado

Mr. Jorge Wade Gonzlez Mr. Donaciano Gonzlez Hidalgo

Mr. Hctor Manuel Sosa Rodrguez Mr. Alejandro Mendoza Guadarrama

Mr. Pedro Garca Barabata Mr. Alfredo Yuen JimnezProfessional Members Committees

Mr. Jos Fortunato lvarez Enrquez Audit and Performance Evaluation Acquisitions, Leasing, Works and Services

Dr. Hctor Moreira Rodrguez Strategy and Investment Compensation

Dr. Rogelio Gasca Neri Transparency and Accountability Environmental and Sustainability

Dr. Fluvio Csar Ruiz Alarcn Development and Technological Research

42

Documents

Business Plan 2012-2016