Petróleos Mexicanos in context

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Petróleos Mexicanos in context Petróleos Mexicanos is a decentralized public entity of the

laws, with legal status and own patrimony, and whose aim is to exert the central leading and

accordingly to the Ley Reglamentaria (Regulations Law).

in order to contribute to the sustainable development of the country.

Integrity Creativity and innovation Team work Development of human resources Efficient

vocation and commitment Respectfulness for the environment Mutual respect Enthusiasm Courage

1 Petróleos Mexicanos in context Petróleos Mexicanos is a decentralized public entity of the Federal Public Administration, duly constituted and legally existent in accordance to Mexican laws, with legal status and own patrimony, and whose aim is to exert the central leading and the strategic management of all the activities encompassed by the national oil industry, accordingly to the Ley Reglamentaria (Regulations Law). The purpose of PEMEX is to maximize the economic value of hydrocarbons and their derivatives, in order to contribute to the sustainable development of the country. The institutional values 1 of PEMEX are: Leadership Intelligence and technical capability Integrity Creativity and innovation Team work Development of human resources Efficient attention to clients Quality planning Planning culture Proudness about the enterprise, vocation and commitment Respectfulness for the environment Mutual respect Enthusiasm Courage Trust in the personnel Credibility Cohesion Performance evaluation 1 The PEMEX Code of Ethics is available at in section Relaciones con Inversionistas. 8 annual report 2005

PEMEX sees to its employees safety and health, as well as to the protection of the environment.

transport, sales, quality and costs. All incidents and harms can be prevented. The safety, health and protection of the environment are the responsibility of all workers and are work conditions.

All PEMEX workers are convinced that the safety, health and protection of the environment are for our own benefit.

2 PEMEX sees to its employees safety and health, as well as to the protection of the environment. Therefore, its policies include commitments such as the following ruling principles 2 : The safety, health and protection of the environment are values with the same hierarchy as production, transport, sales, quality and costs. All incidents and harms can be prevented. The safety, health and protection of the environment are the responsibility of all workers and are work conditions. In PEMEX, we are committed to continue protecting and preserving the environment, for the community s benefit. All PEMEX workers are convinced that the safety, health and protection of the environment are for our own benefit. Petróleos Mexicanos is the largest Mexican company, with 86 billion USD of total sales, in It is the sole producer of crude oil and natural gas, and the sole producer of refined products and only company in Mexico commercializing them. With a daily average production of 3.3 million barrels, Petróleos Mexicanos is the world s third crude oil producer, the first in offshore production, and the ninth integrated oil company 3. Our proven reserves amount to billion barrels of crude oil equivalent (BBCOE) enough for 10 years production, at the rate of Our average lifting cost was 4.29 dollars per BCOE in Our profit before interests, taxes, depreciation and amortization (EBITDA) of 55.3 billion USD places Petróleos Mexicanos in second place among the 10 main integrated oil companies of the world. 2 Presentation of the PEMEX Safety, Health and Environmental Protection Emergency Strengthening Program by its Director General on April 29, From PIW 2004 Rankings, December, Petroleum Intelligence Weekly. 4 Source: Reservas de Hidrocarburos 2005, available at in section Relaciones con Inversionistas. safety, health and environmental protection

Infrastructure and main operational results 5 Petróleos Mexicanos runs a wide net of production processing, storage and distribution facilities.

2005: 3.3 million barrels of oil, and 4.8 billion cubic feet of gas The nine gas processing centers and the six refineries processed daily 3.

With this processing infrastructure, the daily production levels of the main oil products of the system were as follows: 455 thousand barrels of

The seven petrochemical facilities of the system produced 6.1 million metric tons of petrochemical products throughout the year.

offshore terminals 17 liquefied gas terminals, and 39.

3 Infrastructure and main operational results 5 Petróleos Mexicanos runs a wide net of production processing, storage and distribution facilities. With 742 operative wells and 116 drilling teams in 12 integral development sites and three region exploration sites, PEMEX produced daily, in 2005: 3.3 million barrels of oil, and 4.8 billion cubic feet of gas The nine gas processing centers and the six refineries processed daily 3.88 billion cubic feet of gas 6 and 1.28 million barrels of crude oil, respectively. With this processing infrastructure, the daily production levels of the main oil products of the system were as follows: 455 thousand barrels of gasolines 63 thousand barrels of jet fuel 318 thousand barrels of diesel 351 thousand barrels of fuel oil 246 thousand barrels of liquefied gas The seven petrochemical facilities of the system produced 6.1 million metric tons of petrochemical products throughout the year. The main storage, distribution and commercialization infrastructure associated to these operations was: 77 land based storage terminals 15 offshore terminals 17 liquefied gas terminals, and 39.7 thousand kilometers of hydrocarbons transportation pipelines 7 5 Source: Memoria de labores, available at in section Informes. 6 Processed humid gas. 7 Besides, Petróleos Mexicanos has around 21 thousand kilometers of pipelines for the collection and discharge of wells production. 10 annual report 2005

Main economic results 8 In 2005, the main economic variables of the company were: Total sales for the amount of 928.6 billion MXP, 16% more compared to 2004. Income before taxes for a total of 506.

4 Main economic results 8 In 2005, the main economic variables of the company were: Total sales for the amount of billion MXP, 16% more compared to Income before taxes for a total of billion MXP, 7% more compared to Net loss of 76.3 billion MXP. In 2005, the income before taxes, rights and non classifiable charges was billion MXP, compared against billion MXP in The increase of 7% was mainly due to: An increase of 28.4 billion MXP of operative yield A decrease of 0.3 billion MXP of other net incomes A reduction of 2.8 billion MXP in the integral financing cost In 2005, the total amount of taxes, rights and non classifiable charges increased 18% compared to 2004, up to billion MXP. The payment of Petróleos Mexicanos and Subsidiary Companies taxes, rights and non classifiable charges was 62.5% of their total sales plus a non classifiable charge on the surplus yields on crude oil exports (ARE). According to official data of the Secretaría de Hacienda y Crédito Público 9, the receipts from Advantage on Excessive Yields, generated on 2005 on the basis of an average price for oil exports higher than 27 dollars, amounted to billion MXP. The distribution of the resources corresponding to each federal entity is based on the same porcentage structure resulting from the Fondo General de Participaciones (General Shares Fund) recorded in the Cuenta de la Hacienda Pública Federal de 2004 (2004 Treasury Account). 8 Unaudited consolidated financial results report as of December 31, Source: Informes sobre la Situación Económica, las Finanzas Públicas y la Deuda Pública / Cuarto Trimestre de Available at home page, in section Información Diversa. safety, health and environmental protection 11

Hydrocarbons reserves 10 The results as of December 31, 2005 show that PEMEX has proven reserves for the amount of 16.

69% of the reserves are developed, meaning the reserves that can be retrieved from existing wells, including those that ca be retrieved with the present infrastructure, by means of a slight update

5 Hydrocarbons reserves 10 The results as of December 31, 2005 show that PEMEX has proven reserves for the amount of billion barrels of crude oil equivalent, of which 72% correspond to crude oil, 11% to plant condensates and liquids, and the remaining 17% to dry gas equivalent to liquid. 69% of the reserves are developed, meaning the reserves that can be retrieved from existing wells, including those that ca be retrieved with the present infrastructure, by means of a slight update with moderate investment. 31% of the proven reserves are not developed, meaning the volume we expect to produce in the future by drilling new wells. The potential reserves are calculated in billion barrels of crude oil equivalent. The sum of these reserves and the proven ones constitute the reserve 2P, which totals billion barrels of crude oil equivalent. The likely reserves total billion barrels of crude oil equivalent which, added to the proven and potential reserves, constitute the reserve 3P with a total of billion barrels of crude oil equivalent. Among several, the main oil fields in this category are Chicontepec, Akal, Maloob and May. The total of the reserve 3P is divided in: 71% of crude oil, 10% of plant condensates and liquids, and 19% of dry gas equivalent to liquid. The restitution of reserves issue is, with no doubt, of the highest strategic importance for the company. We will be able to reach the objectives on this matter only by investing significant resources. Resulting from the investment in exploration, between 2001 and 2005, the rate of restitution of total reserves of hydrocarbons increased from 14% to 59%. Crude oil 72% 74% 73% 68% 71% Plant condensates and liquids 11% 7% 9% 9% 10% Dry gas 17% 19% 18% 23% 19% Note: The sums may not coincide due to round off This results in the fact that the annual incorporation of total reserves went from 216 million barrels of crude oil equivalent in 2001 to 950 million at the closing of Considering the information as of December 31, 2005, with an amount of annual investment in exploration and production above 10 billion USD in the next four years, and with a rising tendency of the amount intended to exploration, our expected goal is to reach a restitution rate in 3P of 75% for 2006 and 100% for Likewise, the goal for the integrated restitution rate in 1P will rise to reach a rate of 77% in These expected results will contribute to reinforce substantially the PEMEX long term prospects regarding hydrocarbons production and transformation. 10 Source: Las reservas de hidrocarburos de México. Evaluación al 1 de enero de 2006, available at in section Relación con inversionistas / estadísticas operativas / reservas de hidrocarburos. 12 annual report 2005

Corporate governance Risk management PEMEX Board of Directors has eleven members: six representatives of the Government designated by the President of Mexico, including the president of the board,

6 Corporate governance Risk management PEMEX Board of Directors has eleven members: six representatives of the Government designated by the President of Mexico, including the president of the board, and five representatives of the Sindicato de Trabajadores Petroleros de la República Mexicana (Mexican Oil Workers Union). There are no independent counselors in the Board of Directors. Presently, the representatives of the Government are the Secretario de Energía (Secretary of Energy), who is the President of the Board of Directors; the Secretario de Hacienda y Crédito Público (Secretary of the Treasury); the Secretario de Medio Ambiente y Recursos Naturales (Secretary of Environment and Natural Resources); the Secretario de Comunicaciones y Transportes (Secretary of Communications and Transports); the Secretario de Relaciones Exteriores (Secretary of Foreign Affairs), and the Secretario de Economía (Secretary of Economy). The Organic Law of PEMEX and its Subsidiary Companies states that: the President of the Board shall be the head of the sector coordinating entity to which Petróleos Mexicanos is ascribed and he will have casting vote. The sector coordinating entity is the Department of Energy. The members of the Board of Directors do not receive any emolument for their services to the company. The directors of PEMEX and its Subsidiary Companies must carry out their duties without receiving any additional benefits besides those established by the Law. The directors are not empowered to grant personal loans with funds of the company. The Board has a consultant Committee whose task is to emit opinions and recommendations to the Board of Directors, in the following issues: Budgets Donations Special payments The issues specifically proposed by the counselors and/or stated by the President of the Board, or presented by the Director General. In its business common activities, PEMEX is a party in trials of various kinds. In each particular case, PEMEX evaluates if the claimed payments do proceed or not, so as to determine if it is necessary to create a contingency fund should it be the case of a unfavorable verdict. PEMEX has no knowledge of being, or if it might be, a party of any trial or procedure that may have a detrimental verdict, for which it has not created a contingency fund. PEMEX has insurance policies for its properties and land assets, such as refineries, processing plants, pipelines and storage facilities, as well as for its offshore facilities, such as drilling platforms, machinery and equipment, gas collection, floating docks and production facilities. These insurance policies cover risks of sudden and accidental destruction, as well as extraordinary expenditures related to wells operation, such as, repair and control costs, and evacuation costs. PEMEX also has general civil responsibility insurance policies covering risks of environmental responsibilities, including spills. Besides, it has protection and indemnity insurance policies, life insurance for its employees, as well as insurance policies for cars, heavy equipment and electronic equipment, and finally hull and cargo insurance policies for its marine fleet. safety, health and environmental protection 13

México Proposed Reforms for the O&G Industry. Antonio Juárez Director AMESPAC

México Proposed Reforms for the O&G Industry Antonio Juárez Director AMESPAC 1 AMESPAC Was created in 2009 to bring together private companies that perform O&G services for Pemex Looks to concur, integrate