On May 13, Petrobras engineers from the exploration, production, and transformation divisions flew into Mexico City to start working alongside Pemex technicians on deep-water extraction, refining, and biofuel production. The visit followed a meeting between President Sheinbaum and Petrobras CEO Magda Chambriard at the National Palace on April 25, where the two sides formalized the cooperation framework.
The English-language financial press gave this roughly three paragraphs. A few wire service hits from Reuters, a Seeking Alpha blurb, and silence, which is a mistake. The partnership between the world’s most indebted oil company and the world’s best deep-water operator is the most important development in Mexican energy policy in years, and the information gap between Spanish-language reporting and English-language coverage is as wide as we have seen on any Mexico story this year.
Two companies, one table
Petrobras’s Q1 2026: record oil and gas production at 2.58 million bpd. Pre-salt output alone hit 2.18 million bpd. Net income was USD 6.2 billion. Adjusted EBITDA, USD 11.7 billion. Refinery utilization touched 97.4% in March, the highest since December 2014. April production climbed to 2.73 million bpd. Eleven new pre-salt platforms are going in by 2027.
Pemex’s Q1 2026: a net loss of MXN 46 billion (USD 2.6 billion), 6.1% worse than Q1 2025. Crude production averaged 1.368 million bpd, flat year over year despite MXN 58.3 billion in government capital contributions during the quarter alone. Export volumes fell 38.8%. The value of those exports fell 25.3%. Financial debt: USD 79 billion at the end of March, down from USD 84.5 billion at year-end 2025, but the reduction came from government bond support, not from the business itself.
The ten-year production chart is where the real story lives. Pemex produced 2.27 million bpd of crude in 2015. Last year: 1.37 million bpd. That is a 40% decline. Petrobras went the other way: 2.1 million bpd of crude in 2015, 2.4 million bpd in 2025, with total oil and gas reaching 3.0 million barrels of oil equivalent per day. Pre-salt, the technology play Petrobras spent two decades building, accounts for all of that growth.
These are the two companies now sitting across the same table. One spent two decades building deep-water capability and is now producing more oil than at any point in its history. The other spent two decades receiving government bailouts and is now producing less oil than at any point since the 1980s.
change, 2015 to 2025
change, 2015 to 2025
What Mexico is buying
Deep-water production is the headline. Mexico’s side of the Gulf holds hydrocarbon potential that Pemex has never touched. Zero commercial barrels from deep water, ever. The only active ultra-deep-water project in the country, Trion, is a joint venture with Woodside Energy targeting first production in 2028. Petrobras, meanwhile, has proprietary extraction technology for pre-salt reservoirs sitting 5,000 to 6,000 meters below the ocean surface, developed over 15 years at CENPES, Petrobras’s in-house research center. Brazil built a national industrial policy around this technology. Mexico did not.
Refining is the second piece. The Olmeca refinery at Dos Bocas is still ramping to its 340,000 bpd nameplate capacity. Pemex has made progress here: domestic gasoline production rose 5% and fuel imports dropped 22% through the first ten months of 2025. But the self-sufficiency target has slipped to 2027, and the gap between Pemex’s utilization rates and Petrobras at 97.4% tells you how much room there is.
Then there is biofuels. Sheinbaum raised Brazil’s ethanol program explicitly, mentioned Petrobras’s experience with sugarcane-based production, and pointed to a Brazilian laboratory working on biomass from maguey cactus. This is speculative, longer-dated, and smaller in dollar terms than the other two pillars. But it is the first time a Mexican president has talked about Pemex and biofuels in the same sentence with any specificity. If you have followed Mexican energy politics for any length of time, you know that Pemex’s identity has been crude-and-refining, full stop, since nationalization in 1938. The biofuel conversation is a small signal of a larger shift.
Why nobody cares (yet)
No signed contract exists. Sheinbaum says she will travel to Brazil to sign a formal agreement with Lula. No date. The May 13 visit was a working session, not a closing. Markets are right to discount announcements without binding terms.
Oil is not the Mexico trade right now. Brent is at USD 108, driven by the Middle East conflict and Strait of Hormuz disruptions. Investors watching Mexico are focused on the USMCA review (formal talks begin May 25), the IPC’s recovery (up 3.6% in May, around 69,200), and Banxico at terminal rate of 6.50%. Pemex barely registers.
The timeline does not help either. Commercial deep-water production from any new Pemex-Petrobras acreage is five years out at the earliest. Trion targets 2028. In a market that struggles to look past two quarters, five years is infinity.
Fair objections, all three. They also miss the point.
Consider the parallel with Brazil itself. When Petrobras first discovered pre-salt oil in 2006, the market did not re-rate the company for years. The geology was confirmed, but commercial production seemed distant, and the Lava Jato scandal nearly bankrupted the company in between. Pre-salt production did not reach 1 million bpd until 2016, a decade after discovery. Today it produces over 2 million bpd and constitutes the core of Petrobras’s entire investment thesis. Long timelines do not mean irrelevance. They mean the market gets a long window to price the asset incorrectly.
What investors should watch
The first real signal will be the structure of the formal agreement. If Sheinbaum signs a memorandum of understanding with vague cooperation language and no specific acreage, this stays in the diplomatic category. If the agreement names blocks, assigns operational roles, and includes a timeline for seismic work or exploratory drilling, it is something else entirely.
Watch for Petrobras’s next strategic plan update. CEO Chambriard has named international expansion as a priority, with Africa and Latin America as target regions. If Mexico appears in Petrobras’s capital allocation framework with dollar figures attached, the market will have to re-evaluate.
The USMCA review, starting May 25, is also relevant here. Energy is part of the broader bilateral conversation between Mexico and the United States. A stable USMCA outcome reduces political risk for any long-dated energy investment in Mexico. A contested review raises the hurdle. The two stories are connected, even if the market is trading them separately.
For our coverage universe, the Pemex-Petrobras story has limited direct read-through. Pemex is not listed. But it has indirect implications for Pemex’s fiscal burden on the sovereign, which affects everything from bond spreads to the peso to the cost of capital for every listed Mexican company. As we discussed in our 2026 Outlook, Pemex’s trajectory is the macro variable that nobody in the equity market wants to model but everybody’s returns depend on.
The math that matters
Pemex’s decline curve is the single largest structural drag on Mexico’s fiscal accounts. The company absorbed MXN 58.3 billion in government capital in Q1 2026. It received USD 12 billion in bond support and a USD 4.4 billion investment fund in 2025. Fitch upgraded Pemex to BB in August 2025; Moody’s gave it a two-notch lift to B1 in September. Both agencies cited government willingness to pay, not Pemex’s ability to earn.
Government money keeps Pemex solvent. It does not put new barrels in the pipeline. New barrels require new reservoirs, and new reservoirs in Mexico’s deep water require technology that Pemex does not have and has never developed. Lopez Obrador’s approach was to throw capital at existing fields and build a new refinery. Sheinbaum’s approach, whether by conviction or necessity, is different: find someone who knows how to produce from deep water and bring them in. That is what the April 25 meeting and the May 13 visit represent.
Petrobras has the technology. And Petrobras has transferred it before: Shell, TotalEnergies, Repsol, and Galp all operate in Brazil’s pre-salt fields under partnership structures that included technology sharing. The open question is whether the Pemex-Petrobras framework becomes a genuine joint venture with aligned incentives and real operational authority for Petrobras, or a diplomatic exercise that generates memoranda of understanding and nothing else.
The Spanish-language coverage, from Excelsior, SDP Noticias, La Periodista, and others, leans toward the former. Sheinbaum’s personal involvement at the April 25 meeting, the fact that Petrobras sent exploration, production, and transformation teams (not just a delegation head with a PowerPoint), and the bilateral framing around “energy sovereignty” all suggest operational intent. Sheinbaum publicly discussed maguey-biomass research by name. Presidents do not cite specific laboratory projects when they are performing diplomacy for cameras.
Run the numbers on even a modest outcome. If the partnership adds 100,000 bpd within five years, that is roughly USD 2.8 billion in annual revenue at Maya crude prices (around USD 77 per barrel). Against quarterly losses of USD 2.6 billion, that does not fix Pemex. Against a decade of uninterrupted production declines, it breaks the trend. And the trend is what Fitch, Moody’s, and the sovereign risk models care about. Pemex’s credit trajectory has been a one-way bet against the company for years. The August 2025 Fitch upgrade and the September 2025 Moody’s upgrade bought time. An actual production inflection, even a modest one, buys credibility.
continues at ~4% per year
deep-water contribution by 2031
The bottom line
The 2013 energy reform opened Mexico’s oil sector to private capital. This partnership opens it to the one thing Pemex actually needs: deep-water production technology proven at scale, from the company that built it.
No contract is signed. The timeline is long. The execution risk is real. Latin American state-to-state partnerships have a long history of producing press conferences and a short history of producing barrels. We are not calling this a done deal.
But the setup is different this time. Pemex’s decline curve has run out of easy fixes. The government has spent over USD 16 billion in support in the last 18 months and bought a credit rating upgrade, not a production turnaround. Petrobras has the technology, the incentive to expand internationally (CEO Chambriard has explicitly named Africa and Latin America as growth targets), and a track record of transferring deep-water know-how through partnerships.
We are saying that the most important energy meeting in Mexico this year happened on May 13, and almost nobody outside the Spanish-language press covered it.