Mexico’s energy sector occupies a central place in the country’s economic and political life, and in 2026 it faces a defining set of tensions. Petróleos Mexicanos (PEMEX), the state oil company that has dominated Mexico’s hydrocarbon sector for over 80 years, is grappling with declining production, a mountainous debt burden, and aging infrastructure. Meanwhile, Mexico’s manufacturing boom — driven by the nearshoring of supply chains from Asia by companies seeking access to the US market — is creating surging electricity and energy demand that the state system struggles to meet. The debate over whether to open more space for private investment in oil, gas, and power has intensified, with the new government signalling a pragmatic rethink of its predecessor’s nationalist energy posture.
PEMEX: A Company Under Pressure
PEMEX’s crude oil production has been in structural decline for two decades, falling from a peak of around 3.4 million barrels per day (bpd) in 2004 to approximately 1.55–1.65 million bpd in early 2026. The declines reflect a combination of factors: maturing conventional fields in the Campeche Sound (historically the backbone of Mexican production), underinvestment during periods of low oil prices, inadequate upstream technology deployment, and the diversion of PEMEX revenues to the federal budget rather than reinvestment in production. The company carries approximately $100 billion in financial debt — one of the largest corporate debt loads in Latin America — which constrains its ability to invest in new field development.
The Cantarell field, once one of the world’s most productive and the source of PEMEX’s greatest output in the early 2000s, now produces a fraction of its peak levels following natural decline. The Ku-Maloob-Zaap complex in the Bay of Campeche has been the main production workhorse for the past decade but is also maturing. PEMEX has been investing in onshore unconventional (tight oil) plays in the Burgos Basin and other areas, but technical challenges and the company’s limited capital budget have slowed development.
Deepwater represents Mexico’s most significant long-term potential. The Gulf of Mexico’s deepwater basins contain substantial resources that have been explored and developed extensively on the US side of the maritime boundary. On the Mexican side, development has been much slower. The constitutional reforms of 2013–2014 opened deepwater to private investment and several international companies — including Talos Energy, Eni, and Premier Oil — made significant discoveries. However, the subsequent political shift under López Obrador reversed some of this opening, and deepwater development by private companies was constrained. The current government is reassessing this posture.
Nearshoring: A New Energy Demand Driver
The nearshoring of manufacturing from Asia — accelerated by US-China trade tensions, COVID supply chain disruptions, and the economic incentives of the USMCA trade agreement — has made Mexico one of the most sought-after manufacturing destinations for companies serving the North American market. Electronics, automotive parts, medical devices, and aerospace components are all sectors where factories are being relocated or newly built in Mexico, particularly in the northern border states of Nuevo León, Coahuila, Chihuahua, and Baja California.
This manufacturing surge is generating substantial new electricity demand. Industrial parks are being developed at scale, and the electricity infrastructure — transmission lines, substations, and generation capacity — must keep pace. The state utility CFE has struggled to meet the reliability requirements of international manufacturers, who often have stringent power quality and uptime requirements as conditions of their investment. Power outages and voltage instability in industrial zones have been reported, creating reputational concerns for Mexico as a nearshoring destination.
The corporate sustainability requirements of multinational companies have also created demand for renewable energy supply. Many manufacturers need to demonstrate renewable electricity procurement to meet their own sustainability commitments and those of their global customers. This is driving demand for solar and wind PPAs, which private renewable developers are positioned to supply — if the regulatory framework allows it. Follow the latest in global oil markets and Latin America energy news on our site.
The Energy Reform Debate
Mexico’s energy policy has oscillated between opening to private investment and renationalisation over the past decade. The 2013 reforms under President Enrique Peña Nieto created a framework for private participation in oil, gas, and electricity. The subsequent López Obrador government (2018–2024) reversed much of this opening, prioritising CFE and PEMEX and marginalising private generators. Legal disputes with foreign investors — including under USMCA’s investment protection provisions — have accumulated and remain unresolved.
President Claudia Sheinbaum, who took office in October 2024, has signalled a more nuanced approach. While maintaining the principle of state energy leadership, she has acknowledged the need for private investment to meet electricity demand and improve PEMEX’s financial position. Early policy signals suggest a willingness to honour existing renewable energy contracts, create new frameworks for private power investment, and explore selective partnerships for PEMEX upstream development. The details of this reform direction will be critical for the investment community and for Mexico’s energy security and climate commitments.
Natural Gas: The Import Dependence Problem
Mexico is heavily dependent on natural gas imports from the United States for power generation. US pipeline gas flows south through several major interconnectors, supplying approximately 70% of Mexican gas consumption. This dependence has made Mexico’s electricity system vulnerable to US market conditions — a concern that was dramatically illustrated in February 2021, when the Texas winter storm disrupted gas supplies and contributed to widespread Mexican power outages. The EIA tracks these cross-border flows closely. Investment in LNG import capacity (at Pacific and Gulf of Mexico terminals) would diversify supply sources, and several such projects are under development or consideration, though none have yet reached final investment decision.
