UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

OF THE SECURITIES EXCHANGE ACT OF 1934

for the fiscal year ended December 31, 20192020

Commission File Number0-99

PETRÓLEOS MEXICANOS

(Exact name of registrant as specified in its charter)

Avenida Marina Nacional No. 329

Colonia Verónica Anzures

11300 Ciudad de México, México

(Address of principal executive offices)

Lucero Angélica Medina González

(5255) 9126-2940

ri@pemex.com

Avenida Marina Nacional No. 329

Torre Ejecutiva, Piso 38 Colonia Verónica Anzures

11300 Ciudad de México, México

(Name, telephone,e-mail and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act. None

Securities registered or to be registered pursuant to Section 12(g) of the Act. None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Title of Each Class

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes☐  Yes    ☒No  ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes☐  Yes    ☒No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes☒  Yes    ☐No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes☒  Yes    ☐No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

☐

†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.    

Yes  ☐    No  ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐Item 17☐Item 18  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).

Yes☐  Yes    ☒No  ☒

TABLE OF CONTENTS

i

EXPLANATORY NOTE

In the process of the preparation of the consolidated financial statements for the year ended December 31, 2020, we identified errors in certain costs and expenses used for the determination of the value in use of some cash generating units of Pemex Exploration and Production for the assessment of the impairment of long-term assets as of December 31, 2019. This resulted in a different value in use in some cash generating units and thus, an increase in the value of wells, pipelines, plants and platforms as of December 31, 2019 in the amount of Ps. 65.8 billion and a favorable impact on our results of operation for 2019, for the same amount. Accordingly, we adjusted our consolidated financial statements for the year ended December 31, 2019 to correct this error. See Note 4-B to our consolidated financial statements included herein.

Petróleos Mexicanos and its fourthree subsidiary entities, which we refer to as the subsidiary entities,Pemex Exploración y Producción (Pemex Exploration and Production),Pemex Transformación Industrial (Pemex Industrial Transformation), and Pemex Logística (Pemex Logistics) andPemex Fertilizantes (Pemex Fertilizers), comprise the state oil and gas company of the United Mexican States, which we refer to as Mexico. Petróleos Mexicanos is a productivestate-owned company of the Federal Government of Mexico, which we refer to as the Mexican Government, and each of the subsidiary entities is a productivestate-owned subsidiary of Mexico. Each of Petróleos Mexicanos and the subsidiary entities is a legal entity empowered to own property and carry on business in its own name. In addition, a number of subsidiary companies that are defined in Note 13-a and listed in Note 5 to our consolidated financial statements incorporated in Item 18, which we refer to as our subsidiary companies, are incorporated into the consolidated financial statements; these subsidiary companies are also identified with their corresponding ownership percentages in “––Consolidated Structure of PEMEX” on page 4.8. Petróleos Mexicanos, the subsidiary entities and the subsidiary companies are collectively referred to as “PEMEX” or “we.” See “Item 4—Information on the Company—History and Development—Corporate Structure” for more details.

References herein to “U.S. $,” “$,” “U.S. dollars” or “dollars” are to United States dollars. References herein to “pesos” or “Ps.” are to the legal currency of Mexico. References herein to “euros” or “€” are to the legal currency of the European Economic and Monetary Union. References herein to “pounds sterling” or “£” are to the legal currency of the United Kingdom. References herein to “Swiss francs” are to the legal currency of the Swiss Confederation. References herein to “Japanese yen” or “¥” are to the legal currency of Japan. References herein to “Australian dollars” are to the legal currency of Australia. The term “billion” as used herein means one thousand million.

Our consolidated financial statements included in this annual report were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. We refer in this report to “International Financial Reporting Standards as issued by the International Accounting Standards Board” as IFRS. In addition, these financial statements were audited in accordance with the International Standards on Auditing, as required by theLey del Mercado de Valores (Securities Market Law) and theDisposiciones de carácter general aplicables a las emisoras de valores y a otros participantes del mercado de valores(General Provisions applicable to issuers of securities and other participants in the securities market) in each case, of Mexico, for purposes of filing with theComisiónNacional Bancaria y de Valores (National Banking and Securities Commission, or the CNBV) and theBolsa Mexicana de Valores, S.A.B. de C.V.(Mexican Stock Exchange), and in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB, for purposes of filings with the U.S. Securities and Exchange Commission, or the SEC.

The regulations of the SEC do not require foreign private issuers that prepare their financial statements on the basis of IFRS to reconcile such financial statements to United States Generally Accepted Accounting Principles, which we refer to as U.S. GAAP. Accordingly, while we have in the past reconciled our consolidated financial statements prepared in accordance withNormas de Información Financiera Mexicanas(Mexican Financial Reporting Standards) to U.S. GAAP, those reconciliations are no longer presented in our filings with the SEC. We do, however, continue to provide the disclosure required under the U.S. Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 932 “Extractive Activities—Oil and Gas” (which we refer to as ASC Topic 932), as this is required regardless of the basis of accounting on which we prepare our financial statements.

We maintain our consolidated financial statements and accounting records in pesos. Unless otherwise indicated, we have translated all peso amounts to U.S. dollars in this Form20-F, including all convenience translations of our consolidated financial statements included herein, at an exchange rate of Ps. 18.845219.9487 = U.S. $1.00, which is the exchange rate that the Secretaría de Hacienda y Crédito Público (Ministry of Finance and Public Credit) instructed us to use on December 31, 2019.2020. You should not construe these translations from pesos into dollars as actually representing such U.S. dollar amounts or meaning that you could convert such amounts into U.S. dollars at the rates indicated. Mexico has a free market for foreign exchange, and the Mexican Government allows the peso to float freely against the U.S. dollar. There can be no assurance that the Mexican Government will maintain its current policies with regard to the peso or that the peso will not depreciate or appreciate significantly in the future. Due to the volatility of the peso/U.S. dollar exchange rate, the exchange rate on any date subsequent to the date hereof could be materially different from the rate indicated above.

PRESENTATION OF INFORMATION CONCERNING RESERVES

The proved hydrocarbon reserves included in this report for the year ended December 31, 20192020 are those that we have the right to extract and sell based on assignments granted to us by the Mexican Government.

The estimates of our proved reserves of crude oil and natural gas for the five years ended December 31, 20192020 included in this report have been calculated according to the technical definitions required by the SEC. DeGolyer and MacNaughton, Netherland, Sewell International, S. de R.L. de C.V. (which we refer to as Netherland Sewell) and, GLJ Petroleum Consultants Ltd. (which we refer to as GLJ) and Sproule International Limited and Sproule México, S.A. de C.V. (which we refer to as Sproule) conducted reserves audits of our estimates of our proved hydrocarbon reserves as of December 31, 20192020 or January 1, 2020,2021, as applicable. All reserves estimates involve some degree of uncertainty. For a description of the risks relating to reserves and reserves estimates, see “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government— Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions,” “—We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our abilitypotential to make capital investments” and “—The Mexican nation, not us, owns the hydrocarbon reserves located in the subsoil in Mexico and our right to continue to extract these reserves is subject to the approval of theSecretaría de Energía (Ministry of Energy or SENER).”

FORWARD-LOOKING STATEMENTS

This Form20-F contains words, such as “believe,” “expect,” “anticipate” and similar expressions that identifyforward-looking statements, which reflect our views about future events and financial performance. We have madeforward-looking statements that address, among other things, our:

Actual results could differ materially from those projected in suchforward-looking statements as a result of various factors that may be beyond our control. These factors include, but are not limited to:

Accordingly, you should not place undue reliance on theseforward-looking statements. In any event, these statements speak only as of their dates, and we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise.

For a discussion of important factors that could cause actual results to differ materially from those contained in anyforward-looking statement, see “Item 3—Key Information—Risk Factors.”

CONSOLIDATED STRUCTURE OF PEMEX

The following chart presents the consolidated structure of PEMEX as of December 31, 2020.

PART I

Not applicable.

Not applicable.

SELECTED FINANCIAL DATAA.      Selected Financial Data

The selected statement of comprehensive income (loss), statement of financial positionNot applicable.

B.      Capitalization and cash flows data set forth below as of andIndebtedness

Not applicable.

C.      Reasons for the five years ended December 31, 2019 have been derived from,Offer and should be read in conjunction with, our consolidated financial statements asUse of December 31, 2018 and 2019 and for the years ended December 31, 2017, 2018 and 2019, which are included in Item 18 of this report. Our consolidated financial statements for each of the fiscal years ended December 31, 2015, 2016 and 2017 were audited by Castillo Miranda y Compañía, S.C. (which we refer to as BDO Mexico), an independent registered public accounting firm. Our consolidated financial statements for the fiscal year ended December 31, 2018 and 2019 were audited by KPMG Cárdenas Dosal, S.C. (which we refer to as KPMG Mexico), an independent registered public accounting firm. Certain amounts in the consolidated financial statements for the years ended December 31, 2015, 2016, 2017 and 2018 have been reclassified to conform the presentation of the amounts in the consolidated financial statements for the year ended December 31, 2019. These reclassifications are not significant to the consolidated financial statements and had no impact on our consolidated net income (loss). As of January 1, 2019, we adopted IFRS 16 “Leases,” without modifying financial information as of December 31, 2018 and 2017. See impacts from the adoption of IFRS 16 in Notes 4 and 17 to our consolidated financial statements included herein.Proceeds

As detailed below, for the years ended December 31, 2017, 2018 and 2019, we recognized a net loss of Ps. 280.9 billion, Ps. 180.4 billion and Ps. 347.9 billion, respectively. In addition, we had negative equity as of December 31, 2018 and 2019 of Ps. 1,459.4 billion and Ps. 1,997.2 billion, respectively. This has led us to state in our consolidated financial statements that there exists significant doubt about our ability to continue as a going concern. However, we have concluded that we continue to operate as a going concern. Accordingly, we have prepared our consolidated financial statements on a going concern basis, which assumes that we can meet our payment obligations. For more information on the actions that we are taking to face these negative trends, see “Item 5—Operating and Financial Review and Prospects—Overview” and “Item 5 — Operating and Financial Review and Prospects —Liquidity and Capital Resources.”

Selected Financial Data of PEMEXD.     Risk Factors

Source: PEMEX’s consolidated financial statements, prepared in accordance with IFRS, as it relates to the selected statements of comprehensive income, statement of financial position and statement of cash flows data; and Petróleos Mexicanos, as it relates to other financial data.

RISK FACTORS

Risk Factors Related to Our Operations

We have a substantial amount of indebtedness and other liabilities and are exposed to liquidity constraints, which could make it difficult for us to obtain financing on favorable terms and could adversely affect our financial condition, results of operations and ability to repay our debt and, ultimately, our ability to operate as a going concern.debt.

We have a substantial amount of debt, which we have incurred primarily to finance the capital expenditures needed to carry out our capital investment projects.projects and to fund our operating expenses. Due to our heavy tax burden, our cash flow from operations in recent years has not been sufficient to fund our capital expenditures and other expenses and, accordingly, our debt has significantly increased and our working capital has decreased.deteriorated. In recent years, our level of indebtedness relative to our oil reserves has increased substantially. Relatively low oil prices since 2014 and the rapidfurther decline in early 2020, as well as declining production, have also had a negative impact on our ability to generate positive cash flows, which, together with our continued heavy tax burden and increased competition from the private sector, has further strained our ability to fund our capital expenditures and other expenses from cash flow from operations. Therefore, in order to develop our hydrocarbon reserves, service our indebtedness and amortize scheduled debt maturities, we will need to obtain funds from a broad range of sources, in addition to successfully implementing the efficiency andcost-cutting initiatives described in this annual report.initiatives. There can be no assurance that we will continue to have access to capital on favorable terms or any terms at all.

As of December 31, 2019,2020, our total indebtedness, including accrued interest, was Ps. 1,983.22,258.7 billion (U.S. $105.2$113.2 billion), in nominal terms, which represented a 4.8% decrease13.9% increase in peso terms compared to our total indebtedness, including accrued interest, of Ps. 2,082.31,983.2 billion (U.S. $105.8$105.2 billion) as of December 31, 2018.2019. As of December 31, 2019, 24.3%2020, 28.3% of our existing debt, or Ps. 481.0640.2 billion (U.S. $25.5$32.1 billion), including accrued interest, is scheduled to mature in the next three years, including Ps. 244.9 billion (U.S. $13.0 billion) scheduled to mature in 2020. As of December 31, 2019, we hadyears. Our working capital deteriorated from a negative working capital of Ps. 211.7209.2 billion (U.S. $10.6$11.1 billion). as of December 31, 2019 to a negative working capital of Ps. 442.6 billion (U.S. $22.2 billion) as of December 31, 2020. Our level of debt may increase further in the short or medium term as a result of new financing activities or future depreciation of the peso as compared to the U.S. dollar, and may have an adverse effect on our financial condition, results of operations and liquidity position. To service our debt, we have relied and may continue to rely on a combination of cash flows provided byfrom our operations, drawdowns under our available credit facilities and incurrence of additional indebtedness (including refinancing ourof existing indebtedness.indebtedness). See “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Overview—Changes to Our Business Plan.Overview.”

If we were unable to obtain financing, on favorable terms, this could hamper our ability to obtain further financing, invest in projects financed through debt and meet our principal and interest payment obligations with our creditors. As a result, we may be exposed to liquidity constraints and may not be able to pay our suppliers, service our debt or make the capital expenditures required to maintain our current production levels and to maintain, and increase, the proved hydrocarbon reserves assigned to us by the Mexican Government, which may adversely affect our financial condition and results of operations. See “—Risk Factors Related to our Relationship with the Mexican Government—We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our abilitypotential to make capital investments” below.

If such constraints occur at a time when our cash flow from operations is less than the resources necessary to meet our debt service obligations, in order to provide additional liquidity to our operations, we could be forced to further reduce our planned capital expenditures and implement further austerity measures and/or sell additionalnon-strategic assets in order to raise funds.measures. A reduction in our capital expenditure program could adversely affect our financial condition and results of operations. Additionally, such measures may not be sufficient to permit us to meet our obligations.

Our financial statements have been prepared on the assumption that we will continue as a going concern.

Our consolidated financial statements have been prepared under the assumption that we will continue as a going concern. However, there is material uncertainty that may castraises significant doubt about our ability to continue operating as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty. If the actions we are taking to improve our financial condition, which are described in detail under “Item 5 — Operating and Financial Review and Prospects —Liquidity and Capital Resources — Overview—Changes to Our Business Plan,Overview,” are not successful, we may not be able to continue operating as a going concern.

Downgrades in our credit ratings could negatively impact our access to the financial markets and cost of financing.

We rely on access to the financial markets to fund our operations and finance the capital expenditures needed to carry out our capital investment projects. Accordingly, credit ratings are important to our business and financial condition, as credit ratings affect the cost and other terms upon which we are able to obtain funding. Certain rating agencies have expressed concerns regarding: (1) our heavy tax burden; (2) the total amountIn light of our debt andhigh leverage, the ratio of our debt to our proven reserves; (3) the significant increase in our indebtedness over the last several years; (4) our negative free cash flow; (5) the natural decline of certain of our oil fields and lower quality of crude oil; (6) our substantial unfunded reserve for retirement pensions and seniority premiums, which was equal to Ps. 1,456.8 billion (U.S. $77.3 billion) as of December 31, 2019; (7) the persistence of our operating expenses notwithstanding declines in oil prices; (8) our rising per barrel lifting costs; (9) the possibility that our budget for capital expenditures will be insufficient to maintain and exploit reserves, particularly given our high investment needs to maintain production and replenish reserves; (10) the possibility that the Mexican Government will not be able to continue providing the support it has provided in recent years; and (11) the involvement of the Mexican Government in our strategy, financing and management. In particular, in light of the recent downturn seen in the oil and gas industry, beginning inas well as the first quarter of 2020,ongoing economic and public health crises posed by the COVID-19 pandemic, certain ratings agencies have expressed concern that we lack flexibility to navigate the downturn and to finance our capital investment needs in the face of low cash flow generation and adverse financing conditions. Partially as a result of these external pressures, various rating agencies have downgraded our ratings during March and April of 2020. See “Item 5—Liquidity and Capital Resources—Overview” below for some of the concerns expressed by certain ratings agencies.

Ratings address our creditworthiness and the likelihood of timely payment of our long-term debt securities. Ratings are not a recommendation to purchase, hold or sell securities and may be changed, suspended or withdrawn at any time. Our current ratings and the rating outlooks depend, in part, on economic conditions and other factors that affect credit risk and are outside our control, as well as assessments of the creditworthiness of Mexico. Certain ratings agencies have recently downgraded Mexico’s credit ratings and their assessment of Mexico’s creditworthiness has and may further affect our credit ratings.

We currently have a “split rating,” with anon-investment grade credit rating from two rating agencies but investment grade credit ratings from other rating agencies. For information regarding our current credit ratings, please see “Item 5—Liquidity and Capital Resources—Overview.” While these downgrades do not constitute a default or event of default under our debt instruments, they have increased our cost of financing. Any further lowering of our credit ratings may have material adverse consequences on our ability to access the financial markets and the terms on which we may obtain financing, including our cost of financing. In turn, this could significantly harm our ability to meet our existing obligations, financial condition and results of operations. In addition, in connection with the entry into new financings or amendments to existing financing arrangements, our financial and operational flexibility may be reduced as a result of more restrictive covenants, requirements for security and other terms that may be imposed on split rated entities. Our split rating and any further credit rating downgrades could also negatively impact the prices of our debt securities and reduce our potential pool of investors and funding sources, among other consequences. There can be no assurance that we will be able to maintain or improve our current credit ratings or outlook.

Crude oil, and natural gas and petroleum products prices are volatile and low crude oil and natural gas prices adversely affect our income and cash flows and the amount of hydrocarbon reserves that we have the right to extract and sell.

International crude oil, and natural gas and petroleum products prices are subject to global supply and demand and fluctuate due to many factors beyond our control. These factors include competition within the oil and natural gas industry, the prices and availability of alternative sources of energy, international economic trends, exchange rate fluctuations, expectations of inflation, domestic and foreign laws and government regulations, political and other events in major oil and natural gas producing and consuming nations and actions taken by Organization of the Petroleum Exporting Countries (OPEC) members and other oil exporting countries, trading activity in oil and natural gas and transactions in derivative financial instruments (which we refer to as DFIs) related to oil and gas.

When international crude oil, petroleum product and/or natural gas prices are low, we generally earn less revenue and, therefore, generate lower cash flows and earn less income before taxes and duties because our costs remain roughly constant. Conversely, when crude oil, petroleum product and natural gas prices are high, we earn more revenue and our income before taxes and duties increases. Crude oil export prices, which had generally traded above U.S. $75.00 per barrel since October 2009 and traded above U.S. $100.00 per barrel as of July 30, 2014, began to fall in August 2014. The weighted average Mexican crude oil export price fell further in subsequent years, reaching U.S. $18.90 per barrel on January 20, 2016. In subsequent years, while prices have remained significantly below 2014 levels, average crude oil export prices stabilized, with the Mexican crude oil export price averaging of U.S. $62.29 per barrel in 2018 and U.S. $55.60$55.53 per barrel in 2019.

During 2020, the weighted average Mexican crude oil price was U.S. $35.82 per barrel, a decrease of U.S. $19.71 per barrel as compared to the 2019 weighted average Mexican crude oil export price. While prices have begun to stabilize, they still remain significantly lower than 2014 levels. Any future decline in international crude oil and natural gas prices will have a similar negative impact on our results of operations and financial condition. These fluctuations may also affect estimates of the amount of Mexico’s hydrocarbon reserves that we have the right to extract and sell, which could affect our future production levels. See “—Risk Factors Related to our Relationship with the Mexican Government—Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions” and “Item 11—Quantitative and Qualitative Disclosures About Market Risk—Changes in Exposure to Main Risks—Market Risk—Hydrocarbon Price Risk” below.

However, beginning in early March of 2020, the market experienced a precipitous decline in oil prices. This decline occurred in response to a substantial decline in demand for oil due to the economic impacts of the pandemic caused by the highly transmissible and pathogenic coronavirus known asCOVID-19 pandemic, which caused an oversupply and in turn insufficient global storage capacity. The Mexican crude oil export price averaged U.S. $40.91 per barrel for the three month period ended March 31, 2020 and reached an unprecedented low of negative U.S. $7.33 per barrel on April 28, 20202020. Prices continue to display significant volatility both in reaction to theCOVID-19 pandemic and actions taken by other oil producing countries.

On April 12, 2020, OPEC and othernon-OPEC oil exporting countries, including, among others, Mexico and Russia, reached an agreement to reduce world crude oil supply. Pursuant to this agreement, these countries, which are known as OPEC+, agreed to reduce their overall crude oil production by 9.7 million barrels per day from May 1, 2020 through June 30, 2020, by 7.7 million barrels per day from July 1, 2020 through December 31, 2020 and by 5.8 million barrels per day from January 1, 2021 through April 30, 2022. In particular, Mexico has agreed to reduce its crude oil production by 100,000 barrels per day for a period of two months beginning on May 1, 2020. During May, June, July, August, September, October and November 2020, we decreased our crude oil production to 1,676.6, 1,654.7, 1,647.3, 1,687.9, 1,697.8, 1,680.2 and 1,688.8 thousand barrels per day, respectively. In December 2020, we increased our crude oil production to 1,711.5 thousand barrels per day. Furthermore, as a result of the reduction in the demand and prices of oil and fuel caused by the COVID-19 pandemic, we revised our production target for 2021 from approximately 2.03 million barrels per day to 1.88 million barrels per day.

Any further or future production cuts or declinedeclines in international crude oil and natural gas prices will likely have a negative impact on our results of operations and financial condition. In addition, significant fluctuations may affect estimates of the amount of Mexico’s hydrocarbon reserves that we have the right to extract and sell, which could affect our future production levels. See “—Risk Factors Related to our Relationship with the Mexican Government—Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions” below and “Item 11—Quantitative and Qualitative Disclosures About Market Risk—Changes in Exposure to Main Risks—Market Risk—Hydrocarbon Price Risk.”

The outbreak ofCOVID-19 has had and may continue to have an adverse effect on our business, results of operations and financial condition.

Since December 2019, a novel strain of coronavirus (2019-nCov, referred(referred to asCOVID-19) has spread throughout the world. On March 11, 2020,COVID-19 was categorized as a pandemic by the World Health Organization. TheCOVID-19 pandemic has resulted in numerous deaths and the imposition of local, municipal and national governmental“shelter-in-place” and other quarantine measures, border closures and other travel restrictions, causing unprecedented commercial disruption in a number of jurisdictions, including Mexico. Many countries around the world, including Mexico, are suffering significant economic and social crises as a result of the ongoingCOVID-19 pandemic and measures taken to contain or mitigate it, which have had dramatic adverse consequences on demand, operations, supply chains and financial markets, as well as contributed to significant oil price volatility. While the nature and scope of the consequences to date are difficult to evaluate precisely, and their future course is impossible to predict with confidence, these events may continue for a sustained period of time.

As of the date of this annual report, theThe Mexican Government has adopted certain measures intended to help mitigate the spread ofCOVID-19 in Mexico, including the suspensionintroduction of alla color-coded system that ranges from red to green and clarifies what level of activities are permitted depending on the percentage of local hospitalizations and the trend in positive non-essentialCOVID-19 activities. However, wecases. In the case of a red color, only essential activities are permitted. We cannot predict the range of future policies that may be enacted by the Mexican Government, or any other government, or the impact these policies will have on our business and operations. Our business operation is generally considered a strategic area as defined in Articles 27 and 28 of theConstitución Política de los Estados Unidos Mexicanos (Political Constitution of the United Mexican States or the Mexican Constitution). Certain of our operations therefore remainhave remained active as ofduring the date of this annual reportpandemic – however, in accordance with our business continuity plan, we have limited our workforce’s access to our facilities, implemented alternating shifts and allowed a portion of our workforce to work remotely. In addition, we have implemented sanitizing measures to disinfect our facilities and the use of thermal cameras and other special equipment to monitor infection risks. Despite these precautions, thea significant portion of our workforce has contracted COVID-19 and regrettably some of our employees have died. The COVID-19 pandemic, or any future pandemic or epidemic, has and may further impact the places where we operate or our workforce. In turn, this could significantly disrupt our operations and cause health restrictions to our workforce and, therefore, impact the operation of our facilities, including our platforms, refineries and terminals, among others. These conditions couldmay adversely affect our business, results of operations and financial condition.

In addition to the operational impacts of theCOVID-19 pandemic, international oil prices, for oil, oil products and natural gas are volatile and strongly influenced by conditions and expectations of world supply and demand. TheCOVID-19 pandemic has significantly decreased and iswill likely to continue to cause a significant decrease in worldwide oil demand in 2020,2021. The decrease in oil demand has led to significantly decreasedlower oil prices and, consequently, has significantly adversely affected our business, results of operations and financial condition. See “—Risk Factors Related to Our Operations—Crude oil, and natural gas and petroleum products prices are volatile and low crude oil and natural gas prices adversely affect our income and cash flows and the amount of hydrocarbon reserves that we have the right to extract and sell” above, “Item 5—Overview” and Note 28 to our consolidated financial statements for further information about the impact on us ofCOVID-19 pandemic.

IfGiven that the impact of theCOVID-19 pandemic continueswill likely continue for an extended period of time, it could adversely affect our ability to operate our business in the manner and on the timelines previously planned. Further, it has had, and could continue to have accounting consequences, such as decreases in our revenues and the value of our inventories, foreign exchange losses, impairments of fixed assets, and affect our ability to operate effective internal control over financial reporting.

The extent to whichCOVID-19 or other health pandemics or epidemics may continue to impact Mexico, the Mexican economy and the global economy and, in turn, our business, results of operations and financial condition is highly uncertain and will depend on numerous evolving factors that we cannot predict, including, but not limited to:

We are an integrated oil and gas company and are exposed to production, equipment and transportation risks, criminal acts, blockades to our facilities,cyber-attacks, failure in our information technology system and deliberate acts of terror that could adversely affect our business, results of operations and financial condition.

We are subject to several risks that are common among oil and gas companies. These risks include production risks (fluctuations in production due to operational hazards, natural disasters or weather, accidents, etc.), equipment risks (relating to the adequacy and condition of our facilities and equipment) and transportation risks (relating to the condition and vulnerability of pipelines and other modes of transportation). More specifically, our business is subject to the risks of explosions in pipelines, refineries, plants, drilling wells and other facilities, oil spills, hurricanes in the Gulf of Mexico and other natural or geological disasters and accidents, fires and mechanical failures.

Our operations are also subject to the risk of criminal acts to divert our crude oil, natural gas or refined products from our pipeline network, including the theft, and tampering with the quality, of our products. We have experienced an increase in the illegal trade in the fuels that we produce and in the illegal “tapping” of our pipelines, which has resulted in explosions, property and environmental damage, injuries and loss of life, as well as loss of revenue from the stolen product.

In 2019,2020, we discovered 10,31611,022 illegal pipeline taps.taps, as compared to 13,137 in 2019. In 2020, we estimate fuel theft averaged about 4,800 barrels per day. We are also subject to the risk that some of our employees may, or may be perceived to, be participating in the illicit market in fuels. In addition, our facilities are subject to the risk of sabotage, terrorism and blockades. For example, in early 2017 we experienced widespread demonstrations, including blockades, as a result of the Mexican Government’s increase in fuel prices during 2017, which prevented us from accessing certain of our supply terminals and caused gasoline shortages at several retail service stations in Mexico. The occurrence of incidents such as these related to the production, processing and transportation of oil and gas products could result in personal injuries, loss of life, environmental damage from the subsequent containment,clean-up and repair expenses, equipment damage and damage to our facilities, which in turn could adversely affect our business, results of operations and financial condition.

Our operations are supported by our information technology systems and therefore, cybersecurity plays a key role in protecting our operations. Cyber-threats and cyber-attacks are becoming increasingly sophisticated, coordinated and costly, and could be targeted at our operations or information systems. Accordingly,Consequently, we have established an information security policypolicies, in order to help us to prevent, detect and correct vulnerabilities.vulnerabilities, contain and mitigate threats, reduce the possibilities of attacks and where appropriate, mitigate their impacts. On November 10, 2019, we detected a ransomware cyber-attack that targeted certain computer software applications. The cyber-attack did not affect the operational continuity of our business. Following the cyber-attack and in accordance with our protocols, we implemented remedial measures intended to contain the extent of the attack and preserve the integrity of our proprietary information. We have also undertaken an investigationAdditionally, we made complaints to identify the sourcecompetent authority to investigate the causes and nature of the cyber-attack and identify the full extent of its impact.cyber-attack.

Although we have established an information security program, that helps us to prevent, detect and correct vulnerabilities, if the integrity of our information technology systemsystems were to be compromised due to anothercyber-attack, or due to the negligence or misconduct of our employees, our business operations could be disrupted or even paralyzed and our proprietary information could be lost or stolen. As a result of these risks, we could face, among other things, regulatory action, legal liability, damage to our reputation, a significant reduction in revenues, an increase in costs, a shutdown of operations, or loss of our investments in areas affected by suchcyber-attacks, which in turn could have a material adverse effect on our reputation, results of operations and financial condition.

We purchase comprehensive insurance policies covering most of these risks; however, these policies may not cover all liabilities, and insurance may not be available in the market for some of the consequential risks. There can be no assurance that significant incidents will not occur in the future, that insurance will adequately cover the entire scope or extent of our losses or that we will not be held responsible for such incidents. The occurrence of a significant incident or unforeseen liability for us for which we are not fully insured or for which insurance recovery is significantly delayed could have a material adverse effect on our results of operations and financial condition. See “Item 4—Information on the Company—Business Overview—PEMEX Corporate Matters—Insurance.”

A continued decline in our proved hydrocarbon reserves and production could adversely affect our operating results and financial condition.

Some of our existing oil and gas producing fields are mature and, as a result, our reserves and production may decline as reserves are depleted. In years prior yearsto 2019, the replacement rate for our proved hydrocarbon reserves has been insufficient to prevent a decline in our proved reserves. However, during 2019,2020, our total proved reserves increased by 171.7201.9 million barrels of crude oil equivalent, or 2.4%2.8%, after accounting for discoveries, extensions, revisions, and delimitations, from 7,010.3 million barrels of crude oil equivalent as of December 31, 2018 to 7,182.0 million barrels of crude oil equivalent as of December 31, 2019.2019 to 7,383.9 million barrels of crude oil equivalent as of December 31, 2020. See “Item 4—Information on the Company—Business Overview––Exploration and Production—Production––Reserves” for more information about the factors leading to this increase. Ourreserve-replacement reserve replacement ratio, or RRR, in 20192020 was 120.1%119.7%, as compared toa small decrease from our RRR of 34.7%120.1% in 2018. Nevertheless,2019. However, while in 2019, our crude oil production continued to decreasedecreased by 9.5%7.6%, in 2017,2020, our crude oil production increased by 6.4% in 2018 and by 7.6% in 2019,0.1%, primarily as a result of the decline ofincrease in the Cantarell,Yaxché-Xanab, Crudo Ligero Marino, ElGolpe-Puerto Ceiba,Bellota-Chinchorro, Antonio J. Bermúdez,Cactus-Sitio Grande,Ixtal-Manik, Chuc, Costero Terrestenew offshore fields Cahua, Cheek, Chejekbal, Hok, Mulach, Manik NW, Octli, Tlacame andTsimín-Xux projects. in the onshore fields Teotleco, Sini, Tokal, Quesqui, Cibix and Ixachi. There can be no assurance however, that we will be able to stop or reverse the decline in our proved reserves and production, which at any moment could have an adverse effect on our business, results of operations and financial condition.

Developments in the oil and gas industry and other factors may result in substantialwrite-downs of the carrying amount of certain of our assets, which could adversely affect our operating results and financial condition.

We evaluate on an annual basis, or more frequently where the circumstances require, the carrying amount of our assets for possible impairment. Our impairment tests are performed by a comparison of the carrying amount of an individual asset or acash-generating unit with its recoverable amount. Whenever the recoverable amount of an individual asset orcash-generating unit is less than its carrying amount, an impairment loss is recognized to reduce the carrying amount to the recoverable amount.

Changes in the economic, regulatory, business or political environment in Mexico or other markets where we operate, such as the liberalization of fuel prices or a significant decline in international crude oil and gas prices, among other factors, may result in the recognition of impairment charges in certain of our assets. Due to the decline in oil prices, we have performed impairment tests of ournon-financial assets (other than inventories and deferred taxes) at the end of each quarter. As of December 31, 20172018 and 2018,2019, we recognized a net reversal of impairment of Ps. 151,444.6(21,419.0) million and an impairment charge of Ps. (21,419.0)31,283 million, respectively. As of December 31, 2019,2020, we recognized an impairment in the amount of Ps. (97,082.2)36,354 million. See Note 13 to our consolidated financial statements for further information about the impairment of certain of our assets. Future developments in the economic environment, in the oil and gas industry and other factors could result in further substantial impairment charges, adversely affecting our operating results and financial condition.

Increased competition in the energy sector could adversely affect our business and financial performance.

TheMexicanTheMexican Constitution and theLey de Hidrocarburos (Hydrocarbons Law) allow other oil and gas companies, in addition to us, to carry out certain activities related to the energy sector in Mexico, including exploration and production activities, and the import and sale of gasoline. As a result, we face competition for the right to explore and develop new oil and gas reserves in Mexico. We also face competition in connection with certain refining, transportation and processing activities. Increased competition could make it difficult for us to hire and retain skilled personnel. While we have not yet experienced significant adverse effects from increased competition, there can be no assurances that we will not experience such adverse effects in the future. If we are unable to compete successfully with other oil and gas companies in the energy sector in Mexico, our results of operations and financial condition may be adversely affected.

We participate in strategic alliances, joint ventures and other joint arrangements. These arrangements may not perform as expected, which could harm our reputation and have an adverse effect on our business, results of operations and financial condition.

We have entered into and may in the future enter into strategic alliances, joint ventures and other joint arrangements. These arrangements are intended to reduce risks in exploration and production, refining, transportation and processing activities. Our partners in such arrangements may, as a result of financial or other difficulties, be unable or unwilling to fulfill their financial or other obligations under our agreements, threatening the viability of the relevant project. In addition, our partners may have inconsistent or opposing economic or business interests and take action contrary to our policies or objectives, which could be to our overall detriment. If our strategic alliances, joint ventures and other joint arrangements do not perform as expected, our reputation may be harmed and our business, financial condition and results of operations could be adversely affected.

We are subject to Mexican and internationalanti-corruption,anti-bribery andanti-money laundering laws. Our failure to comply with these laws could result in penalties, which could harm our reputation and have an adverse effect on our business, results of operations and financial condition.

We are subject to Mexican and internationalanti-corruption,anti-bribery andanti-money laundering laws. See “Item 4—Information on the Company—General Regulatory Framework.” Although we maintain a corporate compliance program that includes policies and proceduresprocesses intended to monitor our compliancecomply with these laws, including the review of our internal control over financial reporting, we are subject to the risk that our management, employees, contractors or any person doing business with us may engage in fraudulent activity, corruption or bribery, circumvent or override our internal controls and procedures or misappropriate or manipulate our assets for their personal benefit or of third parties to our detriment. This risk is heightened by the fact that we have a large number of complex, valuable contracts with local and foreign third parties. Although we have systems in place for identifying, monitoring and mitigating these risks, our systems may not be effective and we cannot ensure that these compliance policies and proceduresprocesses will prevent intentional, reckless or negligent acts committed by our management, employees, contractors or any person doing business with us. Any failure—real or perceived—by our management, employees, contractors or any person doing business with us to comply with applicable governance or regulatory obligations could harm our reputation, limit our ability to obtain financing and otherwise have a material adverse effect on our business, financial condition and results of operations.

If we fail to comply with any applicableanti-corruption,anti-bribery oranti-money laundering laws, we and our management, employees, contractors or any person doing business with us may be subject to criminal, administrative or civil penalties and other measures, which could have material adverse effects on our reputation, business, financial condition and results of operations. Any investigation of potential violations ofanti-corruption,anti-bribery oranti-money laundering laws by governmental authorities in Mexico or other jurisdictions could result in an inability to prepare our consolidated financial statements in a timely manner and could adversely impact our reputation, ability to access financial markets and ability to obtain contracts, assignments, permits and other government authorizations necessary to participate in our industry, which, in turn, could have adverse effects on our business, results of operations and financial condition.

Our management has identified material weaknesses in our internal control over financial reporting infor each of the fourlast five years ended December 31, 2018. Although our managementand has concluded that our internal control over financial reporting was not effective as ofat December 31, 2019, if we fail to establish and maintain effective internal control over financial reporting in the future, the accuracy and timeliness of our financial reporting may be adversely affected,2020, which may have a material adverse result on our results of operation and financial condition.

Our management identified one material weaknesses in our internal control over financial reporting in 2020. For further information on the material weakness identified by our management in 2020, see “Item 15—Controls and Procedures—Management’s Annual Report on Internal Control over Financial Reporting.” In light of the identified material weakness, our management concluded that our internal control over financial reporting was not effective at December 31, 2020. Although we are developing and implementing several measures to remedy these material weaknesses, we cannot be certain that there will be no other material weaknesses in our internal control over financial reporting in the future.

In addition, our management identified material weaknesses in our internal control over financial reporting in connection with the preparation of our consolidated financial statements as of and for each of the years ended December 31, 2015, 2016, 2017, 2018, 2019 and 2018.2020. In light of the identified material weaknesses, our management concluded that our internal control over financial reporting was not effective at December 31 of each of those years. We disclosed the circumstances giving rise to these material weaknesses—which were generally different from one year to the next—in our annual reports on Form20-F for the years 2015, 2016, 2017 and 2018, respectively.corresponding to each of those years. As of the date of this annual report, we believe that each of these material weaknesses has been remediated.remediated, except for those in 2019 and 2020 for which we are in the process of implementing the corresponding remediation actions. For more information, see “Item 15––Controls and Procedures––Management’s Annual Report on Internal Control over Financial Reporting”.

We cannot be certain that additionalIf our efforts to remediate the material weaknesses will not develop or be discoveredidentified in the future. If other material weaknesses exist,2020 are unsuccessful, we may be unable to report our results of operations for future periods accurately and in a timely manner and make our required filings with government authorities, including the SEC. We cannot be certain that additional material weaknesses will not develop or be discovered in the future. There is also a risk that there could be accounting errors in our financial reporting, and we cannot be certain that in the future additional material weaknesses will not exist or otherwise be discovered. Any of these occurrences could adversely affect our results of operation and financial condition.

Our compliance with environmental regulations in Mexico, including in connection with efforts to address climate change, could result in material adverse effects on our results of operations.

A wide range of general andindustry-specific Mexican federal and state environmental laws and regulations apply to our operations; these laws and regulations are often difficult and costly to comply with and carry substantial penalties fornon-compliance. This regulatory burden increases our costs because it requires us to make significant capital expenditures and limits our ability to extract hydrocarbons, resulting in lower revenues. For an estimate of our accrued environmental liabilities, see “Item 4—Information on the Company—Environmental Regulation—Environmental Liabilities.” Growing international concern over greenhouse gas emissions and climate change could result in new laws and regulations that could adversely affect our results of operations and financial condition. International agreements, including the Paris Agreement approved by the Mexican Government, contemplate coordinated efforts to combat climate change. We may become subject to market changes, including carbon taxes, efficiency standards,cap-and-trade and emission allowances and credits. These measures could increase our operating and maintenance costs, increase the price of our hydrocarbon products and possibly shift consumer demand tolower-carbon sources. See “Item 4 — 4—Environmental Regulation —ClimateRegulation—Climate Change” for more information on the Mexican Government’s current legal and regulatory framework for combatting climate change.

Discontinuation, reform or replacement of the London Interbank Offered Rate (or LIBOR) or other benchmark interest rates, or uncertainty related to the potential for any of the foregoing, may impact our business.

As of December 31, 2019 and 2020, we had Ps. 151.6 billion (U.S. $8.0 billion) and Ps. 158.8 billion (U.S. $7.9 billion), respectively of variable rate indebtedness linked to LIBOR or other benchmark rates. In July 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced its intention to phase out the use of LIBOR by the end of 2021.2023. In addition, other regulators have suggested reforming or replacing other benchmark rates. As there is not yet definitive information regarding thephase-out of LIBOR, we cannot currently predict the effect of the discontinuation, reform or replacement of LIBOR. However, the phase out of LIBOR and the discontinuation, reform or replacement of other benchmark rates may have an unpredictable impact on, or cause disruption to, the broader financial markets or borrowing costs to borrowers. These developments may in turn increase the cost of our variable rate indebtedness or otherwise have an adverse effect on our results of operations and financial condition.

Risk Factors Related to Mexico

Economic conditions and government policies in Mexico and elsewhere may have a material impact on our operations.

A deterioration in Mexico’s economic condition, social instability, political unrest or other adverse social developments in Mexico could adversely affect our business and financial condition. Those events could also lead to increased volatility in the foreign exchange and financial markets, thereby affecting our ability to obtain new financing and service our debt. Additionally, the Mexican Government in November 2015, February 2016 and September 2016 announced budget cuts in response to declines in international crude oil prices, and, whileprices. Although the Mexican Government did not reduce our budget in 2017 and announced a budget increase in each of December of 2018 and 2019, itgiven the ongoing impact of the COVID-19 pandemic on our business and the global economy, on July 14, 2020, the Board of Directors of Petróleos Mexicanos authorized the amendment of the 2020 budget for Petróleos Mexicanos and the subsidiary entities. This amendment decreased our budget revenue of Ps. 4.5 billion, which was offset by a net decrease in expenses by Ps. 21.0 billion, consisting of (1) a decrease in investment expenditure by Ps. 28.0 billion (including non-capitalizable maintenance), (2) an increase in operating expense of Ps. 7.0 billion and (3) an increase in financing cost of Ps. 16.5 billion. Further, the Mexican Government may reduce our budget in the future. Any new budget cuts could adversely affect the Mexican economy and, consequently, our business, financial condition, operating results and prospects. See “—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government controls us and it could limit our ability to satisfy our external debt obligations or could reorganize or transfer us or our assets” below. Any new budget cuts could adversely affect the Mexican economy and, consequently, our business, financial condition, operating results and prospects.

In addition, many countries around the world, including Mexico, are suffering significant economic and social crises as a result of the ongoingCOVID-19 pandemic as well as oil price volatility, and these events may continue for a sustained period of time. In addition to these economic effects, if theCOVID-19 pandemic or any future pandemic or epidemic, werehas, and continues to adversely impact the places wherein which we operate orand our workforce, itand could significantly disrupt our operations. IfGiven that the impact of theCOVID-19 pandemic continueswill likely continue for an extended period of time, it could adversely affect our ability to operate our business in the manner and on the timelines previously planned. The extent to whichCOVID-19 or other health pandemics or epidemics may impact Mexico and the Mexican economy and, in turn, our results of operations will depend on future developments, which are highly uncertain and cannot be predicted.

In the past, Mexico has experienced several periods of slow or negative economic growth, high inflation, high interest rates, currency devaluation and other economic problems. These problems may worsen or reemerge, as applicable, in the future and could adversely affect our business and ability to service our debt. A deterioration in international financial or economic conditions, such as a slowdown in growth or recessionary conditions in Mexico’s trading partners, including the United States, or the emergence of a new financial crisis, could have adverse effects on the Mexican economy, our financial condition and our ability to service our debt.

Changes in Mexico’s exchange control laws may hamper our ability to service our foreign currency debt.

The Mexican Government does not currently restrict the ability of Mexican companies or individuals to convert pesos into other currencies. However, we cannot provide assurances that the Mexican Government will maintain its current policies with regard to the peso. In the future, the Mexican Government could impose a restrictive exchange control policy, as it has done in the past. Mexican Government policies preventing us from exchanging pesos into U.S. dollars could hamper our ability to service our foreign currency obligations, including our debt, the majority of which is denominated in currencies other than pesos.

Mexico has experienced a period of increasing criminal activity, which could affect our operations.

In recent years, Mexico has experienced a period of increasing criminal activity, primarily due to the activities of drug cartels and related criminal organizations. In addition, the development of the illicit market in fuels in Mexico has led to increases in theft and illegal trade in the fuels that we produce. In response, the Mexican Government has implemented various security measures and has strengthened its military and police forces, and we have also established various strategic measures aimed at decreasing incidents of theft and other criminal activity directed at our facilities and products. See “Item 8—Financial Information—Legal Proceedings—Actions Against the Illicit Market in Fuels.” Despite these efforts, criminal activity continues to exist in Mexico, some of which may target our facilities and products. These activities, their possible escalation and the violence associated with them, in an extreme case, may have a negative impact on our financial condition and results of operations.

Economic and political developments in Mexico and the United States may adversely affect Mexican economic policy and, in turn, PEMEX’s operations.

Political events in Mexico may significantly affect Mexican economic policy and, consequently, our operations. Presidential and federal congressional elections in Mexico were held on July 1, 2018. Mr. Andrés Manuel López Obrador, a member of theMovimiento Regeneración Nacional (National Regeneration Movement, or MORENA), was elected President of Mexico and took office on December 1, 2018, replacing Mr. Enrique Peña Nieto, a member of thePartido Revolucionario Institucional(Institutional Revolutionary Party, or PRI). The current President’s term will expire on September 30, 2024. The elected members of the Mexican Congress took office on September 1, 2018. As of the date of this annual report, the MORENA party holds an absolute majority in theCámara de Diputados (Chamber of Deputies). On June 6, 2021, intermediate elections will be held in Mexico to elect 500 members of the Chamber of Deputies. The newly elected members of the Chamber of Deputies will take office on September 1, 2021.

The current administration and the Mexican Congress have the power to revise the legal framework that governs us, and the current administration and the Mexican Congress are discussing a number of reforms that could affect economic conditions or the oil and gas industry in Mexico. Until any reform has been adopted and implemented, we cannot predict how these policies could impact our results of operation and financial position. We cannot provide any assurances that political developments in Mexico will not have an adverse effect on the Mexican economy or oil and gas industry and, in turn, our business, results of operations and financial condition, including our ability to repay our debt.

Economic conditions in Mexico are highly correlated with economic conditions in the United States due to the physical proximity and the high degree of economic activity between the two countries generally, including the trade facilitated by the North American Free TradeUnited States-Mexico-Canada Agreement, or NAFTA.the USMCA, which was signed by the presidents of Mexico, the United States and Canada on November 30, 2018 and subsequently ratified by the legislatures of the three countries. As a result, political developments in the United States, including changes in the administration and governmental policies, can also have an impact on the exchange rate between the U.S. dollar and the Mexican peso, economic conditions in Mexico and the global capital markets.

Since 2003, exports of petrochemical products from Mexico to the United States have enjoyed azero-tariff rate under NAFTA and, subject to limited exceptions, exports of crude oil and petroleum products have also been free or exempt from tariffs. During 2019,2020, our export sales to the United States amounted to Ps. 372.1303.8 billion, representing 26.5%31.9% of total sales and 63.5%68.2% of export sales for the year. On November 30, 2018, the presidents of Mexico, the United States and Canada signed the UnitedStates-Mexico-Canada Agreement, or the USMCA. As of the date of this annual report, the legislatures of the three countries have ratified the USMCA. Therefore, pending notification by all three countries that all internal procedures have been completed and a three month waiting period, the USMCA is expected to effectively replace NAFTA. While the USMCA provides that exports of petrochemical products from Mexico to the United States will continue to enjoy azero-tariff rate, any shift in the trade relationships between Mexico and the United States and Canada as a result of the implementation of the USMCA could require us to renegotiate our contracts or lose business, resulting in a material adverse impact on our business and results of operations.

In addition, because the Mexican economy is heavily influenced by the U.S. economy, policies that may be adopted by the U.S. government may adversely affect economic conditions in Mexico. These developments could in turn have an adverse effect on our financial condition, results of operations and ability to repay our debt.

Risk Factors Related to our Relationship with the Mexican Government

The Mexican Government controls us and it could limit our ability to satisfy our external debt obligations or could reorganize or transfer us or our assets.

We are controlled by the Mexican Government and our annual budget may be adjusted by the Mexican Government in certain respects. Pursuant to the Petróleos Mexicanos Law, Petróleos Mexicanos was transformed from a decentralized public entity to a productivestate-owned company on October 7, 2014. The Petróleos Mexicanos Law establishes a special regime governing, among other things, our budget, debt levels, administrative liabilities, acquisitions, leases, services and public works. This special regime provides Petróleos Mexicanos with additional technical and managerial autonomy and, subject to certain restrictions, with additional autonomy with respect to our budget. Notwithstanding this increased autonomy, the Mexican Government still controls us and has the power to adjust our financial balance goal, which represents our targeted net cash flow for the fiscal year based on our projected revenues and expenses, and our annual wage and salary expenditures, subject to the approval of the Chamber of Deputies.

The adjustments to our annual budget mentioned above may compromise our ability to develop the reserves assigned to us by the Mexican Government and to successfully compete with other oil and gas companies that may enter the Mexican energy sector. See “Item 4—General Regulatory Framework” for more information about the Mexican Government’s authority with respect to our budget. In addition, the Mexican Government’s control over us could adversely affect our ability to make payments under any securities issued by Petróleos Mexicanos. Although we are wholly owned by the Mexican Government, our financing obligations do not constitute obligations of and are not guaranteed by the Mexican Government. See “—Risk Factors Related to theour Relationship with the Mexican Government—Our financing obligations are not guaranteed by the Mexican Government” below.

The Mexican Government’s agreements with international creditors may affect our external debt obligations. In certain past debt restructurings of the Mexican Government, Petróleos Mexicanos’ external indebtedness was treated on the same terms as the debt of the Mexican Government and otherpublic-sector entities, and it may be treated on similar terms in any future debt restructuring. In addition, Mexico has entered into agreements with official bilateral creditors to reschedulepublic-sector external debt. Mexico has not requested restructuring of bonds or debt owed to multilateral agencies.

The Mexican Government has the power, if the Mexican Constitution and federal law were amended, to reorganize our corporate structure, including a transfer of all or a portion of our assets to an entity not controlled, directly or indirectly, by the Mexican Government. See “—Risk Factors Related to Mexico” above.

Our financing obligations are not guaranteed by the Mexican Government.

Although Petróleos Mexicanos is wholly owned by the Mexican Government, our financing obligations do not constitute obligations of and are not guaranteed by the Mexican Government. As a result, the Mexican Government would have no legal obligation to make principal or interest payments on our debt if we were unable to satisfy our financial obligations.

We pay significant taxes and duties to the Mexican Government, and, if certain conditions are met, we may be required to pay a state dividend, which may limit our capacity to expand our investment program or negatively impact our financial condition generally.

We are required to make significant payments to the Mexican Government, including in the form of taxes and duties, which may limit our ability to make capital investments. For the year ended December 31, 2019,2020, our total taxes and duties were Ps. 412.0185.6 billion, or 29.4%19.5% of our sales revenues in the form of taxes and duties, which constituted a substantial portion of the Mexican Government’s revenues. On April 21, 2020, the Mexican Government, through a presidential decree, granted us a reduction in our tax burden equal to Ps. 65.0 billion for 2020 via a tax credit applicable to the Derecho por laUtilidad Compartida (Profit-sharing Duty or “DUC”). During 2020, we applied this tax credit in the amount of Ps. 65.0 billion. On February 19, 2021, the Mexican Government, through a presidential decree, granted us a reduction in our tax burden equal to Ps. 73.3 billion for 2021 via a tax credit applicable to the Profit-sharing Duty.

In addition, we are generally required, subject to the conditions set forth in the Petróleos Mexicanos Law, to pay a state dividend to the Mexican Government. We were not required to pay a state dividend in 2016, 2017, 2018, 2019 and 2019,2020, and we will not be required to pay a state dividend in 2020.2021. See “Item 8—Financial Information—Dividends” for more information. Although the Mexican Government has on occasion indicated a willingness to reduce its reliance on payments made by us and recent changes to the fiscal regime applicable to us are designed in part to reduce such reliance by the Mexican Government, we cannot provide assurances that we will not be required to continue to pay a large proportion of our sales revenue to the Mexican Government. See “Item 4—Information on the Company—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime.” In addition, the Mexican Government may change the applicable rules in the future.

The Mexican Government has entered into agreements with other nations to limit production.

Although Mexico is not a member of OPEC, from time to time it enters into agreements with OPEC andnon-OPEC countries to reduce global crude oil supply. Most recently, onOn April 12, 2020, Mexico entered into an agreement with OPEC+ pursuant to whichwhereby it has agreed to reduce its crude oil production by 100,000 barrels per day for a period of two months beginning on May 1, 2020. During 2020, the average crude oil production (including condensates and not including production from partners) for January through April 2020 reached 1,736 thousand barrels per day. Crude oil production from May through December 2020 averaged 1,662 thousand barrels per day. We do not control the Mexican Government’s international affairs and the Mexican Government could enter into further agreements with OPEC, OPEC+ or other countries to reduce our crude oil production or exports in the future. A reduction in our oil production or exports may have an adverse effect on our business, results of operations and financial condition. For more information, see “Item 4—Trade Regulation, Export Agreements and Production Agreements.”

The Mexican nation, not us, owns the hydrocarbon reserves located in Mexico and our right to continue to extract these reserves is subject to the approval of the SENER.Secretaría de Energía (Ministry of Energy or SENER).

The Mexican Constitution provides that the Mexican nation, not us, owns all petroleum and other hydrocarbon reserves located in the subsoil in Mexico. Article 27 of the Mexican Constitution provides that the Mexican Government will carry out exploration and production activities through agreements with third parties and through assignments to and agreements with us. We and other oil and gas companies are allowed to explore and extract the petroleum and other hydrocarbon reserves located in Mexico, subject to assignment of rights by the SENER and entry into agreements pursuant to a competitive bidding process.

Access to crude oil and natural gas reserves is essential to an oil and gas company’s sustained production and generation of income, and our ability to generate income would be materially and adversely affected if the Mexican Government were to restrict or prevent us from exploring or extracting any of the crude oil and natural gas reserves that it has assigned to us or if we are unable to compete effectively with other oil and gas companies in future bidding rounds for additional exploration and production rights in Mexico. For more information, see “—We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our abilitypotential to make capital investments” below.

Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions.

The information on oil, gas and other reserves set forth in this annual report is based on estimates. Reserves valuation is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner; the accuracy of any reserves estimate depends on the quality and reliability of available data, engineering and geological interpretation and subjective judgment. Additionally, estimates may be revised based on subsequent results of drilling, testing and production. These estimates are also subject to certain adjustments based on changes in variables, including crude oil prices. Therefore, proved reserves estimates may differ materially from the ultimately recoverable quantities of crude oil and natural gas. Downward revisions in our reserve estimates could lead to lower future production, which could have an adverse effect on our results of operations and financial condition. See “—Risk Factors Related to Our Operations—Crude oil, and natural gas and petroleum products prices are volatile and low crude oil and natural gas prices adversely affect our income and cash flows and the amount of hydrocarbon reserves that we have the right to extract and sell” above. We revise annually our estimates of hydrocarbon reserves that we are entitled to extract and sell, which may result in material revisions to these estimates. Our ability to maintain ourlong-term growth objectives for oil production depends on our ability to successfully develop our reserves, and failure to do so could prevent us from achieving ourlong-term goals for growth in production.

TheComisión Nacional de Hidrocarburos (National Hydrocarbon Commission, or CNH)“CNH”) has the authority to review and approve our estimated hydrocarbon reserves estimates and may require us to make adjustments toadjust these estimates. A request to adjust these reserves estimates could result in our inability to prepare our consolidated financial statements in a timely manner. This could adversely impact our ability to access financial markets, obtain contracts, assignments, permits and other government authorizations necessary to participate in the crude oil and natural gas industry, which, in turn, could have an adverse effect on our business, results of operations and financial condition.

We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our abilitypotential to make capital investments.

Because our ability to maintain, as well as increase, our oil production levels is highly dependent upon our ability to successfully develop existing hydrocarbon reserves and, in the long term, upon our ability to obtain the right to develop additional reserves, we continually invest capital to enhance our hydrocarbon recovery ratio and improve the reliability and productivity of our infrastructure.

The development of the reserves that were assigned to us by the Mexican Government will demand significant capital investments and will pose significant operational challenges. Our right to develop the reserves assigned to us is conditioned on our ability to develop such reserves in accordance with our development plans, which were based on our technical, financial and operational capabilities at the time. We cannot provide assurances that we will have or will be able to obtain, in the time frame that we expect, sufficient resources or the technical capacity necessary to explore and extract the reserves that the Mexican Government assigned to us, or that it may grant to us in the future. In the past, we have reduced our capital expenditures in response to declining oil prices, and unless we are able to increase our capital expenditures, we may not be able to develop the reserves assigned to us in accordance with our development plans. We would lose the right to continue to extract these reserves if we fail to develop them in accordance with our development plans, which could adversely affect our operating results and financial condition. In addition, increased competition in the oil and gas sector in Mexico may increase the costs of obtaining additional acreage in potential future bidding rounds for the rights to new reserves.

Our ability to make capital expenditures is limited by the substantial taxes and duties that we pay to the Mexican Government, the ability of the Mexican Government to adjust certain aspects of our annual budget, cyclical decreases in our revenues primarily related to lower oil prices and any constraints on our liquidity. The availability of financing may limit our ability to make capital investments that are necessary to maintain current production levels and decrease the proved hydrocarbon reserves that we are entitled to extract. For more information on the liquidity constraints we are exposed to, see “—We have a substantial amount of indebtedness and other liabilities and are exposed to liquidity constraints, which could make it difficult for us to obtain financing on favorable terms and could adversely affect our financial condition, results of operations and ability to repay our debt and, ultimately, our ability to operate as a going concern” above.

In addition, we have entered into and continue to enter into, strategic alliances, joint ventures and other joint arrangements with third parties in order to develop our reserves. If we were unable to find partners for such joint arrangements, or if our partners were to significantly default on their obligations to us, we may be unable to maintain production levels or extract from our reserves. Moreover, we cannot assure you that these strategic alliances, joint ventures and other joint arrangements will be successful or reduce our capital commitments. For more information, see “—Risk Factors Related to Pemex’s Operations—We participate in strategic alliances, joint ventures and other joint arrangements. These types of arrangements may not perform as expected, which could harm our reputation and have an adverse effect on our business, results of operations and financial condition” above and “Item 4—Information on the Company—History and Development—Capital Expenditures.”

The Mexican Government has historically imposed price controls in the domestic market on our products.

The Mexican Government has from time to time imposed price controls on the sales of natural gas, liquefied petroleum gas, gasoline, diesel, gas oil intended for domestic use, fuel oil and other products. As a result of these price controls, we have not been able to pass on all of the increases in the prices of our product purchases to our customers in the domestic market when the peso depreciates in relation to the U.S. dollar. A depreciation of the peso increases our cost of imported oil and gas products, without a corresponding increase in our revenues unless we are able to increase the price at which we sell products in Mexico.

In accordance with theLey de Ingresos de la Federación para el Ejercicio Fiscal de 2017 (2017 Federal Revenue Law), during 2017 the Mexican Government gradually removed price controls on gasoline and diesel as part of the liberalization of fuel prices in Mexico. As of the date of this annual report, sales prices of gasoline and diesel have been fully liberalized and are determined by the free market. For more information, see “Item 4—Information on the Company—Business Overview—Industrial Transformation.” However, we do not control the Mexican Government’s domestic policies and the Mexican Government could impose additional price controls on the domestic market in the future. The imposition of such price controls would adversely affect our results of operations. For more information, see “Item 4—Information on the Company—Business Overview—Refining—Pricing Decrees” and “Item 4—Information on the Company—Business Overview—Gas and Aromatics—Pricing Decrees.”

We may claim some immunities under the Foreign Sovereign Immunities Act and Mexican law, and your ability to sue or recover may be limited.

We arepublic-sector entities of the Mexican Government. Accordingly, you may not be able to obtain a judgment in a U.S. court against us unless the U.S. court determines that we are not entitled to sovereign immunity with respect to that action. Under certain circumstances, Mexican law may limit your ability to enforce judgments against us in the courts of Mexico. We also do not know whether Mexican courts would enforce judgments of U.S. courts based on the civil liability provisions of the U.S. federal securities laws. Therefore, even if you were able to obtain a U.S. judgment against us, you might not be able to obtain a judgment in Mexico that is based on that U.S. judgment. Moreover, you may not be able to enforce a judgment against our property in the United States except under the limited circumstances specified in the Foreign Sovereign Immunities Act of 1976, as amended. Finally, if you were to bring an action in Mexico seeking to enforce our obligations under any securities issued by Petróleos Mexicanos, satisfaction of those obligations may be made in pesos, pursuant to the laws of Mexico.

Our directors and officers, as well as some of the experts named in this annual report, reside outside the United States. Substantially all of our assets and those of most of our directors, officers and experts are located outside the United States. As a result, investors may not be able to effect service of process on our directors or officers or those experts within the United States.

Item 4.

Information on the Company

HISTORY AND DEVELOPMENT

We are the largest company in Mexico according to the June 2019July 2020 edition ofExpansiónmagazine, and according to the November 22, 201913, 2020 issue ofPetroleum Intelligence Weekly,we were the tenthlargesteleventhlargest crude oil producer and the twentieth largestoillargestoil and gas company in the world based on data from the year 2018.2019.

Our executive offices are located at Avenida Marina Nacional No. 329, Colonia Verónica Anzures, 11300, Alcandía Miguel Hildalgo, Ciudad de México, México. Our telephone number is(52-55) 9126-8700.

In March 1938, President Lázaro Cárdenas del Río nationalized theforeign-owned oil companies that were then operating in Mexico, and the Mexican Congress established Petróleos Mexicanos through theDecreto que crea la Institución Petróleos Mexicanos (Decree that creates the entity Petróleos Mexicanos), which was published in the Official Gazette of the Federation and took effect on July 20, 1938.

Legal Regime

On December 21, 2013, amendments to Articles 25, 27 and 28 of the Mexican Constitution took effect, including transitional articles setting forth the general framework and timeline for implementing legislation relating to the energy sector.

On August 11, 2014, this implementing legislation was published in the Official Gazette of the Federation. The implementing legislation includes nine new laws, of which the following are most relevant to our operations:

Together, the Hydrocarbons Law and the Hydrocarbons Revenue Law establish the legal framework for the exploration and production of oil and gas through assignments and contracts, as well as the fiscal regime through which the Mexican Government collects revenues from participants in the Mexican oil and gas industry. The Hydrocarbons Law empowers the SENER to determine the appropriate contract model for each area that is subject to a competitive bidding process, while the Ministry of Finance and Public Credit is responsible for determining the economic and fiscal terms of each contract. See “—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime” below in this Item 4. The following arrangements comprise the contractual regime established by the current legal framework for upstream activities:

For midstream and downstream activities, including oil refining and natural gas processing, the Hydrocarbons Law establishes a permit regime that is granted by the SENER and theComisión Reguladora de Energía (Energy Regulatory Commission, or CRE), as applicable. The Hydrocarbons Law also sets forth the process by which entities may apply for these permits. The CRE has issued permits for the retail sale of gasoline and diesel fuel since 2016.

Under the Petróleos Mexicanos Law, Petróleos Mexicanos is a productivestate-owned company, wholly owned by the Mexican Government, and has the corporate purpose of generating economic value and increasing the income of the Mexican nation while adhering to principles of equity, as well as social and environmental responsibility.

On December 2, 2014, the special regime provided for in the Petróleos Mexicanos Law, which governs Petróleos Mexicanos’ activities relating to productivestate-owned subsidiaries, affiliates, compensation, assets, administrative liabilities, budget, debt levels and the state dividend, took effect. On June 10, 2015, theDisposiciones Generales de Contratación para Petróleos Mexicanos y Sus Empresas Productivas Subsidiarias (General Provisions for Contracting for Petróleos Mexicanos and its ProductiveState-Owned Subsidiaries) were published in the Official Gazette of the Federation, and on June 11, 2015, the special regime for acquisitions, leases, services and public works became effective.

Corporate Structure

TheAs of December 31, 2020, the principal lines of business of the productivestate-owned subsidiariessubsidiary entities are as follows:

Each of these productivestate-owned subsidiariessubsidiary entities is a legal entity empowered to own property and carry on business in its own name and has technical and operational autonomy, subject to the central coordination and strategic direction of Petróleos Mexicanos.

Prior to July 27, 2018,Pemex Cogeneración y Servicios (Pemex Cogeneration and Services) operated as an additional productive state-owned subsidiary. On July 13, 2018, the Board of Directors of Petróleos Mexicanos issued theDeclaratoria de Liquidación y Extinción de Pemex Cogeneración y Servicios (Declaration of Liquidation and Extinction of Pemex Cogeneration and Services), which was published in the Official Gazette of the Federation and became effective on July 27, 2018. As of July 27, 2018, all of the assets, liabilities, rights and obligations of Pemex Cogeneration and Services were automatically assumed by, and transferred to, Pemex Industrial Transformation, and Pemex Industrial Transformation became, as a matter of Mexican law, the successor to Pemex Cogeneration and Services. Pemex Cogeneration and Services was in turn dissolved effective as of July 27, 2018.

Prior to July 1, 2019,Pemex Perforación y Servicios (Pemex Drilling and Services) andPemex Etileno (Pemex Ethylene) operated as additional productive state-owned subsidiaries. On July 25, 2019, the Board of Directors of Petróleos Mexicanos issued the Declaratoria de Extinción de Pemex Perforación y Servicios (Declaration of Extinction of Pemex Drilling and Services) and the Declaratoria de Extinción de Pemex Etileno (Declaration of Extinction of Pemex Ethylene), both of which were published in the Official Gazette of the Federation on July 30, 2019 and became effective on July 1, 2019. As of July 1, 2019, all of the assets, liabilities, rights and obligations of Pemex Drilling and Services were assumed by, and transferred to, Pemex Exploration and Production, and Pemex Exploration and Production became, as a matter of Mexican law, the successor to Pemex Drilling and Services. As of July 1, 2019, all of the assets, liabilities, rights and obligations of Pemex Ethylene were assumed by, and transferred to, Pemex Industrial Transformation, and Pemex Industrial Transformation became, as a matter of Mexican law, the successor to Pemex Ethylene. Pemex Drilling and Services and Pemex Ethylene were in turn dissolved effective as of July 1, 2019.

Prior to January 1, 2021, Pemex Fertilizantes (Pemex Fertilizers) operated as additional productive state-owned subsidiary. On January 12, 2021, the Board of Directors of Petróleos Mexicanos issued the Declaratoria de Extinción de Pemex Fertilizantes (Declaration of Extinction of Pemex Fertilizers), which was published in the Official Gazette of the Federation on January 27, 2021 and became effective on January 1, 2021. As of January 1, 2021, all of the assets, liabilities, rights and obligations of Pemex Fertilizers were assumed by, and transferred to, Pemex Industrial Transformation, and Pemex Industrial Transformation became, as a matter of Mexican law, the successor to Pemex Fertilizers. Pemex Fertilizers was in turn dissolved effective as of January 1, 2021.

Capital Expenditures

The following table shows our capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2019,2020, as well as the budget for these expenditures for 2020.2021. Capital expenditure amounts are derived from our budgetary records, which are prepared on a cash basis. Accordingly, these capital expenditure amounts do not correspond to capital expenditure amounts included in our consolidated financial statements prepared in accordance with IFRS. The following table presents our capital expenditures made or expected to be made by each productivestate-owned subsidiary.

Capital Expenditures and Budget by Subsidiary

Note: Numbers may not total due to rounding.

n.a.: Not applicable.

Source: Petróleos Mexicanos.

The following table shows our capital expenditures, excluding non-capitalizable maintenance, by segment for the years ended December 31, 2019 and 2020 and the budget for these expenditures in 2021.

Capital Expenditures by Segment

Note: Numbers may not total due to rounding.

n.a.: Not applicable.

Source: Petróleos Mexicanos.

The following table shows our capital expenditures, excludingnon-capitalizable maintenance, by segment for the years ended December 31, 2018 and 2019 and the budget for these expenditures in 2020.

Capital Expenditures by Segment

Source: Petróleos Mexicanos.

Capital Expenditures Budget

Capital expenditures and budget by project are described under each segment below in this Item 4.

The weighted average Mexican crude oil export price for 20192020 was U.S. $55.63$35.82 per barrel. Based on its estimate that the weighted average Mexican crude oil export price would be U.S. $49.00$42.10 per barrel, the Mexican Congress approved a 20202021 budget of Ps. 523.4544.6 billion, including operational expenses, andwhich would represent a financial balance goal (which we define as sales after deducting costs and expenses, capital expenditures, taxes and duties, and cost of debt)budget shortfall of Ps. 62.6 billion. With92.7 billion for the year of 2021. Despite this budget shortfall, our management expects that we will be able to maintain ourmedium- andlong-term growth plans without the need to incur more indebtedness thanbeyond the amount included in our approved financing program for 20202021 of Ps. 35.0 billion.44.9 billion because our financial balance projections consider additional actions, such as implementation of optimization measures and further investment in new projects that we expect will contribute to the generation of increased revenues. The budget was based on the guiding principles of: stabilizing our crude oil and gas production levels in the medium and long-term; maintaining the industrial safety and reliability of our facilities; taking advantage of our ongoing contracts with third parties; and meeting our labor and financial obligations.

Our budget for 20202021 includes a total of Ps. 332.6352.7 billion for capital expenditures, including 94.1Ps. 110.6 billion fornon-capitalizable maintenance and 41.3Ps. 47.6 billion for financial investment. The financial investment budget includes Ps. 45.1 billion in capital contributions to our subsidiary company PTI Infraestructura de Desarrollo, S.A. de C.V. for the construction of our new refinery in Dos Bocas, refinery, led by PTI Infraestructura de Desarrollo, S.A. de C.V.).Paraíso, Tabasco and Ps. 2.5 billion in capital contributions to the subsidiaries of our fertilizers business line. Our net capital expenditures budget is Ps. 197.2194.5 billion. We expect to direct Ps. 175.7179.3 billion (or 89.1%)92.2 %) to exploration and production programs in 2020.2021. This investment in exploration and production activities reflects our focus on maximizing the potential of our hydrocarbon reserves and our most productive projects. In addition, in 20202021 we expect to direct Ps. 17.011.7 billion (or 8.6%6.0%) to our industrial transformation segment. We continuously review our capital expenditures portfolio in accordance with our current and future business plans.

Our main objectives for upstream investment are to maximize ourlong-term economic value, and to increase and improve the quality of the oil and gas reserves assigned to us, enhance Pemex Exploration and Production’s reserves recovery ratio, improve the reliability of its production and transportation infrastructure for crude oil and natural gas operations and continue to emphasize industrial safety and compliance with environmental regulations. Our 20202021 budget objectives include maintaining crude oil production at levels sufficient to satisfy domestic demand and have a surplus available for export and maintaining natural gas production levels.

Our downstream investment program seeks to increase our refining capacity, to improve the quality of our product selection and the reliability of our logistics and distribution services, to achieve a level of efficiency similarcomparable to that of our international competitors and to continue to emphasize industrial safety and environmental compliance.

Given the recent and ongoing impact of theCOVID-19 pandemic on our business and the global economy, our management expects to propose amendments to our 2020 budget to our Board of Directors. These amendments are expected to reflect the anticipated impact on our cash flows of the following developments: decreases in the prices and production of crude oil and derivatives, additional support from the Mexican Government in the form of contributions and tax benefits and changes to the U.S. dollar-peso exchange rate. The amendments are expected to represent an approximately Ps. 5.0 billion reduction in operating expenses and a Ps. 40.5 billion reduction in production capital expenditures (includingnon-capitalizable maintenance expenses). Once the Board of Directors approves the amendment budget, it will be required to be submitted to the Ministry of Finance and Public Credit for approval as part of its authority over our financial balance goal for the fiscal year. However, the budget information included in this report does not reflect any potential amendments as these remain subject to final approval by our Board of Directors as of the date of this report. For more information regarding the impact of theCOVID-19 pandemic to our budget, See “Item 5—Overview”.

BUSINESS OVERVIEW

Overview by Business Segment

Exploration and Production

Our exploration and production segment operates through the productivestate-owned subsidiary Pemex Exploration and Production and explores for and produces crude oil and natural gas, primarily in the northeastern and southeastern regions of Mexico and offshore in the Gulf of Mexico. In nominal peso terms, our capital expenditures in exploration and production activities increased by 38.9%8.5% in 2019.2020. As a result of these investments, our total hydrocarbon production reached a level of approximately 884.0883.8 million barrels of oil equivalent in 2019. Despite these investments,2020. Further, our crude oil production decreasedincrease by 7.6%0.1% from 20182019 to 2019,2020, averaging 1,6841,686.3 thousand barrels per day in 2019,2020, primarily as a result of the decline of the Cantarell, Yaxché-Xanab, Crudo Ligero Marino, El Golpe-Puerto Ceiba, Bellota-Chinchorro, Antonio J. Bermúdez, Cactus-Sitio Grande, Ixtal-Manik, Chuc, Costero Terrestre,Tsimín-Xux projects, which was partially offset by development of our new offshore fields Cahua, Cheek, Chejekbal, Hok, Mulach, Manik NW, Octli and Tlacame, the Integral Tekel project’s Ayatsil fielddevelopment of our onshore fields Teotleco, Sini, Tokal, Quesqui, Cibix and by repairs,Ixachi and workovers, improvements and diversification of artificial systems at our other onshore fields that helped maintain production levels.

Our natural gas production (excluding natural gas liquids) increased 0.3%decreased 1.1% from 20182019 to 2019,2020, averaging 4,8164,761.6 million cubic feet per day in 2019.2020. This increasedecrease in natural gas production resulted primarily from the increaseddecreased volumes in the Burgos, Crudo Ligero Marino, Ixtal-Manik, Integral Veracruz Basin, Cactus-Sitio Grande, Integral Macuspana Basin and Ogarrio SáOgarrio-Sánchez Magallanes projects. Exploration drilling activity increaseddecreased by 21.1%26.1% from 20182019 to 2019,2020, from 19 exploratory wells completed in 2018 to 23 exploratory wells completed in 2019.2019 to 17 exploratory wells completed in 2020. Development drilling activity increaseddecreased by 38.5%16.2% from 20182019 to 2019,2020, from 143 development wells completed in 2018 to 198 development wells completed in 2019.2019 to 166 development wells completed in 2020. In 2019,2020, we completed the drilling of 221183 wells in total. In 2019,2020, our exploration drilling activity was focused on the shallow waters of the Gulf of Mexico and onshore regions and the development drilling activity was focused on increasing the production of crude oil and associated gas in theAyatsil-Tekel, Crudo Ligero Marino, El Golpe-Puerto Ceiba,Ku-Maloob-Zaap, Yaxché-Xanab, Antonio J. Bermúdez, Aceite Terciario del Golfoat new offshore fields (including Cahua, Cheek, Chejekbal, Hok, Mulach, Manik NW, Octli andOgarrio-Sánchez Magallanes projects. Tlacame) and at onshore fields (including Teotleco, Sini, Tokal, Quesqui, Cibix and Ixachi).

In advance of 2019,2020, we planned to invest in 20four new developments: 16developments, all of them in shallow water, and four onshore fields.continue with the development of the other 22 fields we have been developing since 2019. During 2019,2020, we incorporated the OnelTeca, Tlamatini, Itta, and YaxchéXolotl shallow water fields into our development plan, bringing our total investment in new developments to 2226 fields, 1822 in shallow water and four onshore fields. As of December 31, 2019,2020, we had begun production in five13 of these 2226 fields. These five13 fields had an average production of 6.477.8 thousand barrels per day of crude oil and 42.2200.7 million cubic feet per day of naturalgas in 2019.2020.

Our primary objectives for 20202021 include: (i) strengthening our financial condition; (ii) ensuring our sustainability by accelerating the incorporation of hydrocarbon reserves; and (iii) adapting and modernizing our production infrastructure. We aim to meet these objectives through the following strategies: (1) accelerating the incorporation of hydrocarbon reserves by prioritizing our exploration activities onshore, in conventional shallow waters and in adjacent blocks; (2) accelerating secondary and enhanced recovery processes to increase the recovery factor for hydrocarbon reserves in our mature fields; (3) expediting the development of newly discovered fields; (4) prioritizing and developing activities that improve the reclassification of possible and probable reserves into proved reserves; (5) increasing our production ofnon-associated gas and (6) enhancing our operations efficiency and optimizing our exploration and production costs.

Entering 2020,2021, our production goals for 2020 include producing crude oil at a level of approximately 1,866.51,876.7 thousand barrels per day and maintaining natural gas production above 5,331.95,335.1 million cubic feet per day. However, as a result of the OPEC+ production agreement entered into by Mexico on April 12, 2020, we are revising our crude oil production goals for 2020 taking into account the amendments in progress to our annual budget. For more information regarding this OPEC+ production agreement, see “Item 4—Trade Regulation, Export Agreements and Production Agreements.” We aim to meet these production goals through exploration and development activities, increasing inventory reserves through new discoveries and reclassifications and managing the decline in field production by focusing our exploration and production activities in areas where we have greater experience and higher historical success rates, such as secondary and tertiary recovery systems. In addition, we intend tore-allocate reallocate resources away fromdeep-water projects, which tend to be expensive andlong-term activities, and towardsshallow-water shallow water and onshore projects, which have the potential fornear-term results. We plan to continue the development of 2226 new fields in 2020, 182021. 22 of which are in shallow waters, and four18 of which are onshore.the original fields we began to develop in 2019 and 4 were added in 2020. Four of these fields are onshore and have been in development since 2019. We expect that these 2226 fields will be able to produce an aggregate of up to 144.6320.9 thousand barrels per day of crude oil during 2020. Despite these production reductions as a result of the current circumstances of the market and the global economic conditions, we continue to prepare our infrastructure for an increase in our crude oil and gas production once the market conditions are favorable.2021.

Drilling and Services

Prior to July 1, 2019, Pemex Drilling and Services operated as an additional productive state-owned subsidiary. As of July 1, 2019, as a result of corporate reorganization, Pemex Drilling and Services was merged into Pemex Exploration and Production. Therefore, our drilling and services segment operated through the productive state-owned subsidiary Pemex Drilling and Services until July 1, 2019 and through the productive state-owned subsidiary Pemex Exploration and Production as a line of business after July 1, 2019. Prior to July 1, 2019, Pemex Drilling and Services mainly provided services to Pemex Exploration and Production.

In 2019, our drilling and services business provided drilling, completion, workover and well services in onshore and offshore fields both to us and to our external client Marinsa de México S.A. de C.V. (Marinsa). Beginning July 1, 2019, such services were provided through Pemex Exploracion and Production.

Industrial Transformation

Our industrial transformation segment is comprised of threefour principal activities: (i) refining, (ii) gas and aromatics, and (iii) since July 1, 2019, ethylene and derivatives:derivatives and (iv) fertilizers, since January 1, 2021:

Refining

Pemex Industrial Transformation converts crude oil into gasoline, jet fuel, diesel, fuel oil, asphalts and lubricants. We also distribute and market most of these products throughout Mexico. During 2019,2020, atmospheric distillation refining capacity remained stable at 1,640.0 thousand barrels per day, following a capacity increase of 0.8% in 2018.day.

In the first nine months of 2019, our2020, crude oil processing and production levels increased as a result of maintenance carried out in our refineries beginning in March 2019. Such maintenance was financed with operating cash flow. However, in the last quarter of the year, crude oil processing decreased due to increased refinery maintenance activities that temporarily reduced our refining capacity. Therefore, in 2019, processing of crude oil by the National Refining System decreased by 3.2%registered a slight of decrease 0.2%, from 611.9 thousand barrels per day in 2018 to 592.0 thousand barrels per day in 2019. In 2019 to 590.6 thousand barrels per day in 2020. Pemex Industrial Transformation produced 625.6596.4 thousand barrels per day of refined products in 2020, a 0.5%4.7% decrease as compared to 628.5625.6 thousand barrels per day in 2018.2019. These decreases were mainly due to the fact that we carried out repairs beyond those originally scheduled under the National Refining System rehabilitation program, together with operational and reliability in our units.

Our primary goals for 20202021 include: prioritizing attention(i) continuing maintenance and repair activities pursuant to critical risks, implementing steps to counteract low availability of ethane and wet gas for process in our petrochemical complexes and gas processing complexes and reaching the goals of the National Refining System Rehabilitation Program.rehabilitation program, (ii) restoring the reliability of our assets, (iii) improving the efficiency and stabilization of crude oil process and (iv) increasing the production of high-value fuels.

Gas and Aromatics

Our gas and aromatics businessPemex Industrial Transformation processes wet natural gas to produce dry natural gas, ethane, liquefied petroleum gas (LPG) and other natural gas liquids, along with aromatic derivatives chain products such as toluene, benzene and xylene. In 2019,2020, our total sour natural gas processing capacity remained at 4,523.0 cubic feet per day.

In 2019, our supply2020, as a result of sourreduced availability of wet gas from Pemex Exploration and Production, stabilized, particularly towards the end of the year. Despite this trend, we processed 2,826.32,765.4 million cubic feet of wet natural gas per day, in 2019, a 4.3%2.2 % decrease as compared to 2,951.92,826.3 million cubic feet per day in 2018.2019. In 2019,2020, we produced 221.3207.4 thousand barrels per day of natural gas liquids, a 7.8%6.3% decrease as compared to 240.1221.3 thousand barrels per day in 2018.2019. In 2019,2020, we also produced 2,305.02,245.2 million cubic feet per day of dry gas (which is natural gas with a methane content of more than 90.0%), a 4.8%2.6% decrease as compared 2,421.72,305.0 million cubic feet per day in 2018. Our highest dry gas production level for 2019 was 2,369.0 million cubic feet per day, which we reached during the third quarter of 2019. In 2019,2020, we produced 919.6336.4 thousand tons of aromatics and derivatives, a 61.5% increase63.4% decrease as compared to 570.0919.6 thousand tons in 2018.2019. This increasedecrease in aromatics and derivatives production was primarilymainly due to stable operationsthe shutdown of aromatics production.our Ciclo de Reformado Catalítico (Catalytic Reforming Cycle) plant, due to operational difficulties in the delivery of steam and electricity to the plant.

Our primary goal for 20202021 is to improve the utilization of our complex gas processors.

Ethylene and Derivatives

Prior to July 1, 2019, Pemex Ethylene operated as an additional productive state-owned subsidiary. As of July 1, 2019, as a result of corporate reorganization, Pemex Ethylene was merged into Pemex Industrial Transformation. Therefore, our ethylene segment operated through the productive state-owned subsidiary Pemex Ethylene until July 1, 2019 and through the productive state-owned subsidiary Pemex Industrial Transformation as a line of business after July 1, 2019.

This line of business’s main objectives include the production, distributionproduces, distributes and marketing ofmarkets ethane and propylene derivatives. In 2019,2020, we produced a total of 1,610.81,146.8 thousand tons of petrochemical products, a 12.0%28.8% decrease from the 1,830.31,610.8 thousand tons of petrochemical products produced in 2018.2019. This decrease was mainly due to limited operating capacity at our units because of problems with auxiliary services, operational failures and an unscheduled reduction in the commercialization of monoethylene glycol caused by a decrease in the national supplyprices of ethane,monoethylene glycol as the result of an oversupply in the international market, due to which impacted the production of ethylene and its derivatives, including ethylene oxide, glycols and high-density polyethylene.we elected to reduce production.

Our ethylene linesegment leverages the integration of business manufacturesthe ethane production chain to manufacture several petrochemical products, including:

The primary goalgoals for our ethylene line of businessand derivatives segment in 2020 is to enable our ethane derivatives production by adapting our infrastructure at the Pajaritos refrigerated ethylene shipping terminal in order2021 are to increase the usage of our shipping, vaporizationinstalled capacity of ethylene and storage capacity for imported ethane.derivatives units through rehabilitation and technological improvements and to increase the availability of raw material.

Fertilizers

OurPrior to January 1, 2021, Pemex Fertilizers operated as an additional productive state-owned subsidiary. As of January 1, 2021, Pemex Fertilizers was merged into Pemex Industrial Transformation. Therefore, our fertilizers segment operated through the productive state-owned subsidiary Pemex Fertilizers until December 31, 2020, and operates through the productivestate-owned subsidiary Pemex Fertilizers andIndustrial Transformation as of January 1, 2021 as a line of business.

Our fertilizers business integrates the ammonia production chain up to the point of sale of fertilizers, including agricultural and industrial nitrates, phosphate fertilizers and acids, (producedwhich are produced by Grupo Fertinal, S.A. de C.V., which we refer to as Fertinal). We also expect that our Our subsidiaryPro-Agroindustria, S.A. de C.V., which we refer began to asintermittently produce urea beginning in April 2020. Pro-Agroindustria, will be able to begin producing ureaS.A. de C.V. ceased operations in the second quarterhalf of 2020.

InDecember 2020 we intenddue to focus our strategy on: (1) increasing the national production of fertilizers at competitive prices; (2) contributing to the strengthening of the agricultural sectorinterruption in Mexico through the supply of fertilizers; (3) ensuring araw materials.

Our primary goal for 2021 is to leverage the synergies created by our merger into Pemex Industrial Transformation to reduce costs and reactivate our ammonia production. In particular, we aim to maintain reliable supply of natural gas for the operation offertilizer production and strengthen our plants;fertilizer business through maintenance to our ammonia VI plant, our storage units and (4) continuingour distribution terminals, as well as to make capital expenditure investmentsaddress certain critical risks related to improve the operational reliability of our four ammonia plants.operations.

Logistics

Our logistics segment operates through the productivestate-owned subsidiary Pemex Logistics and provides land, maritime and pipeline transportation, storage and distribution services to some of our subsidiary entitiessubsidiaries and other companies, including Tesoro MexicoMéxico Supply & Marketing, S. de R.L. de C.V. (an affiliate(a subsidiary of Marathon Petroleum Corporation), which we refer to as Tesoro, CENAGAS, local gas stations and distributors.

During 2019,2020, we injected approximately 1,299.41,140.6 thousand barrels per day of crude oil and petroleum products into our pipelines, representing a 17.8%12.2% decrease as compared to 20182019 when we injected approximately 1,581.51,299.4 thousand barrels per day, mainly due to a reduction in crude oil processed in the National Refining System and to controlled operations aimed at reducing losses from fuel subtractionstheft in pipelinesour pipeline transportation systems in accordance with our strategy to combat fuel theft.theft and the decrease in sales as a result of the COVID-19 pandemic.

During 2019,2020, we injected 132.7134.2 thousand barrels per day of LPG, representing a 4.6% decrease1.1% increase as compared to the 139.1132.7 thousand barrels per day of LPG injected in 2018,2019, due to a decreasean increase in Pemex Industrial Transformation’s sales. In addition,the transportation of liquid gas by pipelines. Additionally, we injected 4.33.8 thousand barrels per day of petrochemicals in 2019, an increase2020, a decrease of 79.2%11.6% as compared to the 2.44.3 thousand barrels per day we injected in 2018.2019. This increasedecrease was mainly due to an increase in imports ofdecreased requirements for isobutane as a result of a higher gasoline production at the Minatitlán and Salina Cruz refineries.

In 2019,2020, we transported a total of 2,069.31,804.3 thousand barrels per day of petroleum products: 1,436.41,278.7 thousand barrels per day (69.4%(70.9%) were injected by pipeline systems, 431.8361.4 thousand barrels per day (20.9%(20.0%) were transported by land transport and the remaining 201.1164.2 thousand barrels per day (9.7%(9.1%) were transported by tankers.

International Trading

The international trading segment provides us with international trading, distribution, risk management, insurance and transportation services. This segment operates through P.M.I. Comercio Internacional, S.A. de C.V. (which we refer to as PMI), P.M.I. Trading Designated Activity Company (formerly P.M.I. Trading, Ltd., which we refer to as P.M.I. Trading DAC), P.M.I. Norteamérica, S.A. de C.V., (which we refer to asPMI-NASA, and, together with PMI and P.M.I. Trading DAC, we collectively refer to as the PMI Subsidiaries) and Mex Gas International, S.L. (which, together with the PMI Subsidiaries, we collectively refer to as the Trading Companies). Certain of the Trading Companies sell, buy and transport crude oil, refined products and petrochemicals in world markets, and provide related risk management, insurance, transportation and storage services. The Trading Companies have offices in Mexico City, Houston and Singapore. Export sales are made through PMI to 23 major customers in various foreign markets.

In 2019,2020, our crude oil exports decreasedincreased in volume by 6.8%1.5%, from 1,184.01,103.3 thousand barrels per day in 20182019 to 1,103.71,119.9 thousand barrels per day in 2019.2020. Natural gas imports decreased by 26.6%11.7% in 2019,2020, from 1,316.5 million cubic feet per day in 2018 to 965.9 million cubic feet per day in 2019.2019 to 853.1 million cubic feet per day in 2020. In 2019,2020, our exports of petrochemical products increaseddecreased by 24.5%44.1%, from 57.8 thousand metric tons in 2018 to 71.9 thousand metric tons in 2019 to 40.2 thousand metric tons in 2020, and our imports of petrochemical products increased 5.5%decreased by 56.0%, from 831.8 thousand metric tons in 2018 to 877.3 thousand metric tons in 2019.2019 to 386.0 thousand metric tons in 2020. In 2019,2020, our exports of other petroleum products decreased 12.7%and liquefied petroleum gas increased by 54.4%, from 132.882.3 thousand barrels per day in 20182019 to 116.0127.1 thousand barrels per day in 2019,2020, and our imports of other petroleum products and liquefied petroleum gas decreased 14.1%by 34.7%, from 985.9302.5 thousand barrels per day in 20182019 to 846.9197.4 thousand barrels per day in 2019.2020. As a major supplier of crude oil to the United States, our international trading segment’s crude oil exports to the United States totaled U.S. $22.4$8.7 billion in 2019,2020, a decrease of U.S. $4.1 billion.$3.9 billion with respect to 2019.

Infrastructure of PEMEX

Exploration and Production

Following our 2015 corporate reorganization, certain business units and assets that were operated by our exploration and production segment were transferred to our drilling and services segment upon the formation of Pemex Drilling and Services on August 1, 2015. For the year ended December 31, 2015, we have not presented separately the operating results of our drilling and services segment in this Item 4 and, accordingly, the results of our exploration and production segment include the results of that segment for this period. Operating results for both the exploration and production and drilling and services segments are presented separately for periods beginning January 1, 2016. For a detailed description of the financial results of each segment, see our consolidated financial statements included herein.

Exploration and Drilling

We seek to identify new oil reservoirs through our exploration program in order to increase the future replacement rate of proved reserves. From 1990 to 2019,2020, we completed 13,61213,795 exploration and development wells. During 2019,2020, our average success rate for exploratory wells was 52.2%35.3%, a 22.9% increase16.9% decrease as compared to 20182019 and our average success rate for development wells was 93.9%95.2%, a 1.9% decrease1.3% increase as compared to 2018.2019. From 20152016 to 2019,2020, we discovered 1220 new crude oil fields. We discovered three of these new crude oil fields two new natural gas fields and three new gas and condensate fields,during 2020, bringing the total number of our producing fields to 319313 at the end of 2019.2020.

Our 20192020 exploration program was comprised of exploration in both onshore regions and offshore regions includingin the deep waters of the Gulf of Mexico. These exploratory activities yielded 104.9130.6 million barrels of oil equivalent of proved reserves resulting from the discovery of three gasoil producing fields and condensate producingthree reservoirs in existing fields, as well as from the drilling of onethree appraisal wellwells in one existing field.fields. In addition, in 2019 we acquired licensing for three-dimensional seismic multi-client data for 5,080 square kilometers in shallow waters.discovered a new reservoir at one of the fields.

The following table summarizes our drilling activity for the five years ended December 31, 2019,2020, all of which occurred in Mexican territory.

Source: Pemex Exploration and Production.

Extensions and Discoveries

During 2019,2020, our exploratory activity in the shallow waters of the Gulf of Mexico and onshore regions resulted in the discovery of sixthree new fields: two onshore fields (the Quesqui(Camatl, Paki and Vinik gasXolotl). Additionally, three new reservoirs were discovered in the existing fields Cibix, Terra and condensate fields) and four offshore fields (the Koban gas and condensate field and the Itta, Tema and Tlamatini crude oil fields).Pokche. In addition, extension activities in our NobilisPokche, Ixachi and TecaQuesqui fields led to the incorporation of additional reserves. Together, these extensions and discoveries led to the incorporation approximately 115.6130.6 million barrels of oil equivalent.

Reserves

Under the Mexican Constitution, all oil and other hydrocarbon reserves located in the subsoil of Mexico are owned by the Mexican nation and not by us. Pemex Exploration and Production has the right to extract, but not own, the reserves granted to us by the Mexican Government and to sell the resulting production. As of the date of this report, the exploration and development activities of Petróleos Mexicanos and the subsidiary entities are limited to reserves located in Mexico.

Proved oil and natural gas reserves are those estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations.

Proved reserves estimates as of December 31, 20192020 were prepared by our exploration and production segment and were reviewed by the Independent Engineering Firms (as defined below), which audit its estimates of our oil and gas reserves. In addition, pursuant to theLineamientos que Regulan los Procedimientos de Cuantificación y Certificación de Reservas de la Nación (Guidelines for Regulating the Nation’s Reserves Quantification and Certification Procedures), the CNH was required to review and approvereviewed the proved reserves reports estimates as of December 31, 2019 by the second week of April.2020 and approved them on April 20, 2021. However, due to theCOVID-19 pandemic, the CNH has suspended the deadlines and, as of the date of this annual report, the CNH has not issuedpublished the resolution in connection with the reports of Pemex fields.resolution. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government— Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions.”

We estimate reserves based on generally accepted petroleum engineering and evaluation methods and procedures, which are based primarily on applicable SEC regulations and, as necessary, the Society of Petroleum Engineers’ (which we refer to as the SPE) publication entitled Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information, dated February 19, 2007June 25, 2019 and other SPE publications, as amended, including the SPE’s publication entitled Petroleum Resources Management System, as well as other technical sources, including Estimation and Classification of Reserves of Crude Oil, Natural Gas, and Condensate, by Chapman Cronquist, and Determination of Oil and Gas Reserves, Petroleum Society Monograph Number 1, published by the Canadian Institute of Mining and Metallurgy & Petroleum. The choice of method or combination of methods employed in the analysis of each reservoir is determined by:

Reserves data set forth herein represent only estimates. Reserves valuation is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserves estimate depends on the quality of available data, engineering and geological interpretation and professional judgment. As a result, estimates of different engineers may vary. In addition, the results of drilling, testing and producing subsequent to the date of an estimate may lead to the revision of an estimate. See “Item 3—Key Information—Risk Factors”

During 2019,2020, we did not record any material increase in our proved oil and gas reserves as a result of the use of new technologies.

In order to ensure the reliability of our reserves estimation efforts, we have undertaken the internal certification of our estimates of reserves since 1996. We have established certain internal controls in connection with the preparation of our proved reserves estimates. Initially, teams of geoscientists from our exploration and production business units (with each of these units covering several projects) prepare the reserves estimates, using distinct estimation processes for valuations relating to new discoveries and developed fields, respectively. Subsequently, the regional reserves offices collect these reserves estimates from the units and request that theGerencia de Certificación de Reservas de Hidrocarburos (Office of Certification of Hydrocarbon Reserves), the central hydrocarbon reserves management body of Pemex Exploration and Production, review and certify such valuations and the booking of the related reserves. This internal certification process is undertaken in accordance with internal guidelines for estimating and classifying proved reserves, which are based on the SEC’s rules and definitions. The Office of Certification of Hydrocarbon Reserves, which additionally oversees and conducts an internal audit of the process described above, consists entirely of professionals with geological, geophysical, petrophysical and reservoir engineering backgrounds. Additionally, the engineers who participate in our reserves estimation process are experienced in: reservoir numerical simulation; well drilling and completion; pressure, volume and temperature (PVT) and analytical tools used in forecasting the performance of the various elements comprising the production system; and design strategies in petroleum field development. Furthermore, all of our personnel have been certified by theSecretaría de Educación Pública (Ministry of Public Education), most have earned master’s degrees in areas of study such as petroleum engineering, geology and geophysical engineering and they possess an average of over fifteen years of professional experience.

In addition to this internal review process, our exploration and production segment’s final reserves estimates are audited by independent engineering firms. ThreeFour independent engineering firms audited our estimates of proved reserves as of December 31, 20192020 or January 1, 2020,2021, as applicable. Netherland Sewell, DeGolyer and MacNaughton, GLJ and GLJSproule (we refer to these firms together as the Independent Engineering Firms). The reserves estimates reviewed by the Independent Engineering Firms totaled 96.797.8 % of our estimated proved reserves. The remaining 3.3 %2.2% of our estimated proved reserves consisted mainly of reserves located in certain areas that have been shared with third parties. Netherland Sewell audited the reserves in the Cantarell,Ku-Maloob-Zaap, Cinco Presidentes andMacuspana-Muspac business units, DeGolyer and MacNaughton audited the reserves in the PozaRica-Altamira,Abkatún-Pol-Chuc and Litoral de Tabasco business units, and GLJ audited the reserves in the Burgos, Veracruz,Bellota-Jujo andSamaria-Luna business units.units and Sproule audited the reserves of fields recently added to our inventory registry. The audits conducted by the Independent Engineering Firms consisted primarily of: (1) analysis of historical static and dynamic reservoir data that we have provided; (2) construction or updating of the Independent Engineering Firms’ own static and dynamic reservoir characterization models of some of our fields; (3) economic analysis of fields; and (4) review of our production forecasts and reserves estimates.

Since reserves estimates are, by definition, only estimates, they cannot be reviewed for the purpose of verifying exactness. Instead, the Independent Engineering Firms conducted a detailed review of our reserves estimates so that they could express an opinion as to whether, in the aggregate, the reserves estimates we furnished were reasonable and had been estimated and presented in conformity with generally accepted petroleum engineering and evaluation methods and procedures.

All questions, including any suggested modifications to proved reserves estimates, that arose during the Independent Engineering Firms’ review process were resolved by our exploration and production segment to the satisfaction of the Independent Engineering Firms. The Independent Engineering Firms have concluded that our estimated total proved oil and natural gas reserve volumes set forth in this report are, in the aggregate, reasonable and have been prepared in accordance with Rule4-10(a) of RegulationS-X of the SEC, as amended (which we refer to as Rule4-10(a)), are consistent with international reserves reporting practice and are in accordance with the revised oil and gas reserves disclosure provisions of ASC Topic 932.

Our total proved developed and undeveloped reserves of crude oil, condensates and liquefiable hydrocarbons recoverable from field processing plants increased by 3.0%1.3% in 2019,2020, from 5,786.0 million barrels in 2018 to 5,960.6 million barrels in 2019.2019 to 6,041.0 million barrels in 2020. This increase was due to discoveries, developments, delineations and revisions of our proved reserves, in particular the developmentaddition of the AyatsilKayab and BalamPit assignments to our inventory of reserves, as well as variations in the Akal and Suuk fields and the discovery of the Koban, QuesquiCamatl, Paki and Vinik gas and condensateXolotl oil fields. Our proved developed reserves of crude oil, condensates and liquefiable hydrocarbons recoverable from processing plants decreasedincreased by 0.1%0.5% in 2019,2020, from 3,587.6 million barrels in 2018 to 3,585.0 million barrels in 2019.2019 to 3,603.4 million barrels in 2020. The amount of our proved reserves of crude oil, condensate and liquefiable hydrocarbon reserves added in 20192020 was sufficient to offset the level of production in 2019,2020, which amounted to 687.6694.8 million barrels of crude oil, condensates and liquefiable hydrocarbons.

Our total proved developed and undeveloped dry gas reserves decreasedincreased by 0.3%10.0% in 2019,2020, from 6,370 billion cubic feet at December 31, 2018 to 6,351.7 billion cubic feet at December 31, 2019.2019 to 6,984.2 billion cubic feet at December 31, 2020. Our proved developed dry gas reserves increased by 6.8%8.7% in 2019,2020, from 3,380 billion cubic feet at December 31, 2018 to 3,608.5 billion cubic feet at December 31, 2019.2019 to 3,922.3 billion cubic feet at December 31, 2020. This increase was principally due to an increase in proved developed dry gas reserves of the Poza Rica, Burgos and BurgosAbkatún-Pol-Chuc fields. The amount of dry gas reserves added in 20192020 was insufficientsufficient to offset the level of production in 2019,2020, which amounted to 870.4818.7 billion cubic feet of dry gas. Our proved undeveloped dry gas reserves decreasedincreased by 8.3%11.6% in 2019,2020, from 2,990.0 billion cubic feet at December 31, 2018 to 2,743.1 billion cubic feet at December 31, 2019.2019 to 3,061.9 billion cubic feet at December 31, 2020. This decreaseincrease was primarilyprincipally due to certainan increase in proved undeveloped dry gas reserves of the Poza Rica, Burgos and Burgos fields that were previously classified as undeveloped reserves being reclassified as proved developed reserves.Abkatún-Pol-Chuc fields.

During 2019,2020, our exploratory activity in the shallow waters of the Gulf of Mexico and onshore regions resulted in the discovery of sixthree new fields: two onshore fields (the Quesquithe Camatl, Paki and Vinik gas and condensate fields) and four offshore fields (the Koban gas and condensate field and the Itta, Tema and TlamatiniXolotl crude oil fields).fields. Three new reservoirs were also discovered in our existing fields: Cibix, Terra and Pokche. In addition, extension activities in our TecaPokche, Ixachi and NobilisQuesqui fields led to the incorporation of additional proved reserves. Together, these extensions and discoveries led to the incorporation of approximately 115.6130.6 million barrels of oil equivalent.

In 2019,2020, our proved reserves increased by 1,026.51,019.9 million barrels of oil equivalent due to reclassifications, development, revisions and discoveries.

The following three tables of crude oil and dry gas reserves set forth our estimates of our proved reserves determined in accordance withRule 4-10(a).

Summary of Oil and Gas⁽¹⁾ Proved Reserves as of December 31, 20192020

Based on Average Fiscal Year Prices

Source: Pemex Exploration and Production.

Crude Oil and Condensate Reserves

(including natural gas liquids)⁽¹⁾

Source: Pemex Exploration and Production.

Dry Gas Reserves

Source: Pemex Exploration and Production.

The following table sets forth, as of December 31, 2019,2020, the volumes of proved developed and undeveloped reserves, the number of producing wells and the number of proved undeveloped locations for the fields that contained 95.4%95.0% of our proved reserves.