(Bloomberg) --

Mexico’s lumbering state-owned oil company has had a difficult summer.

First, Petroleos Mexicanos had to put out a gas-induced blaze that literally set alight the waters of the Gulf. Then its already floundering bonds were downgraded deeper into junk territory by Moody’s Investor Service, which cited the company’s increasing business risk as it struggled under a $115 billion mountain of debt, the highest of any major oil company. Finally, on Sunday, Pemex suffered one of the worst offshore platform accidents of the year, resulting in five deaths and cutting output by a quarter.

The litany of events has put Pemex’s environment, social and governance record under scrutiny during an already rocky year for the oil industry, which has faced lawsuits, fines and pushback from shareholders for not moving fast enough to meet climate goals.

Last month, Pemex announced that it will start reporting its carbon-equivalent emissions on a quarterly basis due to requests from investors to disclose ESG data — but it didn’t explain why greenhouse gas emissions had risen by double-digits from April to June, compared to a year ago. After two back-to-back offshore platform explosions, investors and analysts aren’t convinced Pemex is doing enough to address climate and safety concerns.

 “It’s going to take more than a powerpoint slide in their quarterly presentation to say that they're handling ESG issues,” said John Padilla, managing director at energy consultancy IPD Latin America. 

Read More: State Oil Companies Take Their First Ungainly Steps Toward Climate Neutrality

The company is under enormous pressure after about a decade and a half of production declines and soaring debt. Combined, these negative trends have reduced Pemex’s ability to invest in new fields. To climb out of junk status, it will have to balance the environmental demands of foreign bondholders while also expanding its fossil-fuel production to support the Mexican economy. Unlike international, privately owned peers, national oil companies are beholden to their governments, and their core mandate is to generate revenue for state coffers, leaving them little flexibility to reduce their carbon footprint. 

Pemex pumped almost 40% more dangerous pollutants into the atmosphere during the second quarter of the year as exploration crews flared off excess natural gas and facilities were temporarily shut for repairs. It’s also producing more highly-polluting fuel oil at its refineries because they lack the technology to extract cleaner fuels from the process of converting oil to refined products.

Environmentalists and activists have sharply criticized Pemex for Sunday’s deadly blaze at the E-Ku-A2 platform in the Gulf of Mexico.

“Unfortunately, these types of incidents are not an exception. They are frequent and have serious impacts on the workers in the sector, in the communities that live close to the onshore energy projects and the ecosystems where they are located,” said Pablo Ramirez, an energy and climate specialist at Greenpeace in Mexico. “It is urgent to act with adherence to science, but above all with adherence to justice and move towards a climate-sustainable and socially fair energy model.”

Even before the blasts, Pemex’s accident record had drawn international criticism, particularly after it announced plans to buy the Deer Park refinery in Texas from Royal Dutch Shell PLC in May. About a month later, U.S. Representative Brian Babin published a letter to the Committee on Foreign Investment in the United States opposing the deal because he claimed that Pemex did not have a record of operating refineries to international standards.  

Pemex noted that between April to June, 32 of its workers — equivalent to one in every 4,000 or so employees — suffered injuries, including 13 at its refining arm, eight in oil and gas exploration and production, eight at its corporate division and three from its logistics subsidiary. The company also has one of the highest Covid-19 death tolls in the world, reaching almost 600 employees on Tuesday evening.  

“The pattern of overtaxing and pushing too much heavy oil through Pemex’s refineries followed by a major accident has become commonplace,” noted Padilla. “These increasingly routine accidents have resulted in the massive release of greenhouse gases into the environment.”

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