Mexican Oil: Pemex-isstic About the Future

Via The Economist, an interesting analysis of Mexico’s hydrocarbon industry and reserves, detailing the Mexican energy ministry’s rather shocking forecast that total oil production would decline to 2.5m b/d unless policies were reformed, and would remain roughly constant even if the industry were liberalised. Such a decline is a problem for both Mexico and the world. Although Mexico contains less than 1% of the world’s proven oil reserves, it is the sixth-largest producer. Its output of 3.1m b/d is well above that of Venezuela or Kuwait. As the article notes, the decline is a direct result of the fact that, since its nationalisation in 1938, Mexican oil has been the preserve of Petróleos Mexicanos, a state monopoly, which as the article notes “…resembles a poorly run government ministry”.

“….the density of drilling rigs is 20 times greater in oil-producing parts of the American segment of the Gulf of Mexico than it is in Mexican waters. In particular, Pemex has drilled a mere 20 exploratory wells in water deeper than 300 metres (980 feet). The only result so far is Lakach, a gasfield now moving prematurely towards production after the sinking of only one exploratory well. The rush stems from an official desire to start deep-water production before the end of Mr Calderón’s term in 2012, reckons David Shields, an energy consultant.

Pemex has trouble maintaining its existing installations. A fire at a platform in Cantarell in October killed 21 workers. The firm has also suffered several bombings of pipelines this year by a guerrilla group. Since Mexico has not built a new refinery in 20 years, it has to import 40% of its petrol from the United States. The competition commission says Pemex’s 7,500 petrol stations are too few to meet demand.

The obvious solution is to privatise the industry, but that is politically impossible. The state oil monopoly is both popular and constitutionally mandated. So Mr Calderón and other politicians have been searching for ways to loosen the monopoly while respecting the constitution….”

This entry was posted on Sunday, December 30th, 2007 at 3:48 pm and is filed under Mexico, Petróleos Mexicanos (Pemex).  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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