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MrBillM
Platinum Nomad
Posts: 21656
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Old News
Hasn't it been a couple of years since Pemex's problems were outlined in an L.A. Times business article and widely discussed here ?
Aging (or Maturing as they put it) existing fields, aging and inadequate production facilities, lack of investment in Infrastructure, lack of refining
capability, corruption (a given in Mexico) and the inability to attract foreign investment to exploit the deeper-water fields because those investors
had no confidence that their investment would be secure from manipulation or default by the Mexican bureaucrats.
Some things don't change.
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Osprey
Ultra Nomad
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Location: Baja Ca. Sur
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Cypress
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Cypress
Elite Nomad
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A couple of years ago, 10/9/06, oil was $60 US a barrel. Today a barrel of oil is
going for $145 US per barrel. Some things do change.
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Eugenio
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If we had known that folk at the crack Nomad Institute had already covered this theme we wouldn't have bothered - there can't be any more to be said
on the subject.
The difficulty in attracting investors isn't lack of confidence per se - it's that they are prohibited by the mexican constitution from sharing
profits - the same was true when oil was priced at $25 per barrel. Other third world countries in Mexico's situation have some profit sharing formula
- like 50/50 sharing of profits. Mexico is the only country in the world that prohibits ANY profit going to foreign companies. L - even Venezuela
shares profits.
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flyfishinPam
Super Nomad
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eugenio, i apologige for not being able to respond to your earlier post we are very busy right now. well what to say and whre to begin and my time
is limited.
on my reasonable conditions in paying more taxes. i think conditions are expected when someone pays for something and i do not think what i stated as
conditions are unreasonable but paying just for the sake of paying in order to keep an overstuffed beurocracy going is just plain stupid. i guess
that i am seeing history repeating itself of perhaps it may repeat itself. does Mexico really want foreign investment in its petrol industry? or do
they just want financial help? i think it is time for Mexico to be more self sufficient, the people deserve it and it can be done. your comments on
the state of the political scene are depressing but i don't just want to give up, roll over, pay, do what they say no matter what. i guess i have
hope for the future out of my own fear. I do live in a tourist town but does that mean that the people here have less say in matters, or are less
informed? also i just thought the xenophobic remark was directed at me and that's why i wasn't understanding the meaning. but no matter how crappy i
may be expressing myself here on these issues i think you and i think more along the same lines than one would conclude by just looking at our quick
exchanges.
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CaboRon
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| Quote: | Originally posted by Eugenio
If we had known that folk at the crack Nomad Institute had already covered this theme we wouldn't have bothered - there can't be any more to be said
on the subject.
The difficulty in attracting investors isn't lack of confidence per se - it's that they are prohibited by the mexican constitution from sharing
profits - the same was true when oil was priced at $25 per barrel. Other third world countries in Mexico's situation have some profit sharing formula
- like 50/50 sharing of profits. Mexico is the only country in the world that prohibits ANY profit going to foreign companies. L - even Venezuela
shares profits. |
And why would anyone in their right mind invest without sharing in the profits 
[Edited on 7-14-2008 by CaboRon]
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Photog
Junior Nomad
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Location: San Diego
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A response
I've been a member of Nomads since 2003 but rarely post here. Normally I don't do follow up posts or respond to other posters commentary, however, I
feel compelled in this case to do so.
The text of the "State of Mexican Oil" post was original content, this is not an article that was copied from another source, with the
exception of text included in quote boxes. As such it is my opinion drawn from research and reading on the subject of the exploration for and
exploitation of oil world wide, the info having been gathered over about a ten year period, with an emphasis on Mexican oil in the last few years
The subject of how best to manage Mexican oil production and distribution, and the use of oil revenue and subsequent pricing of the derived products,
is a thorny issue when viewed in the context of the current and past political / economic environment of Mexico, and not given to brief "sound bite"
explanations or writings.
While the facts regarding declining oil production, sub-standard distribution / refining capacity and infrastructure, inadequate maintenance
management, corruption within Pemex, the unions and some government institutions related to Pemex oversight, is not "new news", the fact that none of
these issues have been tackled is still currently topical. These are on-going issues.
The significance of the "state of Mexican oil" looms large as the federal government derives some 40% plus of its total revenue from Pemex revenue.
The actual figure is unknown to outside sources, the estimates ranging from a low of 39% to a high of 55%. The consensus seems to be somewhere in the
neighborhood of 40% to 45%. What is "new news" regarding production is that the rate of decline is advancing faster than originally predicted in the
years 2000, 2004, and 2007. Hence, the title of my post and the lead-in line; time is not on Mexico's side and the numbers speak for themselves as to
the consequences if certain problems aren't remedied.
As of late the Mexican congress appears to have reached an agreement on lowering the overall Pemex tax rate from 79% to 71%, thus saving Pemex
approximately 2 to 3 billion dollars USD annually. Where exactly to apply this new revenue is a subject of political and Pemex management debate. What
is clear is that it will not begin to cover increased capital investment needs in all or even most areas.
The info in my post is largely derived from Pemex official data; the info in the quoted articles relies heavily of Pemex data / info also. There
appears to be little debate within Pemex and the Mexican federal government that they are facing a serious problem as regards oil production and
management; the debate centers around what to do, and how to do it. Along those lines there have been numerous schemes floated for
revenue sharing; again, this is new news, as well as "old news". As regards exploration and production Pemex seems to advocate a flat service fee
scenario, while private oil exploration firms who have the technology and equipment for deep sea exploitation favor a revenue sharing scheme. As to
building new refineries the debate appears to revolve around the same issue. Distribution reform would mean opening that service to international
business interests who have the capital and expertise to significantly improve on the efficiency / timeliness of refined oil by-product delivery.
Distribution of gasoline and natural gas to end user retail outlets is already privatized as Pemex does not maintain a trucking fleet, or shipping
fleet, for the purpose of distribution.
It has been suggested in a post here that all of this info is merely "propaganda", somehow a conspiracy to deprive Mexicans of their "patrimony". I
have no vested interest in trying to sway or persuade anyone with the info I wrote in my post, that being Webster's definition of "propaganda". As to
the info in quote boxes, with the exception of the quote from the former Mexican energy minister, none of the individuals or publication / web site
sources have a vested interest, which is to say stand to gain monetarily, from publishing facts, statistics, and opinions, which again are derived
primarily from Pemex data. Pemex management certainly has a vested interest in in making their data / info public in that certain segments of the
federal bureaucracy and a large segment of the population need to be aware of the potential consequences of in-action regarding the issues surrounding
future exploration, current production, distribution / maintenance, and the associated costs of all of these activities as relates to "keeping the
spigot turned on". If the spigot gets turned off, for whatever reason, the Mexicans have no way of getting their "patrimony." If anything, Pemex has a
vested interest in low-balling their numbers in order to deflect criticism and avoid the political fallout from past management practices.
Increased efficiency and a reduction in corruption most certainly would help boost Pemex revenue, however, with the amount of required capital
investment dollars being bandied about by Pemex and international oil analysts / consultants there is no way that these dollar savings will even come
close to providing the necessary new funding. These figures are relatively easy to access and amount to some pretty simple math. As regards
"alternative energy methods" none of these in other countries have proved effective, or cost effective, in reducing oil consumption. If the federal
Mexican government doesn't have the funds to cut Pemex tax rates, thus cutting their own revenue, where would the money come from to develop /
subsidize alternate energy sources? As regards a reduction in consumption, Mexico, like every other industrialized nation in the world, is increasing
its consumption, this being closely coupled with increased economic activity. JOBS require business activity; business activity requires ENERGY.
Regarding increased taxation in an attempt to ameliorate Pemex investment capital shortfalls, the increase in taxes needed to fill the gap would cause
an immediate recession, or perhaps depression, and at any rate would be seen as completely unpalatable by Mexican federal politicians; it would in
affect be ruinous to the economy. However, collecting taxes from the uber-wealthy Mexican industrialists under the current tax structure, coupled with
some degree of business tax reform, is long overdue. The bottom line on taxation is that NO government has ever taxed their way out of a revenue
shortfall in one area without having created unforeseen shortfalls, and at times dire consequences, in another area of the economy. More taxation is
not the answer to the problems of oil production and capital investment shortfalls; less taxation is actually what is needed, as recognized by many in
Los Pinos, and just about everybody in senior management at Pemex.
Eugenio has a very good handle on the reality of the situation as regards all of this:
| Quote: | | let's not confuse "what we wish" to happen with "what is likely" to happen. Yeah - I would propose the same as you - but it can't happen for the
reasons cited in the article (plus a couple more) - as it says - do the math. |
| Quote: | | But as things stand now Mexico does not have the cash flow to finance modernization of Pemex, build refineries (which may be obsolete in 20 years),
explore, extract, and finance 40% of Mexico's federal budget - simultaneously - and all in an environment of corruption. Oh - and meanwhile to sell
it's patrimony at below market value to it's people. |
| Quote: | | Mexican politicians are xenophobic - except that it's not so much the politicians themselves as much as their pandering to sentiments of the Mexican
people - and using it to get elected. |
| Quote: | If we had known that folk at the crack Nomad Institute had already covered this theme we wouldn't have bothered - there can't be any more to be said
on the subject.
The difficulty in attracting investors isn't lack of confidence per se - it's that they are prohibited by the Mexican constitution from sharing
profits - the same was true when oil was priced at $25 per barrel. Other third world countries in Mexico's situation have some profit sharing formula
- like 50/50 sharing of profits. Mexico is the only country in the world that prohibits ANY profit going to foreign companies. L - even Venezuela
shares profits. |
This ultimately leads to the current debate in the DF on changing the federal constitution to allow some sort of foreign investment. Mexico can still
control the lions share of the profits, control and manage the processes, and ultimately remain in the drivers seat, no pun intended. Neither Pemex
nor federal politicians within the Calderón administration are advocating a complete privatization of Mexican oil. That is unnecessary, unwise, and is
a canard advanced by the increasingly politically marginalized PRD party and Obrador. What they are advocating is finding ways to get a badly needed
capital infusion such that they can keep the oil, and oil revenue, flowing.
Photog
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MrBillM
Platinum Nomad
Posts: 21656
Registered: 8-20-2003
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AND..........
Nothing said or suggested here will have affect any on those decisions.
Interestingly, ALL of the current problems have been discussed for many years with no consensus on resolving those problems. When it all crashes,
there will be a panic approach to legislation and action resulting in more chaos.
Just like the current approach in the U.S. Congress.
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rts551
Elite Nomad
Posts: 6699
Registered: 9-5-2003
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discussed for many years but no crash yet. How resilliant humans are
| Quote: | Originally posted by MrBillM
Nothing said or suggested here will have affect any on those decisions.
Interestingly, ALL of the current problems have been discussed for many years with no consensus on resolving those problems. When it all crashes,
there will be a panic approach to legislation and action resulting in more chaos.
Just like the current approach in the U.S. Congress. |
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fulano
Banned
Posts: 496
Registered: 3-31-2008
Location: Ramona, CA
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| Quote: | Originally posted by rts551
discussed for many years but no crash yet. How resilliant humans are. |
That reminds me of the anectdote of the guy who jumped off the top of a 50-story building, thinking he could fly. As he was passing the 25th story on
the way down, a man stuck his head out of the window and asked the jumper how it was going. The jumper replied: "so far, so good".
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Cypress
Elite Nomad
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MrBillM,  The approval rating of the U. S Congress is in the single digits. They've been taken into water over their heads and most of 'em can't swim.
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MrBillM
Platinum Nomad
Posts: 21656
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No Surprise there.
Taking ONLY the example of addressing the energy problems, all that you hear from those in charge is "Well, doing THAT (insert solution) won't change
anything for 5-10 years so there isn't any point in doing it".
Well, If we DO NOTHING, we don't even have 5-10 years to look forward to.
For political leaders to say that DOING NOTHING is the best course is the height of arrogance, but not surprising for a bunch whose legislative record
consists mainly of renaming post offices.
What the Heck ever happened to those first 100 days of action promised by the Dems for the new Congress that they controlled ?
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Cypress
Elite Nomad
Posts: 7641
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They were all selected by majority vote. I'm thinking the voters are dumber than
the idiots they've elected.
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Barry A.
Select Nomad
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Location: Redding, Northern CA
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Photog------
Excellent post---------thank you.
Barry
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bajadock
Super Nomad
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Location: Punta sur de \'Nada
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Chevron CEO in Grover's item mentions Project Better Place.
http://www.projectbetterplace.com/4-gasoline-and-fuel-econom...
June 26, 2008 Congressional Select Committee on Energy Independence and Global Warming....paraphrasing witness testimony at hearing's end...
"The technology is ready. Just get government out of the way!"
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CaboRon
Ultra Nomad
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| Quote: | Originally posted by Cypress
They were all selected by majority vote. I'm thinking the voters are dumber than
the idiots they've elected. |
In the US elections are NOT based on a majority vote ... the results are based on the Electoral College .... a complex and cumberson system left over
from the days when the vote was in the hands of the landowners .
CaboRon
[Edited on 7-15-2008 by CaboRon]
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