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Photog
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Registered: 11-23-2003
Location: San Diego
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Mexican Oil: it's only a matter of time...
Consumption up, production down; not hard to do the math.
Many in the petroleum research and investment industry have been predicting a rapid slowdown in Mexican oil production and a possible corresponding
shortage of refined petro products for well over a year.
Looking at Pemex own data from their web site, Pemex info press releases, and data readily available from petroleum industry research and consulting
firms, it is apparent that the lack of re-investment in the Pemex production and distribution infrastructure, as well as little new investment in
refining capacity, suggests an eventual slowdown in crude oil and refined petroleum product deliverables, and a potential breakdown in the
distribution system. Official Pemex crude oil production figures for 2007 and the first half of 2008 have more than validated the crude oil production
predictions.
Net oil production for all Mexican fields was down 9.3 percent from Jan. to June of 2008, net refined petro product consumption was up by 5.5 %
nation wide according to Pemex official figures. Net oil production is expected to fall approximately 17% for the year 2008. The Cantarell oil field,
at one time the third largest oil producing field in the world, reached "peak" production in 2004 and is now in rapid decline. Although Mexico was the
fifth largest producer of oil in the world in 2007, it is a net importer of refined petro products; there are only 6 currently operating petroleum
product refineries in all of Mexico.
Pemex own production engineers and managers released / leaked an internal audit / report that estimated an investment of 8 to 10 billion dollars
(USD) was necessary just to keep the distribution infrastructure operating in it's current sub-standard state. The Mexican nationalized monopoly is
currently somewhere in the neighborhood of 50 billion dollars (USD, 2008) in debt, a figure unrivaled by any state owned monopoly petroleum company in
the world. the Link below has some interesting info in an article dated from Dec. 2004:
| Quote: | "In November 2004 Pemex announced the discovery of possible reserves that may total 200 million bbl. of oil in the deep waters of the Gulf of Mexico.
Yet independent oil analysts point out that extensive seismic studies and test wells will be needed to confirm the area's true potential, and Pemex
has neither the financial resources nor the technical expertise to carry out those follow-ups on its own."
If Mexico doesn't open its oil industry to private investment, the government will have to come up with $70 billion to $100 billion in investment
capital for Pemex in the coming decade to maintain production at current levels. "There's no way Mexico can tap its oil reserves with public money --
the government doesn't have enough resources, and it never will," says Luis Téllez, a former Energy Minister who now heads the Mexico office of
Carlyle Group, a Washington private-equity outfit.
http://www.businessweek.com/magazine/content/04_50/b3912084_... |
And this from the current Mexican Energy Minister as reported on Peak Oil Review:
| Quote: | | Mexican Energy Minister Kessel reiterated that there will be fuel shortages in less than a decade unless the Congress passes the energy reform bill
and begins to invest in the industry. Mexican oil production has fallen by 600,000 barrels a day since peaking in 2004 at 3.4 million barrels a day.
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This, also from Peak Oil Review:
| Quote: | Members of the Party of the Democratic Revolution (PDR) staged a protest against reform legislation introduced by President Felipe Calderon that would
give Petróleos Mexicanos (PEMEX) the ability to let upstream service contracts to outside oil companies. PDR worries that Calderon is privatizing
PEMEX, Mexico's national oil company and sole operator. Mexico nationalized its oil industry in 1938, a move which remains a source of great pride to
its citizens.
Mexico's future oil production hangs in the balance. Output peaked in 2004 because Cantarell, the mainstay producer, is now in irrevocable decline.
PEMEX does not have the resources to carry out exploration and production in its share of the Gulf of Mexico deepwater or significantly expand
production in the difficult Chicontepec field. Without reform of the upstream rules, which would allow PEMEX to contract out development in untapped
areas, Mexico's oil production and exports are expected to steadily decline over the next decade.
Calderon's government has also proposed plans to boost Mexico's refining capacity, a measure which would further erode exports to the United States.
Mexico currently exports its heavy Maya crude for refining in the United States and then imports the finished products to meet its own increasing
demand. Like the upstream reform proposal, the refinery expansion would allow private firms to build and operate Mexican oil refineries for a fee in
addition to opening the oil pipeline, storage and transport businesses to private capital. The PDR also opposes opening up Mexico's downstream
industry.
It may be a case of "too little, too late" regardless of the fate of the oil reforms. Perhaps a decade would be required before Mexico would see
significant new production from the deepwater Gulf.
http://www.aspo-usa.com/index.php?option=com_content&tas... |
The current refined petroleum products issue in northern Baja is a proto-typical example of Mexican politicians and business elites propensity to
blame external forces for their own failures to govern and manage professionally and prudently. They habitually scapegoat others for their own
failures; there appears to be no mitigating circumstances regarding the refined petroleum products situation in the northern Baja region. Some
analysts believe the same problem may begin to surface in other parts of Mexico in the future.
Xenophobia among many Mexican politicians regarding foreign investment in Pemex, coupled with the Mexican federal law's explicit prohibition, have
effectively eliminated Pemex from seeking international external funding and technology partners for deep water oil field drilling and eventual
exploitation of new and as of yet untapped oil resources, as well as soliciting needed capital investment for the refining and distribution
infrastructure.
And as with many businesses in Mexico there is the issue of corruption, Pemex being prone to, and commonly know as, one of the most corrupt
institutions in Mexico today. Link below to an interesting and particularly damning article regarding Pemex corruption, which significantly impacts
it's ability to perform efficiently:
http://www.globalpolicy.org/nations/launder/regions/2003/012...
Meanwhile, the federal government continues to siphon off needed production and infrastructure re-investment dollars from Pemex revenue to fund the
bulk of the overall federal budget; approximately 40 to 45% of the federal budget is derived from Pemex revenue, which represents approximately 60% of
Pemex net revenue.
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rpleger
Super Nomad
Posts: 1087
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Mood: Was good.
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Hmmmmmmm...
Richard on the Hill
*ABROAD*, adj. At war with savages and idiots. To be a Frenchman abroad is to
be miserable; to be an American abroad is to make others miserable.
-- Ambrose Bierce, _The Enlarged Devil\'s Dictionary_
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Cypress
Elite Nomad
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Photog, There's gonna be a bunch of PO'd folks when the poop hits the fan.
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fulano
Banned
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| Quote: | Originally posted by Cypress
Photog, There's gonna be a bunch of PO'd folks when the poop hits the fan.
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There's gonna be 100 million Mexican refugees trying to climb the border fence.
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Baja Bernie
`Normal` Nomad Correspondent
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What Fence?
My smidgen of a claim to fame is that I have had so many really good friends. By Bernie Swaim December 2007
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Osprey
Ultra Nomad
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Richard, Bernie, terrific, in depth posts about a serious subject as usual. Thanks so much.
Photog: While we all sit around wondering what's what with the peso and Pemex, you are doing not just the heavy lifting but all the lifting. I
appreciate it -- please keep us in the loop -- it is very volitile, dynamic and needs someone savvy like you to make sense of it for us.
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bancoduo
Banned
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What ever happened to GROVERS Accurate CONCISE post.
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flyfishinPam
Super Nomad
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this is more propoganda to convince the Mexican people to sell out their patrimony to foreigners. they're smarter than that and I don't think it will
happen. i hate this reference to "subsidy". do you subsidize your own belongings or your own property to yourself? the oil belongs to the Mexican
people they are not subsidizing what already belongs to them.
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flyfishinPam
Super Nomad
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| Quote: | Originally posted by fulano
| Quote: | Originally posted by Cypress
Photog, There's gonna be a bunch of PO'd folks when the poop hits the fan.
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There's gonna be 100 million Mexican refugees trying to climb the border fence. |
either that or those 100 million will be chasing the elites who govern them and run everything, across that fence! 
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Von
Senior Nomad
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Registered: 10-1-2006
Location: Poway-Rosarito
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Lots BS in the air coming very soon to a theater near you...
READY SET.....................
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woody with a view
PITA Nomad
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where IS the fence?
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Taco de Baja
Super Nomad
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| Quote: | Originally posted by flyfishinPam
this is more propoganda to convince the Mexican people to sell out their patrimony to foreigners. they're smarter than that and I don't think it will
happen. i hate this reference to "subsidy". do you subsidize your own belongings or your own property to yourself? the oil belongs to the Mexican
people they are not subsidizing what already belongs to them. |
Oil is sold on the global market; it belongs to the person who buys it. In the USA we still pay $140 a barrel, even for "our oil" pulled out of
Alaska, California, Florida, and Texas. If the next US Pres. thinks he can 'fix' the energy crisis by lowering the price of US oil that the refiners
pay to $40 a barrel, it would be a subsidy too....Not to mention a bad idea. $5.00-$6.00 a gallon for gas, and $150-$200 a barrel for oil, is the
best (maybe the only) thing to get Americans to conserve.
Besides, that $100 subsidy will have to be made up through either higher taxes or reduced government services, so it a wash....Plus, with the now
lower fuel costs there will be no incentive to conserve or develop alternatives to our oil addiction.
Truth generally lies in the coordination of antagonistic opinions
-Herbert Spencer
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Taco de Baja
Super Nomad
Posts: 1913
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| Quote: | Originally posted by woody in ob
where IS the fence? |
Truth generally lies in the coordination of antagonistic opinions
-Herbert Spencer
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bajalou
Ultra Nomad
Posts: 4459
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But if oil is produced and not sold on the market, the cost of production is the real cost - not what you could have gotten. When I value my
inventory, I'm required to value it at cost, not what I expect to sell it for.
If you sell below your costs, then it's a subsidy.
[Edited on 7-9-2008 by bajalou]
No Bad Days
\"Never argue with an idiot. People watching may not be able to tell the difference\"
\"The trouble with doing nothing is - how do I know when I\'m done?\"
Nomad Baja Interactive map
And in the San Felipe area - check out Valle Chico area |
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Eugenio
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Location: Navojoa, Son.
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Pam - how do you propose that the mexican people extract their patrimony?
To me the effect of decreased Pemex revenues on tax revenues is the scariest - the mexican government will have no recourse but to take it from the
people - and they will take it - here's hoping you have a cash business.
And good luck to the mexican government trying to sell bonds backed by nothing but their good word next time around.
The industrial revolution in the US was financed primarily by europeans. Money paid out in wages far exceeds corporate profit - and in fact wages are
still paid out in tough times when corporate loses money.
Viva la xenofobia.
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Cypress
Elite Nomad
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Taco de Baja,How 'bout Louisiana? There's an off-shore oil rig or two down
there. Good fishing around 'em also. Better fishing than the Sea of Cortez in my humble opinion.
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vivaloha
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Pemex autonomy from the world system will hopefully keep the prices down...
Baja California can be a heaven or hell experience - often the determining factor is your AWARENESS in the moment.
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flyfishinPam
Super Nomad
Posts: 1727
Registered: 8-20-2003
Location: Loreto, BCS
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| Quote: | Originally posted by Eugenio
Pam - how do you propose that the mexican people extract their patrimony?
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I propose they force PEMEX to reinvest its profits to build refineries and extraction equipment (or whatever the lingo is), AND I propose Mexico moves
towards oil independence by conserving nd investing in alternate energy methods.
| Quote: | Originally posted by Eugenio
To me the effect of decreased Pemex revenues on tax revenues is the scariest - the mexican government will have no recourse but to take it from the
people - and they will take it - here's hoping you have a cash business.
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I don't mind paying taxes as long as we receive benefits like education, infrastructure, have a functioning judicial system, public security, etc.
Trouble is we don't pay enough now, I'd certainly be willing to pay more as long as everyone else does too. As someone in business down here I get to
see a side of the tax payment procedures here that perhaps folks just living here retired don't get to see. From what I can see its a very
disorganized and inefficient system and there are many many people here not paying taxes or not paying enough taxes period. This needs to change.
What also needs to change is the mountains of beaurocrats who do nothing buck suck off the system and are unproductive. There are other ways of
generating income that would work well and then PEMEX funds could be left for reinvestments.
| Quote: | Originally posted by Eugenio
And good luck to the mexican government trying to sell bonds backed by nothing but their good word next time around.
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well I can't comment on this as I don't know what you're referring to, not something I followed but I don't have too much faith in the US dollar
anymore either so....
| Quote: | Originally posted by Eugenio
The industrial revolution in the US was financed primarily by europeans. Money paid out in wages far exceeds corporate profit - and in fact wages are
still paid out in tough times when corporate loses money.
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well that was then and this is now and expense vs. income woes, well that's the cost of doing business.
| Quote: | | Originally posted by EugenioViva la xenofobia. |
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Cypress
Elite Nomad
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flyfishinPam
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Eugenio
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Pam - 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.
You're relatively new to Mexico - and it's good that you have this feeling that the mexican peple can turn things around on their own - and I mean
that sincerely Pam - it's great. Actually they probably could - if.....
Your perspective is from an american living in a tourist destination - and that's fine. I've never lived in a tourist destination - and it would be
hard for me to picture myself in one - and enjoying it much. I have however lived in Guadalajara, Mexico DF, Tijuana, Mexicali, Tepic, and around the
Northern Sinaloa/Southern Sonora area. I have a strong faith in the mexican people - but have very little faith in the folks who yield power. That's
probably the basis for our difference in perspective.
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 - simultaneouslly - and all in an environment of corruption. Oh - and meanwhile to sell
it's patrimony at below market value to it's people.
Sorry - the numbers aren't there.
Also sorry - but you totally confuse me on your stance on paying more taxes. First you say you wouldn't mind - and then you give us a list of
conditions..if...if...if... What's your stance if none of your conditions are met? (they won't be Pam - you're a newbie in Mexico).
Oil reserves and receivable from Pemex contracts with US refineries have been used as collateral for bonds and loans (so much for autonomy). So in
effect foreigners already have claim to a piece of Mexico's patrimony. They helped bail out of it's Peso meltdown in1995/6. I'll give you some links
if you wish - or search it yourself.
What do you not understand about my xenophobia remark? I completely agree with the article that 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.
Anyway - thanks for taking a chunk out of my lunch.
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