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The question of Mexico’s viability as a key supplier of oil to the the U.S. is of great interest in terms of the price of oil, the strategic security of U.S. oil supplies, and the viability of Mexico as a self-governing state. The latter point is emphasized by the respected Mexico observer George Baker as quoted in the article below. Baker is confident that Mexico will continue to be a substantial oil exporter because, as he notes, Mexico’s financial viability - and thus its domestic tranquility, to the extent it has much left given that it is fighting both drug-related and political violence - depends on it.
But Mexico’s need for sufficient oil does not guarantee they will get it. If Mexico is only 4 years away from becoming an oil importer as this piece suggests (I think it is now more like 6 years in view of the global recession), that is not a lot of time to explore, find, and exploit enough oil to make a big difference.
Mexico remaining an oil exporter is clearly key to U.S. national security and U.S. law and order in addition to the U.S. ability to obtain enough oil. Remember that China is out gobbling up all the oil supplies it can obtain from any country that will contract with it. All those deals diminish the amount of oil available on the “global free market” for the U.S. to import if it can no longer depend on Mexico for 1.4 mb/d - about 6% of all U.S. oil use. It is unlikely Canada could gear up in time to supply that additional amount, especially with the oil price around $60 at present.
I’ve suggested that unless Mexico can pull a rabbit out of the hat on new oil finds, it could well become a failed state, a possibility pregnant with dire consequences for the U.S. Mexico’s new law lets PEMEX reduce its tax payments to finance oil exploration. Will Mexico’s Congress react to the reduced oil taxes by increasing other sources of income for their federal budge, 40% of which is currently coming from PEMEX? If not, Mexico could be in deep trouble even before oil production actually declines to the point of eliminating exports.
Here’s the report:
Ex-official says Mexico may have to halt oil exports
By JENALIA MORENO and DAVID IVANOVICH Copyright 2008 Houston Chronicle
Nov. 11, 2008, 11:32PM
The U.S. could soon find itself scrambling to make up 11 percent in lost oil imports.
Mexico, the third-largest foreign supplier of U.S. oil, faces the real possibility of having to halt oil exports in four years, a former top Mexican energy official was reported as saying Tuesday in Mexico’s El Universal newspaper.
Rogelio Gasca Neri, the former head of Mexico’s federal electricity commission, blamed the inability of the nation’s oil industry to produce enough oil to meet rising demand.
His prediction comes on the heels of the Mexican Congress last month overturning decades of resistance to allowing private and foreign participation in Mexico’s aging energy infrastructure.
Neri’s comment, made in Mexico at a business forum on reforms in the nation’s energy industry, also joins that of a growing number of energy experts who see an end to Mexican oil exports coming soon.
John Padilla, director of finance and advisory for IPD Latin America, argues that with Mexico’s oil production falling, and its demand for gasoline and other petroleum products on the rise, Mexico could cease to be an oil exporter around 2010 or 2011.
“Mexico, whether it’s 2011, 2012 or 2015, the country is poised to become a net importer,” said Amy Jaffe, associate director of the Rice University energy program. “It’s a tragedy really both for the country and in general. The tragedy is it’s avoidable. It was avoidable and it could be avoidable if they would change their policies.”
But “the grim reality is Pemex’s production is falling very dramatically,” Padilla said this week of the state-owned energy company at a conference hosted by the Center for Strategic and International Studies in Washington, D.C.
For the U.S., the end of Mexican oil exports means companies will have to find alternative suppliers.
“Mexico has been a reliable and stable supplier,” Jaffe said. “The only thing you have to worry about is a hurricane.”
It takes 50 days for oil to arrive in the U.S. from Saudi Arabia, compared to five days from Mexico, she said.
Output falling
The Paris-based International Energy Agency, in a report issued last month, estimated Mexico’s crude output would average 2.8 million barrels a day this year and then drop to about 2.6 million barrels a day in 2009.
Mexico has long relied on production from the country’s largest oil field, the offshore Cantarell field in the Bay of Campeche. But Cantarell’s output has been dropping precipitously.
Production at Cantarell peaked in 2004 at 2.14 million barrels a day, the U.S. Energy Information Administration reported.
During the first nine months of this year, Cantarell’s production averaged less than 1.1 million barrels a day, and during September output dipped below 1 million barrels a day, Padilla said.
With Cantarell’s output sliding, Mexican energy officials have pinned their hopes on the Chicontepec field, which holds 38 percent of the country’s total reserves.
Last year, Chicontepec produced 31,000 barrels a day, Padilla noted. The target for that field is 600,000 barrels a day.
But to achieve that goal, Padilla said, Pemex would have to drill more than 15,000 wells, and the state oil company to date has not come close to that.
More consumers
With a population expected to top 110 million by 2010, Mexico’s thirst for gasoline and other refined products is on the rise, although that growth softened as the credit crisis began gripping the world’s economies.
Mexico currently has 17.2 million cars on the road, up from only 7.3 million in 1995, Padilla said.
Mexico imports about 40 percent of the gasoline it uses, according to the International Energy Agency. And Pemex has estimated that could grow to 50 percent next year.
Mexico is the United States’ third-largest foreign oil supplier after Canada and Saudi Arabia, providing 1.4 million barrels of petroleum products a day, or about 11 percent of U.S. oil imports, according to the U.S. Energy Information Administration.
“The big oil companies in Houston all import oil from Mexico,” said George Baker, president of Houston-based Baker & Associates, Energy Consultants.
However, he casts doubt on the end of the oil exports.
“Mexico’s credit rating is linked to Mexico being an oil exporter. That’s the very last thing they are going to give up, is being an oil exporter,” Baker said. “Whatever they have to do to make that not happen, they are going to do it.”
jenalia.moreno david.ivanovich
But Mexico’s need for sufficient oil does not guarantee they will get it. If Mexico is only 4 years away from becoming an oil importer as this piece suggests (I think it is now more like 6 years in view of the global recession), that is not a lot of time to explore, find, and exploit enough oil to make a big difference.
Mexico remaining an oil exporter is clearly key to U.S. national security and U.S. law and order in addition to the U.S. ability to obtain enough oil. Remember that China is out gobbling up all the oil supplies it can obtain from any country that will contract with it. All those deals diminish the amount of oil available on the “global free market” for the U.S. to import if it can no longer depend on Mexico for 1.4 mb/d - about 6% of all U.S. oil use. It is unlikely Canada could gear up in time to supply that additional amount, especially with the oil price around $60 at present.
I’ve suggested that unless Mexico can pull a rabbit out of the hat on new oil finds, it could well become a failed state, a possibility pregnant with dire consequences for the U.S. Mexico’s new law lets PEMEX reduce its tax payments to finance oil exploration. Will Mexico’s Congress react to the reduced oil taxes by increasing other sources of income for their federal budge, 40% of which is currently coming from PEMEX? If not, Mexico could be in deep trouble even before oil production actually declines to the point of eliminating exports.
Here’s the report:
Ex-official says Mexico may have to halt oil exports
By JENALIA MORENO and DAVID IVANOVICH Copyright 2008 Houston Chronicle
Nov. 11, 2008, 11:32PM
The U.S. could soon find itself scrambling to make up 11 percent in lost oil imports.
Mexico, the third-largest foreign supplier of U.S. oil, faces the real possibility of having to halt oil exports in four years, a former top Mexican energy official was reported as saying Tuesday in Mexico’s El Universal newspaper.
Rogelio Gasca Neri, the former head of Mexico’s federal electricity commission, blamed the inability of the nation’s oil industry to produce enough oil to meet rising demand.
His prediction comes on the heels of the Mexican Congress last month overturning decades of resistance to allowing private and foreign participation in Mexico’s aging energy infrastructure.
Neri’s comment, made in Mexico at a business forum on reforms in the nation’s energy industry, also joins that of a growing number of energy experts who see an end to Mexican oil exports coming soon.
John Padilla, director of finance and advisory for IPD Latin America, argues that with Mexico’s oil production falling, and its demand for gasoline and other petroleum products on the rise, Mexico could cease to be an oil exporter around 2010 or 2011.
“Mexico, whether it’s 2011, 2012 or 2015, the country is poised to become a net importer,” said Amy Jaffe, associate director of the Rice University energy program. “It’s a tragedy really both for the country and in general. The tragedy is it’s avoidable. It was avoidable and it could be avoidable if they would change their policies.”
But “the grim reality is Pemex’s production is falling very dramatically,” Padilla said this week of the state-owned energy company at a conference hosted by the Center for Strategic and International Studies in Washington, D.C.
For the U.S., the end of Mexican oil exports means companies will have to find alternative suppliers.
“Mexico has been a reliable and stable supplier,” Jaffe said. “The only thing you have to worry about is a hurricane.”
It takes 50 days for oil to arrive in the U.S. from Saudi Arabia, compared to five days from Mexico, she said.
Output falling
The Paris-based International Energy Agency, in a report issued last month, estimated Mexico’s crude output would average 2.8 million barrels a day this year and then drop to about 2.6 million barrels a day in 2009.
Mexico has long relied on production from the country’s largest oil field, the offshore Cantarell field in the Bay of Campeche. But Cantarell’s output has been dropping precipitously.
Production at Cantarell peaked in 2004 at 2.14 million barrels a day, the U.S. Energy Information Administration reported.
During the first nine months of this year, Cantarell’s production averaged less than 1.1 million barrels a day, and during September output dipped below 1 million barrels a day, Padilla said.
With Cantarell’s output sliding, Mexican energy officials have pinned their hopes on the Chicontepec field, which holds 38 percent of the country’s total reserves.
Last year, Chicontepec produced 31,000 barrels a day, Padilla noted. The target for that field is 600,000 barrels a day.
But to achieve that goal, Padilla said, Pemex would have to drill more than 15,000 wells, and the state oil company to date has not come close to that.
More consumers
With a population expected to top 110 million by 2010, Mexico’s thirst for gasoline and other refined products is on the rise, although that growth softened as the credit crisis began gripping the world’s economies.
Mexico currently has 17.2 million cars on the road, up from only 7.3 million in 1995, Padilla said.
Mexico imports about 40 percent of the gasoline it uses, according to the International Energy Agency. And Pemex has estimated that could grow to 50 percent next year.
Mexico is the United States’ third-largest foreign oil supplier after Canada and Saudi Arabia, providing 1.4 million barrels of petroleum products a day, or about 11 percent of U.S. oil imports, according to the U.S. Energy Information Administration.
“The big oil companies in Houston all import oil from Mexico,” said George Baker, president of Houston-based Baker & Associates, Energy Consultants.
However, he casts doubt on the end of the oil exports.
“Mexico’s credit rating is linked to Mexico being an oil exporter. That’s the very last thing they are going to give up, is being an oil exporter,” Baker said. “Whatever they have to do to make that not happen, they are going to do it.”
jenalia.moreno david.ivanovich