The KU-S oil production platform off the coast of Ciudad del Carmen, with its 10,000-ton tangle of yellow and red tanks and pipes, would seem the natural product of three years of soaring energy prices. The newly installed platform certainly is the face that Mexico’s state oil monopoly, Pemex, would like to show off.
But Pemex is in trouble. Its production and proven reserves are falling, and it has no money to reverse the slide. Mexico is the second-largest supplier of imported oil to the United States, after Canada, but its total exports are slipping. If the company continues on its current course, Mexico may one day have trouble just keeping up with rising demand at home.
The evidence of its predicament is clear not far from the KU-S platform. On the horizon, some 50 to 60 miles into the southern Gulf of Mexico, aging rigs billow flames and black smoke over the waters as they burn off the natural gas they are unable to process.
The major reason that Pemex’s prospects are so poor, energy experts agree, is government interference. The Mexican government, which expropriated the oil industry in 1938, depends on Pemex to finance its budget. Last year, sales at Pemex (its full name is Petróleos Mexicanos) reached $97 billion. But $79 billion of that went to the government, Pemex’s chief, Jesús Reyes Heróles, said last month. That accounted for almost 40 percent of the federal budget.
Government interference is only part of the story. Pemex has been hamstrung by years of short-sighted management aimed at extracting the most cash for the government treasury — Mexico’s president and Congress must approve the company’s budget, its output, investments and exports each year. By law, Pemex is closed to any outside investment, shutting it off from private capital and expertise.
In addition, Pemex has not reinvested enough for decades and, because it faces no competition at home, has lagged behind many of the industry’s technical advances. Its labor union has locked it into rigid work rules and siphoned off hundreds of millions of dollars for unexplained benefits. And that does not even touch on the widespread corruption and waste.
“Inside Pemex, I think they have creative solutions,” said Amy Myers Jaffe, an energy analyst at the James A. Baker III Institute at Rice University. “They know what they want to do. How do you get that solved within the politics of Mexico?”
President Bush is scheduled to visit Mexico Monday and Tuesday, and oil is likely to be on the agenda. In comments to Latin American reporters this week, Mr. Bush mused that Mexico’s president, Felipe Calderón, should consider private capital to expand Pemex production. The comments ruffled Mexican sensitivities over national sovereignty of its oil resources.
Over the last five years, Pemex has spent about $50 billion, mostly borrowed, to pump more and more oil and gas. “It should have spent much more on exploration so that it wouldn’t be in the situation it is in today,” said Adrian Lajous, who led Pemex in the 1990s. “It was a drive to generate short-term revenue for the government.”
For all that spending, said George Baker, a Houston analyst who publishes a newsletter covering the Mexican oil industry, Pemex did not get much. “In the end, the results were very weak. You didn’t build a new refinery. You didn’t find more oil.”
Mexico, the fifth-largest oil producer in the world in 2005, is sitting on tens of billions of barrels of untapped oil reserves. But much of that is in the deep waters of the gulf, not far from where American companies have announced discoveries. Pemex has neither the money nor the expertise to get at the oil.
Its biggest field, Cantarell, in the shallow waters of the gulf, is one of the world’s richest. That field used to account for about 60 percent of Mexico’s oil production, but has gone into a sharp decline. Production at Cantarell fell 13.5 percent last year, and it will fall another 15 percent this year, Mr. Reyes Heróles said recently.
The decline at Cantarell pushed Pemex’s output down from its peak of 3.4 million barrels a day in 2004 to 3.26 million last year.
At the same time, Pemex’s proven reserves of crude oil have fallen to 11.8 billion barrels at the end of 2005 from 15.1 billion barrels at the end of 2002.
source news : nytimes.com
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