Thread: Our Mexican crisis

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Our Mexican crisis

Some key oil fields are near collapse

August 6, 2006

As if Mexico's political instability wasn't enough to worry about, experts warn that oil production in the nation has begun to nose-dive. Both are very big problems for San Diego.

Pemex, the Mexican oil monopoly, is owned by the federal government, which gets a third of its budget from petroleum sales. The nation's economy is heavily dependent on steady production. So are U.S. drivers; last year Mexico supplied 8 percent of our 20.7 million barrels of daily consumption.

Key to Mexico's fortunes is Cantarell, the world's second-largest oil complex, in the shallow waters of the southern state of Campeche. Production at Cantarell is down 15 percent from its 2004 peak. Officially, Pemex says recent investments in new technologies may reverse the decline, but experts say oil fields generally fade fast. Indeed, the falloff neatly matches data contained in an internal Pemex document leaked to Mexican newspapers that projected a worst-case scenario of output collapsing 75 percent by 2008. This would nearly wipe out Mexico's exports of roughly 2 million barrels a day.

These things happen in the boom-and-bust oil business. Producers know this, so the smart ones constantly invest to find new “elephant” discoveries such as Cantarell or Alaska's North Slope. Here Mexico has failed miserably (and so has the United States, but that's another story).

Last year, the Mexican government diverted $54 billion from Pemex for domestic programs. Much was wasted on corruption. Meanwhile, Mexico's constitution prohibits Pemex from taking on foreign partners. Such deals would spread exploration risk and, crucially, provide deep-water drilling expertise to reach vast new reserves in the Gulf of Mexico.

This urgent need for foreign investment makes the cliffhanger in Mexico City even more important. After a close race, the nation's respected election watchdog declared a winner: Felipe Calderón, a Harvard-educated moderate who served briefly as energy minister.

Demanding a recount is Andrés Manuel López Obrador, a leftist who earned his reputation organizing mass protests and blockades to make sure Pemex continued subsidizing the poor. True to form, López Obrador has mobilized hundreds of thousands of supporters to blockade the nation's capital.

During the campaign, Calderón promised to let private companies enter the oil business. His rival vowed the opposite.

Mexico stands at the edge of economic and political earthquakes that surely would cause a new immigration tsunami. In San Diego, high gas prices would be the least of our worries.

I just heard on the news that the Alaskan Pipeline was shut down due to rust. This is a bunch of crap. You know they inspect that line on a regular basis. They send a pig (not a real one, that's what it's called) down it to check it internally. They have known a long time it needed repairs. More gouging at the pump. Thanks Mr. El Busto!

Dixie

Originally Posted by Dixie

I just heard on the news that the Alaskan Pipeline was shut down due to rust. This is a bunch of crap. You know they inspect that line on a regular basis. They send a pig (not a real one, that's what it's called) down it to check it internally. They have known a long time it needed repairs. More gouging at the pump. Thanks Mr. El Busto!

Dixie

Exactly Dixie, this is another scam to raise oil prices, the oil can still be shiped via tanker so the prices really shouldn't increase persay, another BS story!