Mexico’s Oil Future

Mexico is the third-largest source of oil for the US. The heart of Mexican oil production is the huge Cantarell field, which is in serious decline.  Even after thirty years of production, it supplies roughly two thirds of Mexican oil exports.

The state petroleum company of Mexico, Pemex, is is dire straights. The company provides 40 percent of the budget of the government. Even with record high oil prices, that 60 percent does not leave enough for desperately needed exploration and maintenance.

“The capacity of Mexico to produce petroleum is declining because our proven reserves are running out,” Calderon said last week in Los Angeles, where he ended a five-day tour of the U.S. “They probably will last nine more years.”

Echoing the view of many industry experts, Calderon argues that a structure allowing private Mexican and foreign investment in Pemex’s development of new reserves is urgent. Most of that new oil lies beneath the deep waters of the northern Gulf.

“The good news for Mexico is that we have petroleum and lots of it,” Calderon said. “The problem is that this treasure is buried beneath the ocean. To reach that oil we need to strengthen Pemex.” (link)

It remains to be seen what will happen.  However, there is fierce resistance to opening up to foreign partnership, as the oil is seen as a national resource.  Apparently,  in a couple of years, an agreement not to drill near the international boundary in the Gulf of Mexico will expire.  Oil has been found in the area.  If there are large reserves there, and US companies find most of it, what will this do for the future of Pemex, and by extension, the Mexican government’s main source of funds?