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 Editorials | Issues | April 2008 
Proposals Unlikely to Improve Mexico's Oil Output
 Jim Landers - Dallas Morning News
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Washington – Mexico's oil production continues to decline because Mexico's oil company can't do its job.
Petróleos Mexicanos doesn't have the tools, talent or money to go after the billions of barrels of oil that lie in its deepwater zone in the Gulf of Mexico, and Mexico's constitution bars any other oil company from doing the work.
In an already tight world oil market where prices are pressing $120 a barrel, any decline in oil supplies matters. It matters to the U.S., which buys 8 percent of its oil from Mexico and will have to look to other, shakier suppliers to take Mexico's place. It certainly matters to Mexico, where more than a third of the federal budget comes from oil revenue.
President Felipe Calderón sent the Mexican Congress five bills this month to start fixing what ails Petróleos Mexicanos, better known as Pemex.
Andres Manuel López Obrador, the man Mr. Calderón narrowly defeated for president two years ago, promptly shut Congress down to protest what he called a giveaway of Mexico's sovereignty.
Mr. Calderón's reforms stop well short of opening the door for other energy companies to produce Mexico's oil. The terms that Pemex could offer under the reforms are for service contracts with bonuses rather than partnerships and are not attracting any interest.
But Mr. López Obrador's warning cry of nationalism has resurrected his stature as the leading opposition figure in the country.
Houston consultant George Baker, who analyzes Mexican energy at his Web site energia.com, sees political expediency at work.
"Had Calderón proposed to change the name of Pemex to 'Pemex Mexico Rah-Rah-Rah' or to anything of similar nonconsequence, it would have propelled López Obrador into the streets in the same fashion," Mr. Baker said.
Mr. López Obrador's Party of the Democratic Revolution, or PRD, ended its takeover of Congress on Saturday after winning assurances that Mr. Calderón's energy reform package would be debated for 71 days, from May 13 to July 22.
No one doubts the decline in Mexico's oil production, which fell 5.3 percent in 2007 to 3.1 million barrels a day. It fell 7.8 percent to 2.9 million barrels a day in the first quarter of 2008.
Mr. Calderón wants to strengthen Pemex by allowing the company to enter contracts without the government's rigid lowest-bid rules.
In addition, Pemex could try to lure companies to work service contracts in exploration and development, but joint ventures that allow companies to count any of Mexico's reserves on their balance sheets would not be allowed.
Pemex has argued that the reforms should instead allow the oil company to keep more of its revenue rather than handing the lion's share over to the Mexican treasury. With more cash, Pemex could buy technology and hire more engineers, the company says.
This is the thrust of the PRD's argument as well.
Mr. Baker says that won't work.
"No matter how you gold-plate everything in Pemex, so long as there is only one company on Mexico's side of the Gulf of Mexico, you will never achieve what they need to accomplish," he says.
Under Mr. Calderón's proposals, Pemex will come under greater scrutiny. The president would choose four additional directors from outside the company. The performance of Pemex's director general, along with the rest of the company's directors, would be subject to government evaluation.
Mr. Calderón's lieutenants know these reforms aren't enough but hope they will set the stage for bigger changes. The PRD, meanwhile, hopes to protect the power of Pemex – and advance its own political interests – in the hope that a bigger state-owned company will get good at producing oil.
If Pemex can't sort out its problems soon, Mexico may see some of its oil creep across the international boundary into the well bores of U.S. oil companies.
U.S. leases in the gulf aren't at the boundary yet, but that could change as soon as August, when the next lease sale takes place. U.S. policy is to practice the "rule of capture" – whoever gets to a field first is entitled to drain it.
jlanders(at)dallasnews.com |
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