Pemex, the state-owned oil company on which the Mexican government relies for a third of its budget, is having a bad year, even by its sluggish standards. It lost $3 billion dollars in the third quarter after the value of its foreign sales dropped nearly 10 percent. Costs rose a whopping 13 percent, underscoring the urgency of President Enrique Peña Nieto’s proposed energy reforms. The FT reports:
Mexico is the world’s 10th biggest crude producer and a major exporter to the United States. It said total production in the quarter averaged 3.6m barrels of oil equivalent per day, while crude production averaged 2.5m boepd.
However, a lack of domestic refining capacity means Mexico has to import nearly half its petrol, and crude production has tumbled from a peak of 3.4m boepd in 2004.
Oil majors, service companies and downstream operators are eagerly eyeing Mexico’s energy reform, which is expected to open up rich exploration prospects and a wealth of infrastructure opportunities, from pipelines to refinery capacity.
This isn’t a resource problem—Mexico has vast reserves of oil and gas—but rather one of mismanagement. Many Mexicans look at Pemex through a lens of nationalistic pride and are resistant to Peña’s calls to partially privatize the country’s oil and gas industry. But the state monopoly is running a red queen’s race, running faster and faster just to stay in place. Admitting private firms with the technological expertise and profit motive to innovate will breathe new life into our southern neighbor. The sooner the Mexican Congress approves the proposed constitutional energy reforms, the sooner Mexico will join the great North American energy boom.