Mexico May Finally Get a Modern Oil Industry

Bloomberg Businessweek, 7/12/12

Pemex’s total production declined to 2.5 million barrels a day last year, from 3.4 million in 2004, and in the last quarter oil exports to the U.S. hit the lowest quarterly average since 1993. Pemex estimates it has 27 billion barrels of untapped oil in the deepwater Gulf, but it is relying on limited in-house experience and third-party technology to exploit it. So far it has failed to find any commercially viable crude after 20 attempts. Pemex lost $7.4 billion last year on $126 billion in revenue, its fifth consecutive annual loss.

Incoming President Enrique Peña Nieto has declared that overhauling Pemex will be his “signature issue.” His Institutional Revolutionary Party-led alliance wants outside oil companies to invest in Pemex’s exploration and development activities. “He knows it would be an extraordinary step forward, as extraordinary as was Nafta,” says historian Enrique Krauze, referring to the North American Free Trade Agreement, which was implemented in 1994. Nafta spurred a sixfold increase in Mexican sales to the U.S.

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