August 11, 2013 in Business

Mexico faces oil crisis

Associated Press
 

MEXICO CITY — The cornerstone of Mexico’s economy, its state-owned Pemex oil monopoly, is crumbling.

An unnoticed gas leak at its flagship Mexico City headquarters caused an explosion that collapsed three floors and killed 37 people this year. Thieves by the thousands tap into the company’s pipelines, resulting in frequent fiery blasts and damaging leaks. Pemex has barely broken ground on its biggest investment project, a $9 billion refinery, four years after it was announced.

Worst of all, Mexico’s oil fields are drying up and Pemex lacks the equipment to explore for new reserves in deep water or to extract shale gas. Production has plunged about 25 percent over the last decade, and a country that was once a significant oil power could become a net energy importer in a few years unless new production is brought online.

Within days, President Enrique Pena Nieto is expected to propose the most sweeping changes in decades to rescue Petroleos Mexicanos. But the initiative is under ferocious attack even before it’s been made, largely because he is expected to propose loosening the government’s near-total monopoly on oil exploration and production.

The most controversial part of Pena’s plan will likely seek to encourage private investment and technology, possibly including risk-sharing, production-sharing or concessionary agreements, which are banned by Mexico’s constitution.

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