Woes mount for Mexico’s state oil titan

Output is declining rapidly, but national pride and politics may block possible fixes.

MEXICO CITY — With crude oil topping $95 a barrel, these should be heady days for Petroleos Mexicanos. Mexico’s state-owned oil monopoly, known as Pemex, generated record revenue of about $100 billion in 2007.

But at a ceremony marking the 69th anniversary of the nationalization of Mexico’s oil industry last year, Pemex General Director Jesus Reyes Heroles wasn’t in a celebratory mood.

“The situation of Petroleos Mexicanos is critical and merits immediate attention,” the company’s top executive said.

Indeed, 2007 tapped a gusher of concerns for the world’s sixth-largest oil producer.

Pemex managed to lose $1.2 billion in the third quarter. Output is declining, as are exports and proven reserves. Mexican Energy Secretary Georgina Kessel said last month that Mexico’s crude production, which averaged about 3.1 million barrels a day in 2007, could fall as much as one-third in less than a decade if the nation didn’t move fast to reverse the slide.

The consequences could be painful, not only for Mexico, which relies on oil revenue to fund about 40% of its federal spending, but also for world markets, which are feeling the pinch of tight supplies. Mexico is the No. 2 provider of petroleum to the United States, behind Canada.

LA Times