Looming Energy Crisis In Mexico Stirs Debate As production of crude oil falls in Mexico, debate continues on the issue of privatization of the oil monopoly. Without radical reform, Mexico could run out of oil in less than a decade.
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Looming Energy Crisis In Mexico Stirs Debate

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Looming Energy Crisis In Mexico Stirs Debate

Looming Energy Crisis In Mexico Stirs Debate

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Mexico's state-run oil company has been the source of wealth and also now controversy. Mexico's president wants to open the struggling oil monopoly to foreign investors. Critics on the left have denounced the plan as a privatization of the nation's oil wealth, but the president and top officials within the state company, Pemex, say without radical changes Mexico will run out of oil in less than a decade.

NPR's Jason Beaubien reports from Mexico City.

JASON BEAUBIEN: Just about everyone who's weighed in on the Pemex debate agrees that the Mexican oil monopoly is in crisis. Production of crude is falling dramatically. In July, output at Mexico's largest oil field, Cantarell, was off 37 percent from the year before.

Pemex exploration efforts have fallen flat. By the company's estimates, what was once the world's sixth-largest oil producer could exhaust its proven reserves in the next 10 years. Some other analysts say they could be gone in less than seven.

Pemex's refining and pipeline infrastructure is also in trouble. Despite being a major oil exporter, Mexico imports 40 percent of its gasoline because Pemex doesn't have the capacity to refine its own crude. And oil revenues fund almost half of Mexico's federal budget, so the crisis at Pemex has become a crisis for the nation.

Debate over President Felipe Calderon's reform plan has dragged on for months. Calderon's proposal, among other things, would allow foreign companies to drill in deep water in the Gulf of Mexico, something Pemex doesn't currently have the technology to do on its own.

Professor ALBERTO MONTOYA MARTIN DEL CAMPO (Iberoamericana University): (Speaking foreign language)

GARRELS: Alberto Montoya Martin del Campo, a professor of political and social science at the Iberoamericana University, testified recently before the Energy Committee of the Mexican Senate. Montoya said Pemex is not the problem. He said the problem is that for the last two decades various administrations have used the state-run company as a cash cow and failed to reinvest in new infrastructure and exploration, and he says the billions of dollars generated by Pemex has been a stagnating rather than a stimulating force on Mexico's economy.

Prof. DEL CAMPO: (Speaking foreign language)

GARRELS: All of this has blocked the country from becoming an economic power, he says. He went on to argue that the reforms proposed by Calderon are too narrow and won't significantly change the oil company. Others, however, say Calderon's plan goes too far and allows too much foreign involvement in Mexican oil.

Senator GRACO RAMIREZ (Party of Democratic Revolution, Mexico): (Speaking foreign language)

GARRELS: We believe the proposal of Calderon is a failure, says Senator Graco Ramirez of the left-wing PRD, or the Party of the Democratic Revolution. It will not advance and it will not be approved because the PRD and the PRI are not going to support the privatization of refineries and pipelines. The PRI is the former ruling party. Both the PRI and the PRD have now put forward their own rival reform plans.

The Pemex debate has in many ways been an act of political theater. Odon de Buen, an energy analyst in Mexico City, says this has been useful in that it's made politicians and ordinary people think about Mexico's looming energy crisis, but he says the debate can't go on forever.

Mr. ODON DE BUEN (Energy Analyst, Mexico City): Every month, every year that we don't agree, postpones the solution. So we may be running out of oil before we get to what this reform is promising.

GARRELS: And de Buen says the debate about Pemex has focused far too much on fossil fuels. De Buen and some others are arguing that this is an opportunity for Mexico to look at its energy needs for the coming decades, and they want more focus to be placed on developing alternative energy sources.

Jason Beaubien, NPR News, Mexico City.

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