Nov 21, 2009
Energy
- Article 27 of the Mexican Constitution gave the nation direct dominion and sovereignty over the natural resources of Mexico, reflecting a Mexican desire to preclude outside foreign influence in what is seen as state property. In 1938, during the administration of President Lázaro Cárdenas, foreign oil properties were expropriated and nationalized. These historical events remain emotionally charged subjects which are immensely popular in Mexico, because they are seen as a counter-blow to the more familiar dependency syndrome.
- Currently this has stunted Mexico’s national oil company, Pemex, from drilling in the deep waters of the Gulf of Mexico, where Pemex has little similar experience and lacks the finances to undertake take these expensive risks. Mexico has tried to entice foreign oil companies, to drill in the deep waters of the Gulf under general service contracts but has attracted little interest. These companies generally do not wish to act as service providers, but rather as equity risk takers able to book the oil as they seek financing and share in the benefits of success. Mexico is unable to do this because the Mexican constitution prohibits private equity in Mexico’s oil resources.
- The company has been largely unsuccessful in recent years in finding enough new oil to replace the oil that is produced—and even that is declining rapidly as old wells become less productive— and its proven reserves are now down to an estimated nine years.
- Pemex is now insufficiently able to finance its own exploration and production and operates at a bookkeeping loss, because of the large government take. While the government collects about 11 percent of GDP in taxes, its expenditures are closer to 19 percent of GDP. Most of the remainder is taken from the gross revenue of Pemex.
