Future Uncertain For Mexico's Oil Company

Even With Oil Prices At Record Levels, The State-run Petroleos Mexicanos Still Loses Money

(AP)  Even with oil prices at record highs, Mexico's state-run oil company is managing to lose money.

But a presidential plan to fix Petroleos Mexicanos by inviting foreign help is riling deep-seated emotions over sovereignty - and causing a paralysis that could doom America's third-largest oil supplier.

Leftist legislators have padlocked the doors of Congress, camping out in the chambers for two weeks in protest. Opponents on the right have attacked them in a national TV ad, invoking images of Adolf Hitler.

Everyone in Mexico - from top leaders to housewives - seems to be swept up in the fervor.

While President Felipe Calderon's administration calls the congressional lockdown an international embarrassment, Fernanda de Jesus Arriola gives up her afternoon soaps and takes her young children to march in Mexico City.

"Calderon is a right-winger who is going to take away our way of life," said Arriola, 35, pulling her 6-year-old daughter's pink Barbie suitcase as her family walked with hundreds of protesters. "It's the same as strangling us because foreign oil companies are exploiters who will enslave us."

Pemex is rapidly running out of the oil that provides more than one-third of Mexico's federal budget. Finding more will require drilling thousands of feet below the surface of the Gulf of Mexico - an exceedingly difficult challenge. Nearly everyone agrees that Pemex lacks the capacity to accomplish this without serious reforms.

The trouble is, Mexico's Constitution bans Pemex from joint ventures with private and foreign companies that have the technology and expertise to find oil in such deep water.

Calderon has backed off the politically explosive idea of changing the Constitution, proposing merely to ease some state restrictions on involvement by private companies.

His plan still retains much more state control than other Latin American government oil monopolies do. Even Cuba is working with outside companies to drill in the Gulf. Brazil's state-owned Petroleo Brasileiro SA has used joint ventures with private oil companies to become an industry leader, recently discovering what could be the world's third-largest oil field off its coast.

But while Mexicans may shop at Walmart and eat at McDonald's, oil is a birthright. The sentiment dates back to March 18, 1938, when President Lazaro Cardenas kicked out the American and European oil companies that refused to pay union wage demands while reaping Mexico's oil profits.

Every year on that day, school children learn about the bold eviction of foreign companies, especially those from the United States, whose annexation of half of Mexico's territory after the 1846 Mexican-American War still hurts.

Women offered their jewelry to help pay to establish the national oil company. Arriola says her grandparents gave their chickens and pigs, and she is hell bent on protecting the company 70 years later.

"We are defending our resources, our patrimony, our dignity," she said.

Arriola snarls traffic and waves banners daily with hundreds of other women, who call themselves the "Adelitas" based on a famous folk song about a female soldier who took up arms in the Mexican Revolution.

They are spurred on by leftist leader Andres Manuel Lopez Obrador, who still refuses to concede the 2006 presidential election he narrowly lost to the conservative Calderon.

Lopez Obrador had receded into the background until Calderon made his Pemex proposal. Now he's back to commanding tens of thousands of protesters in the streets.

But oil expert Justin Dargin says Mexicans' passion for their oil could doom the company - and possibly the country.

The national turmoil is keeping anyone from dealing with declining production, leaky pipelines and a lack of technology to tap into potential reserves in the Gulf, where U.S. companies are busily preparing to drill.

Mexico's Cantarell oil field - discovered in 1976 and one of the world's largest - is drying up. Pemex reported a 2007 net loss of US$1.48 billion (euro98 billion) this week, as its revenues are drained to fund schools, hospitals and public works. Meanwhile, every other major oil company is reinvesting unprecedented profits in oil exploration.

Mexico could lose its standing as a major oil exporter in five years if it does not find more oil, experts say.

"We're talking about the vitality of the Mexican state. That's how important this issue is," said Dargin, a research fellow at Harvard University.

Even what Calderon has on the table may not be enough. Boxed in politically, Calderon proposes merely easing bureaucratic barriers and letting Pemex pay outside contractors "bonuses" - not a percentage cut - for any oil they find. Analysts say that's a good start, but won't likely entice major oil companies to invest billions in deep-water drilling.

The impasse isn't likely to be resolved any time soon.

Congress remains under lockdown with Lopez Obrador's allies demanding a 120-day national debate on the issue. Legislators from the ruling National Action Party and the Institutional Revolutionary Party have proposed 72 days.

In an interview with The Associated Press, Lopez Obrador said Thursday that his protests had already succeeded by preventing what he called "el fast-track" for Calderon's reforms.

"They couldn't do what they wanted, which was to pass it quickly in the pre-dawn hours when no one was watching," said Lopez Obrador, who plans another mass rally on the issue Sunday in Mexico City's central square.

On the other side, a conservative group that supports Calderon's bill ran television spots comparing Lopez Obrador to Hitler. The spots were pulled this week after they outraged some viewers.

For Maria Elena Hernandez, 53, much more is at stake than Mexico's image, which wasn't helped when the congressional takeover forced the cancellation of an official state reception for India's president.

The retired secretary joined demonstrators singing the national anthem to police guarding an office building where legislators have fled in hopes of getting some work done.

"If we let down our guard, the Americans would come in and install their oil workers," said Hernandez, wearing a white baseball cap and T-shirt emblazoned with "Defend Pemex." "Soon they would be telling us that we have to pay rent to live here."

[marywent2]

It''s all a plot to up the price of gas. Don''t let them fool you. Read the FACTS!!!! www.theoandavirus.com

[ov442]

C''mon Exxon, buy them too!!

dont let that chavez scumbag get his hands on it!!

I think we should just Annex mexico and make it the 51-60th US states.

The mexicans have no basis for wanting to be independant from us. Half our country is translated into spanish anyway.
And half their population wants into our country also.
If we Annexed them, we could fix their government and leadership system and they wouldnt have any reason to want to jump the border anymore.

[underdogus]

HAHAHAHAHAHAHAHAHA. It shows that Mexico really is a third world country.
Posted by killtheliars ..THE COLLAPSE OF THE US DOLLAR WILL REDUCE AMERICA TO A LEVEL OF CHAOS,POVERTY,ha,ha,hmm? ten thousand nuclear heads and the most technologically trained army in the world will not be able to stop America''s ECONOMIC DISASTER. Your dreams you hopes, your energies,and aspirations will mingle with the smoke that will rise up from the utter destruction of BABYLON..

[underdogus]

hungry1968 what''s in your wallet? he,he,

[underdogus]

BREAKING NEWS OIL HIT 119$ a barrel (again)

[lochlan-2009]

Wasn''t the president of Mexico elected fraudulantly (just like ours). The whole point of him being in power is to privatize Mexico''s state-run oil company,
Petroleos Mexicanos.

[killtheliars]

HAHAHAHAHAHAHAHAHA. It shows that Mexico really is a third world country.

[quetzal0666]

hungry1968 ...

i dont mean to disagree, but switching to Euros to sell Oil would do a small amount of good in liu of the sliding dollar, as for the Constitution, i dont believe it will be changed, too many bad memories of U.S. Hegemony from last century,
what needs to happen is honest investment at honest terms, theres a reason big oil is being kicked out of Latin America.

[hungry1968]

(AP) Even with oil prices at record highs, Mexico''''s state-run oil company is managing to lose money. NO PROBLEM DUMPED THE DOLLAR AND SWITCH INTO THE EURO!!start selling in EUROS!!! the dollar is losing it''''s status as the WORLD currency..

Posted by underdogus at 08:26 AM : Apr 25, 2008




This is the kind of post that people slap on these boards, without reading the actual articles.

They then feel qualified to spew an opinion, no matter HOW STUPID or out of touch that message might be.



How is switching to the Euro, going to help Mexico change it''s constitution, which will enable it to partner with foreign firms, enabling it to drill for oil that it currently is incapable of doing?

[lily1972]

sillywilly4 how do you figure mexicans stole the land from Indians? you stupid!!

[underdogus]

(AP) Even with oil prices at record highs, Mexico''s state-run oil company is managing to lose money. NO PROBLEM DUMPED THE DOLLAR AND SWITCH INTO THE EURO!!start selling in EUROS!!! the dollar is losing it''s status as the WORLD currency..