Pemex: Mexico’s Antiquated Oil Monopoly

Mexico holds the fifth largest oil reserves on the planet, but lately has seen slippage in oil production. That is not good news for the United States, Mexico’s closest neighbor, and also the largest importer of their oil surplus. Mexico is the second largest supplier of oil to the U.S. after Canada, and while the United States’ oil needs continue to rise, Pemex, Mexico’s state owned oil monopoly continues to falter in its management of oil supplies; they are even having trouble keeping up with rising oil demands within their own borders as well.

Pemex, Petroleos Mexicanos, was set up in 1938 to help regulate and control Mexico’s burgeoning oil exploration and export industry. In the many years since its inception, Pemex has risen to its place as the fifth largest oil company in the word, with yearly revenues topping $50 billion. In fact, sales as recently as 2006 reached as high as $97 billion. Instead of using much of these profits to reinvest in the company, its technologies and research, over half of that $97 billion, $79 billion to be exact, went straight to the national government of Mexico. It is no wonder Pemex is having trouble keeping up in the oil industry; it is nearly 40 percent responsible for the federal budget of its nation. Similarly to Gazprom, Russia’s state owned natural gas monopoly, Pemex is not allowed to accept any sort of foreign input financially or otherwise. Because there is no need to improve in order to keep up with oil competitors within Mexico (there are none), Pemex has not reinvested in developing technologies and has fallen behind as new technological developments have been introduced in oil exploration around the world. The United States has offered its help time and again, with much needed private capital and oil exploration expertise from American companies like Triple Diamond Energy Corp. President Bush urged in early 2007 that President Felipe Calderon should consider accepting help from outside entities. This suggestion was summarily dismissed and egos were bruised as Mr. Bush’s effort was considered an affront to Mexican independence and ingenuity.

Mexican government officials have repeatedly said “No, thank you” to all outside intervention while some of the world’s largest oil supplies continue to be squandered due to inefficient management. The nationalist attitudes of the Mexican government as it pertains to their oil reserves has and will continue to be a hindrance for efforts to reach their oil industry’s fullest potential.

About the Author: Robert Jent is the president of Triple Diamond Energy Corp. Triple Diamond Energy specializes in acquiring the highest quality prime oil and gas properties. For more information, visit http://www.triplediamondenergycorp.blogspot.com.