Barone is always a worthwhile read.Edging to the Right
By Michael Barone
The apparent victory of Felipe Calderon, the candidate of incumbent President Vicente Fox's PAN party in Mexico, is the latest in a series of defeats for the hard left in Latin American elections. It also means there will continue to be a trio of center-right North American governments. Leftist Evo Morales, with help from Venezuela's Hugo Chavez, did win in Bolivia, but Chavez's candidate lost in Peru, center-right incumbent Alvaro Uribe won re-election by a huge margin in Colombia, and Andres Manuel Lopez Obrador, former Mexico City mayor and candidate of the leftist PRD party, lost after leading in the polls for most of the past two years. The cry has been going up that the "Washington consensus" favoring free trade and free markets is dead in the region. But that consensus is not threatened by responsible center-left presidents like Lula da Silva of Brazil and Michelle Bachelet of Chile. And the defeat of Lopez Obrador, who called for renegotiation of the North American Free Trade Agreement, shows it's still alive in Mexico.
That doesn't mean Calderon can solve all of Mexico's problems. His PAN will be the largest party in the Congreso but without a majority in either house. For one thing, oil production will most likely continue to lag if PRI, the ruling party from 1929 to 2000, keeps joining PRD in resisting any change in the monopoly status of government-owned Pemex. Government corruption and urban crime will probably persist. But Mexico's economy, in tandem with ours thanks to NAFTA, is now growing robustly, inflation is low, and there has been no peso devaluation since 1994. And in the Congreso, legislators may be developing the knack of compromise and negotiation that was never necessary when they were just rubber stamps for PRI presidents.
Barone hits on a number of the points that I have made before - so obviously I think he's extremely well-informed. I've made the point about Pemex before, and it is one that has significant ramifications for the US, since Mexico is our second-largest supplier of imported oil (after Canada). Essentially, the Mexican government has used Pemex as a cash cow, and has shortchanged investment in new production for decades. The Mexican government doesn't have the resources to invest in Pemex to maintain or expand production, yet it's always been agreed that the Mexican constitution prevents private investment in the energy sector. Mexico is arriving at the point where something will have to give: Pemex will collapse, or Mexico will allow private investment in the energy sector. Private investment has a better chance under Calderon than AMLO.
Interestingly, Mexico's Reforma (in Spanish, subscription required) chooses today to print a story about the challenge that Pemex faces on its two large new oil fields: much higher costs and the difficulty in securing needed hardware:
Triplica Pemex costos
Pemex le apuesta a Chicontepec y Coatzacoalcos para aumentar la producción de crudo, para lo cual deberá realizar cuantiosas inversiones
Ciudad de México (10 julio 2006).- La era del petróleo fácil para México está llegando a su fin.
Los nuevos yacimientos de los que se extraerá el crudo con el que habrá de reemplazarse la declinante producción de Cantarell, el principal campo petrolero de la última década, requieren gastar hasta tres veces más, de acuerdo con cifras de Pemex.
La paraestatal ha decidido apostarle a dos zonas para aumentar su producción: Chicontepec en Veracruz (terrestre) que posee el 40 por ciento de las reservas totales de hidrocarburos, y Coatzacoalcos Profundo (marina) en las aguas profundas del Golfo de México.
Sin embargo, en Chicontepec, documentos de Pemex indican que se requieren inversiones cercanas a los 40 mil millones de dólares para perforar 20 mil pozos y aprovechar todo su potencial.
Para explotar las aguas profundas del Golfo, serán necesarios miles de millones de dólares en una cifra que aún no se puede precisar.
...Cifras de Pemex, solicitadas por Grupo Reforma a través del Instituto Federal de Acceso a la Información Pública (IFAI), revelan que extraer un barril en Chicontepec cuesta 11.68 dólares en promedio, casi tres veces más que Cantarell.
En Coatzacoalcos Profundo la historia no es muy diferente.
El costo por la renta de equipo especializado para explorar la veta petrolera y de gas ubicada en esa zona se ha triplicado en un año por los altos precios del crudo y la demanda de otras compañías.
Desde hace dos años, Pemex contrató equipos de robótica para perforar pozos en tirantes de agua mayores a los mil metros de profundidad.
El contrato para explorar el pozo Noxal 1 se fijó a un precio entre 50 mil y 70 mil dólares por día a principios de 2005, pero el alza en los petroprecios cambió la historia: hoy se rentan entre 150 mil y 300 mil dólares diarios.
Para concluir los trabajos de perforación, Pemex requiere de otra plataforma, pero ahora tendrá que esperar cerca de tres años para rentarla y tener acceso a nuevos pozos, explicó Carlos Morales Gil, director de Pemex Exploración y Producción.
Por ello, la paraestatal no sólo deberá esperar a que bajen los petroprecios para acceder a una mejor cotización de renta, sino que deberá apuntarse en una lista de espera cuya disponibilidad podría ser hasta el 2010, señaló Guillermo Domínguez, analista y ex director de Tecnología de Pemex Exploración y Producción.
I won't provide a full translation, but the gist is that Pemex has two tremendous new oil fields (Chicontepec and Coatzacoalcos) to develop, which will replace the field that has been its primary source for the last decade (Cantarell). However, the per-barrel production cost of the new fields ($11.68 dollars per barrel) will be triple the cost at Cantarell, and will require the investment of tens of billions of dollars in coming years. Plus, the cost of equipment rental for the deep-water fields of Coatzacoalcos (in the Gulf of Mexico) has tripled, and the waiting list for the availability of some needed equipment lasts until 2010.
There's a lot more information here (free, and in English!). Rigzone notes that in recent years, Pemex has paid more in taxes than it has earned - dramatically reinforcing the point I made about lack of reinvestment of profits.
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