Mexico is one of the 10 largest oil producers in the world, the third-largest in the Americas after the United States and Canada, and an important partner in the U.S. energy trade. However, Mexico's oil production has steadily decreased since 2005 as a result of natural production declines from Cantarell and other large offshore fields. The rate of total production decline has abated in past several years.
Oil is a crucial component of Mexico's economy. The oil sector generated 13% of the country's export earnings in 2013, a proportion that has declined over the past decade, according to Mexico's central bank. More significantly, earnings from the oil industry (including taxes and direct payments from PEMEX) accounted for about 32% of total government revenues in 2013. Declines in oil production have a direct impact on the country's economic output and on the government's fiscal health, particularly as refined product consumption and import needs grow.
The Mexican constitution provided that the Mexican nation owns all hydrocarbon resources in the country. In 1938, Mexico nationalized its oil sector, creating Pemex as the sole oil operator in the country. Pemex has four operating subsidiaries: Exploration and Production, Gas and Basic Petrochemicals, Petrochemicals, and Refining. Pemex is the largest company in Mexico and one of the largest oil and natural gas companies in the world: in 2008, Pemex earned pre-tax profits of $43 billion, while it paid $50 billion to the government in the form of taxes and other transfers.
In December 2013, in an effort to address the declines of its domestic oil production, the Mexican government enacted constitutional reforms that ended the 75-year monopoly of Petroleós Mexicanos (PEMEX), the state-owned oil company. On August 07, 2014 Mexican lawmakers approved legislation that will end the government's seven decade monopoly on the country's oil and gas sector. The Senate voted Wednesday on a bill aimed at attracting billions of dollars in new investments from foreign and private oil companies in an effort to boost Mexico's sluggish oil production, which has plunged over the past decade from 3.4 million barrels to 2.5 million barrels a day under state-owned Pemex.
By 2016, the country’s state oil company Pemex, which is one of the federal government’s main sources of revenue, was losing money and is one of the world’s most indebted oil firms. The company's production had dropped for 11 straight years now, while gross income plummeted more than 80 percent in 2015. Due to low international oil prices, the Mexican government recently ordered the company to cut US$5.5 billion from its 2016 budget, amid concerns that the firm’s financial difficulties could lead to the crisis spreading to the wider domestic economy.
The massive cuts took place as Mexican President Enrique Peña Nieto intended to move forward with energy-sector reforms, which would allow foreign participation and financing in the energy sector, with the assumption that these measures will result in a more efficient exploitation of the country’s untapped energy potential. As part of the 2013 energy reforms, which ended Pemex’s decades-long monopoly on oil production, Mexico's energy ministry would award license contracts and secure rights to foreign transnational companies over petroleum exploration and production areas, Under the newly approved Mexican Energy Reform law, the state-owned Pemex would maintain the rights to 83 percent of the country’s existing reserves, while it would only control 21 percent of all prospective reserves.
The United States imported 850,000 barrels per day (bbl/d) of crude oil from Mexico in 2013, the lowest volume since 1993. In the past decade, U.S. crude oil imports from Mexico fell 47%, primarily as a result of declining production of crude oil in Mexico. Despite the decline, Mexico was the third largest source of crude oil imports to the United States in 2013, behind Canada and Saudi Arabia. Conversely, U.S. exports of petroleum products to Mexico have increased 152% in the past decade. In 2013, the United States exported 527,000 bbl/d of petroleum products to Mexico, including motor gasoline (46% of the total), distillate fuel oil (22%), and liquefied petroleum gases (10%).
In 2008, Mexico was the seventh-largest oil producer in the world, and the third-largest in the Western Hemisphere. State-owned Petroleos Mexicanos (Pemex) holds a monopoly on oil production in the country and is one of the largest oil companies in the world. However, oil production in the country has begun to decrease, as production at the giant Cantarell field declines. The oil sector is a crucial component of Mexico's economy: while its relative importance to the general Mexican economy has declined, the oil sector still generates over 15 percent of the country's export earnings. More importantly, the government relies upon earnings from the oil industry (including taxes and direct payments from Pemex) for about 40 percent of total government revenues. Therefore, any decline in production at Pemex has a direct effect upon the country's overall fiscal balance.
According to the Oil and Gas Journal (OGJ), Mexico had 10.5 billion barrels of proven oil reserves as of January 1, 2009. Most reserves consist of heavy crude oil varieties, with a specific gravity of less than 25° API. The largest concentration of reserves occurs offshore in the southern part of the country, especially in the CampecheBasin. There are also sizable reserves in Mexico's onshore basins in the northern parts of the country.
In 2008, Mexico was the seventh-largest producer of oil in the world. The country produced an average of 3.19 million barrels per day (bbl/d) of total oil liquids during 2008, down from 3.50 million bbl/d in 2007. Of Mexico's oil production, about 88 percent was crude oil and condensate, the rest consisting of natural gas liquids (NGL) and refinery gain. Many analysts believe that Mexican oil production has peaked, and that the country's production will continue to decline in the coming years. Based on the March 2009 Short-Term Energy Outlook, EIA forecasts that Mexico will produce 2.9 million bbl/d of oil in 2009 and 2.7 million bbl/d in 2010. The decline is driven mainly by falling production at the super-giant Cantarell field, which has only been partially offset by higher production from other areas.
Most of Mexico's oil production occurs in the Gulf of Campeche, located off the south-eastern coast of the country in the Gulf of Mexico. The two main production centers in the area include Cantarell and Ku-Maloop-Zaap (KMZ), with smaller volumes also coming from the fields off the coast of Tabasco state. In 2008, the Gulf of Campeche accounted for 80 percent of Mexico's total crude oil production. Due to the concentration of Mexico's oil production in the Gulf of Campeche, any tropical storms or hurricanes passing through the area can disrupt oil operations. In 2007, Hurricane Dean forced the evacuation of all offshore platforms and shut-in all production for several days. In 2005, Hurricane Emily also impacted Pemex's operations in the Gulf.
The Cantarell oil field is one of the largest oil fields in the world, but production there has declined dramatically in the past several years. In 2008, Cantarell produced 1.0 million bbl/d of crude oil, down over 30 percent from the 2007 level of 1.47 million bbl/d and down nearly 50 percent from the peak production level of 2.12 million bbl/d in 2004. As production at the field has declined, so has its relative importance to Mexico's oil sector: Cantarell contributed 36 percent of Mexico's total crude oil production in 2008, versus 62 percent in 2004.
The International Energy Outlook (IEO) 2009 forecast that Mexico could become a net oil importer by 2020, with net imports reaching 300,000 bbl/d in 2030. As one of the largest oil exporters to the United States, this had important implications for future U.S. energy supplies. On the other hand, the Annual Energy Outlook (AEO) 2009 Early Release projects that U.S. crude oil imports could fall from 9.78 million in 2008 to 6.95 million bbl/d in 2030. As a result, the long-term fall in U.S. crude oil imports could be larger than the fall in Mexico's crude oil exports. From Mexico's perspective, changing into a net oil importer would have important repercussions upon the economy, due to the dependence of the federal government on Pemex for a sizable share of its revenues.
In addition to crude oil, Mexico had 434 billion cubic meters of proven natural gas reserves in 2006. Since the late 1980s, Mexican demand for natural gas has outpaced production. As a result, Mexico imported 9.7 billion cubic meters of natural gas in 2005, representing about one-fifth of national consumption. Pemex retains sole control of natural gas exploration and production and operates an extensive pipeline network consisting of approximately 453 pipelines spanning 4,700 kilometers.
Mexico has 1.3 billion tons of recoverable coal reserves. During 2006 it produced 13 million short tons of coal while consuming 21 million short tons. Most coal consumption is for electricity generation, while the remainder is for steelmaking.
Mexico has a single nuclear power plant. The 1,400-megawatt Laguna Verde plant is located near Veracruz.
Mexico generated 240 billion kilowatt-hours of electric power in 2006: 79 percent from conventional thermal sources, 13 percent from hydroelectricity, 4 percent from nuclear power, and 3 percent from geothermal, wind, or solar energy. The bulk of conventional thermal capacity in the national electricity grid consumes fuel oil, followed by coal and natural gas. Electricity demand is projected to grow by 6 percent per year during the next decade.
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