Posted on 09/10/2009 5:18:58 PM PDT by SwinneySwitch
Budget Shortfall Is Likely to Worsen; Major Field Plunges
MEXICO CITY -- Mexico's oil output is falling faster than expected, increasing the chance that the country will lose its status as a major oil exporter in coming years and face a worsening budget shortfall.
Output at state-owned oil monopoly Petróleos Mexicanos's offshore field Cantarell, once the world's second-largest oil field, has plunged to 500,000 barrels a day from its peak of 2.1 million in 2005.
"I don't recall seeing anything in the industry as dramatic as Cantarell," says Mark Thurber, assistant director for research at the Program on Energy and Sustainable Development at Stanford University.
.Cantarell's slide has pushed Mexico's overall oil output down. Shrinking oil exports are costing Mexico roughly $14 billion a year -- bad news for a country that relies on oil exports to pay for nearly 40% of its annual government budget. That shortfall, aggravated by the weaker overall economy, has caused the government to cut spending this year and propose a growing budget deficit for next year.
Ratings agency Standard & Poor's revised its outlook for Mexico's sovereign-credit rating to negative in May, citing the decline in oil output as a factor. "There are several elements that all come together," says Lisa Schineller, an S&P analyst. "A low tax base, a dependence on oil for its budget ... lower oil output, a limited outlook for economic growth, and a dependence on the U.S. market."
The shortfall has underscored the need for broad tax reform to reduce dependence on oil money, she says. But the solutions -- ending Pemex's monopoly and raising taxes -- are tough for politicians to swallow. Without progress on tax reform, Mexico's credit rating will likely be downgraded a notch before year-end, Ms. Schineller says.
(Excerpt) Read more at online.wsj.com ...
Pemex ping!
If you want on, or off this S. Texas/Mexico ping list, please FReepMail me.
Not its export of people!
Socialists will ruin any good thing.
Anybody find this news surprising ?
Swinney, I must admit I skimmed the article, but did they say why the output dropped? Is it demand dropping that has caused the drop? If it is demand, then the middle east must be in the crapper.
From what I understand it is an older field and instead of investing in new technology and discovering new fields Petrolos as the article mentions gives a ton of money to the gov’t and the company itself is a huge welfare state on to itself.
Output has dropped because the old fields are becoming exhuasted,at least with the 50’s tech Mexico is using.
They need cash to invest in new field exploration and new technology to increase yields from old fields.
But the cash flow produced from oil is not reinvested for future output it is spent on the governments social agenda.
Production and crude oil prices have both dropped.
Cantarell, Mexico’s biggest field, production has declined about 30% a year.
“Anybody find this news surprising ?”
“Maxine Waters threatens to nationalize U.S. oil industries”
http://www.youtube.com/watch?v=PUaY3LhJ-IQ
Paging Maxine....
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