Posted on 07/29/2013 1:23:34 PM PDT by thackney
Everyone is getting excited that the Mexican government may open up the nation's oil sector to foreign companies, but a dose of realism ought to temper the bullish sentiment.
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The last time this happened was several years ago. Between 2007 and 2008, then-President Felipe Calderon urged the Mexican Congress to adopt legislation that would allow state oil monopoly Pemex to offer bonuses to private companies working as contractors.
The idea was that the bonuses, while not tied to oil prices or reserves, would somehow be enough to bring in foreign capital and expertise to develop Mexico's hitherto largely untouched deepwater oil and gas reserves. But as talk surrounding the reform died down and the hard work of implementing the changes began very quickly, Calderon's policy revealed itself as a less-than-radical change.
It was not until late 2011, when Calderon had less than a year of his six-year presidential term left, that the first service contracts were signed for three small oil fields. No big bang in deepwater has happened. No radical change in the Mexican oil sector.
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Pemex provides between a quarter and third of government revenues, but this does not reflect the full fiscal burden heaped on the Mexican oil industry. Pemex subsidizes fuel sold to Mexicans, disburses donations to local governments and allows the federal government to run a bigger deficit than often stated by funding its capital investments with bonds rather than cash flow.
Indeed, Pemex's crushing tax burden is so high that the company regularly loses money and would be insolvent if it were not able to rely on bond markets assuming that its debt is effectively the Mexican government's. No private company would ever agree to Pemex's fiscal terms, no matter how attractive its oil resources might be.
(Excerpt) Read more at rigzone.com ...
Mexico is a long way from a lot of things.
I wish it was along way from us. We should have kept all we drove through in the Mexican-American War.
Yep...set up 500 mile buffer zone filled with bears, moutain lions, wolves, jaguars and Russian sailors.
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