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Output Falling in Oil-Rich Mexico, and Politics Gets the Blame
Elisabeth Malkin, NY Times
…Pemex is in trouble. Its production and proven reserves are falling, and it has no money to reverse the slide. Mexico is the second-largest supplier of imported oil to the United States, after Canada, but its total exports are slipping. If the company continues on its current course, Mexico may one day have trouble just keeping up with rising demand at home.
… The major reason that Pemex’s prospects are so poor, energy experts agree, is government interference. The Mexican government, which expropriated the oil industry in 1938, depends on Pemex to finance its budget. Last year, sales at Pemex (its full name is Petróleos Mexicanos) reached $97 billion. But $79 billion of that went to the government, Pemex’s chief, Jesús Reyes Heróles, said last month. That accounted for almost 40 percent of the federal budget.
Government interference is only part of the story. Pemex has been hamstrung by years of short-sighted management aimed at extracting the most cash for the government treasury
…Mexico, the fifth-largest oil producer in the world in 2005, is sitting on tens of billions of barrels of untapped oil reserves. But much of that is in the deep waters of the gulf, not far from where American companies have announced discoveries. Pemex has neither the money nor the expertise to get at the oil.
Its biggest field, Cantarell, in the shallow waters of the gulf, is one of the world’s richest. That field used to account for about 60 percent of Mexico’s oil production, but has gone into a sharp decline.
(8 March 2007)
EB co-editor BA writes:
No mention of peak oil, no seeking out of non-industry point of view. The one dissenting view in the article comes from CERA:
“We don’t see even in the most optimistic model that they could manage to reverse the total fall in production,” said Alejandra León, an analyst at Cambridge Energy Research Associates in Mexico City.
Contributor KJMClark writes:
As we’ve all said, the official story will be that this is all due to lack of investment. It’s a little sad to see the Gray Lady trumpeting this line; you would have thought they learned something from the WMD fiasco. They seem to be working on a reputation for shallow analysis.
Iranians lose access to unlimited cheap fuel
Gareth Smyth, Financial Times
Iran’s parliament this week set May 22 as the day when the country’s 15m motorists lose access to unlimited cheap fuel.
Pump prices, frozen for three years at 80 tomans (or 9 cents) a litre, have boosted consumption far beyond the capacity of Iran’s oil refineries and meant that 40 per cent of petrol has had to be imported.
With Iran facing further UN sanctions over its nuclear and missile programmes, politicians have opted to dampen demand by a combination of rationing and higher prices.
(9 March 2007)
Contributor Alfred Nassim writes:
It was cheap before the revolution but now it is ridiculous.
Iran parliament agrees fuel rations
Iran’s parliament has approved the rationing of subsidised petrol, according to the Iranian news agency, Insa.
The move would help insulate the fuel-importing nation from any possible extension of international sanctions. Iran is Opec’s second largest crude oil producer but does not have enough refining capacity to meet its domestic needs.
The Islamic republic currently has to import about 40 per cent of its fuel requirements. Several countries are considering toughening United Nations sanctions on Iran because of its refusal to rein in its nuclear activities.
However, diplomats say fuel imports are unlikely to be targetted because it would hurt the public not the government. Parliament approved rationing the fuel from May 22 and the government will decide on the ration quantity and price for unrationed fuel by April 20.
Isna said: “With a positive vote of lawmakers gasoline will be rationed at a price of 1,000 rials [about 11 US cents] per litre from the start of Khordad [the Iranian month beginning May 22].” Motorists currently pay 800 rials [about 9 US cents] a litre, making it some of the cheapest fuel in the world. Analysts say such a heavy subsidy encourages waste, boosts smuggling to neighbouring states and is a significant drain on government coffers.
Iranian officials previously said one proposal was for private motorists to receive a ration of about 30 litres of petrol a week or 90 litres a month.
(7 Mar 2007)
Cambodia welcomes its oil wealth, but will it do more harm than good?
Ian MacKinnon, Guardian
Aid workers fear resource bonanza offers new potential for corruption
Behind the tall fences and taller cranes of Cambodia’s sole deep-water port lurks a compound filled with rusty pipes and drilling equipment. Unlikely as it seems, this collection of shipping containers represents the best hope in years for the impoverished country still recovering from decades of war.
The base in sleepy Sihanoukville is US oil giant Chevron’s springboard for operations 100 miles off shore. It struck “significant” oil and gas deposits, and is confirming the discovery’s scale. The initial find, estimated by the World Bank and United Nations’ Development Programme to be 400m to 500m barrels of oil, has already sparked something of a “black gold” rush with Chinese, Japanese, French and Korean companies battling for lucrative rights.
Yet international donors whose aid propped up Cambodia for years fear that a bonanza pumping up to $4.6bn (£2.5bn) into the nation’s coffers every year for the next two decades could make things worse. They warn that Cambodia could be blighted by the “resource curse” that has dogged so many developing nations.
Newly oil-rich countries with fragile state institutions have repeatedly fallen victim to sluggish growth despite vast earnings, leaving the poor worse off.
(5 March 2007)
Forget Russia, Jim Rogers advises
John Patridge, Globe & Mail
Commodities bull Jim Rogers would be more likely to advise someone looking to make their fortunes in energy or raw materials to go to Myanmar, Angola or East Timor, despite their political and social woes, than to Russia.
“Russia does have massive amounts of commodities, but Russia is falling apart,” Mr. Rogers told an investor conference in Toronto this week. “Russia is a disaster that is falling into a catastrophe.”
By contrast, he said, oil resources mean that “huge fortunes” are going to be made in Angola, East Timor is going to be “one of the [per capita] richest countries in the world . . . a new Kuwait” and Myanmar, formerly Burma, is “a place of great opportunity” even though its military junta is a world pariah.
…he just does not “see” Russia as a future source of raw materials. “Yes, we think there’s a lot of oil [to be found] in Russia, but it’s not coming to market any time soon,” he said.
Mr. Rogers co-founded, with George Soros, the wildly successful Quantum Fund in the 1970s. Since 1998, he has largely eschewed equities in favour of commodities…
(9 March 2007)