Critical assessments of Mexico’s oil industry in general and of its state-owned oil company, Pemex, in particular are commonplace, often with good reason: Both face many challenges in overcoming the historical legacies that have long undermined their performance. Nevertheless, when President Felipe Calderon’s term in office ends on Dec. 1, he will be leaving both in better shape than when his presidency began six years ago.
True, there have been strategic misfires under his administration. Pemex’s opaque expenditure of almost $2 billion for an increased stake in Spanish oil company Repsol stands out, both for the lack of strategic oversight it highlighted but also the naivety it exposed in terms of the purported desire to use the deal to gain access to deep-water drilling technology. Worse, since Argentina’s expropriation of Repsol’s YPF shares in April, the company’s stock price has dropped and may cause Pemex to write down a loss.
In addition, Mexico’s current severe challenges in meeting domestic natural gas demand underscore its failure to focus sooner on enhancing natural gas infrastructure and developing its world-class shale gas potential. Natural gas sales in Mexico have risen 70 percent in the past decade, while production has only increased approximately 46 percent. As a result, imports from the United States hit record highs in 2012. Meanwhile, natural gas pipeline infrastructure has become increasingly jammed, and cuts put in place by Pemex have angered industrial customers.