Monday, November 19, 2007
Is PEMEX
of Mexico Worse Off Than PDVSA in Venezuela?
By Patrick
Corcoran
The New York Times Magazine recently
devoted one of its periodic Latin America stories to Venezuela’s national oil company, and what a portrait! Equipment
wasting away, experts driven off, rising debt, falling production; the company resembles nothing so much as a runaway train
headed for a cliff.
At one point
only about a decade ago, Petroleos de Venezuela, or PDVSA, was considered one of the world’s finest oil companies. It
was independent, professional, and internationally respected. But the company’s management emerged as a locus of opposition
to President Hugo Chavez. They kneecapped the economy with an anti-Chavez strike beginning in December of 2005. After the
strike ended, Chavez struck back, purging PDVSA of 18,000 employees, or more than one third, most of them expert managers.
Their jobs were taken by often inept Chavistas, and PDVSA’s independence
was thereby replaced with subservience.
Today, PDVSA
is another organ of propaganda in Chavez’s Bolivarian Revolution. The company is a de facto treasury for Chavez’s
grand social programs, both in Venezuela and abroad. It now employs 75,000 workers,
30,000 above its pre-strike level, with plans to add another 30,000. Last year it handed $35 billion, or more than a third
of its earnings, to Chavez’s government. The company was virtually debt-free until 2006, but it took on loans of $12.5
billion last year. PDVSA has barely a third of the number of operating oil rigs it needs to reach its production targets.
Production today is about 25 percent less than a decade ago.
The ruination
of the company is but one of the many symptoms of Chavez’s woeful administration. (Others: his attempt to grab a lifetime
term in office via a December 2nd vote; the violent protests that proposal has provoked; and his recent argument
with the King and Prime Minister of Spain at the Ibero-American summit, in Chile, in which the former told Chavez to shut
up.) While his concern for the poor is laudable, enlisting PDVSA in the fight against poverty has turned the most important
company in Venezuela into a failing giant.
PDVSA is, then,
the kind of company one would expect from a leader like Chavez. It’s certainly unfortunate, but not surprising given
Chavez’s history.
But why is
Mexico’s national oil company in many ways worse off?
Petroleos Mexicanos,
or Pemex, is the product of President Lazaro Cardenas’ nationalization in 1938. The following facts give you an idea
of its general health: Pemex is the world’s most indebted oil company, owing more than $50 billion; despite the record
oil prices, Pemex posted losses of $915 million in the first quarter of this year; and Cantarell, the source of 60 percent
of Mexico’s oil and the world’s largest offshore oil field, is running dry, declining at about 15 percent per
year.
The government’s
decades of leeching have exacerbated the company’s difficulties. Almost 60 percent of Pemex’s revenues go to the
government, which relies on Pemex for a third of its operating budget. So much of the company’s income goes to funding
the government and financing its debt that Pemex has directed scarcely any funds toward investment.
Owing to the
drying Cantarell Field, the new investment that Pemex has neglected is more vital to the company’s future with each
passing barrel. With Pemex so indebted, the prescription would seem to be relatively simple, though not easy. Mexico needs to invite foreign companies with greater expertise and more cash to burn to search
for new deposits in the deeper waters of the Gulf of Mexico, while gradually easing Pemex’s
tax burden.
Recent legislation
aimed at making life easier for Pemex hasn’t gone far enough. As well, proposed energy reforms, now being discussed
in Congress, are unlikely to radically upend the status quo. The opposition to an oil industry opening is deeply entrenched;
the anniversary of Cardenas’ nationalization, March 18, is a holiday; and Mexico’s ownership of its oil is enshrined
in its Constitution.
According to
most sources, only North Korea guards its oil more jealously than Mexico does through Pemex.
Thus, meaningful
foreign involvement will probably have to wait until the company is on the verge of collapse. Given that, one wonders if some
future issue of The New York Times Magazine will feature an article about a sinking
Pemex taking Mexico down with it.
——————————
Patrick Corcoran, a MexiData.info columnist, is a writer who resides in Torreón, Coahuila. He
can be reached at corcoran25@hotmail.com.
