Friday, December 28, 2007

Mexico’s Oil Output

Oil was not discovered in Mexico until after the turn of the twentieth century. Commercial production of crude oil started in 1901 and by 1911 Mexico began to export oil.

In 1923 Bucarelli Agreements committed the United States and Mexico to regard titles held by foreign oil companies as concessions by the Mexican government rather than as outright ownership claims. And in 1925 President Plutarco Elías Calles decreed that foreign oil companies must register their titles in Mexico and limited their concessions.

Largely as a result of increased international demand generated by World War I, Mexico's oil production peaked in 1921 at 193 million barrels (25 percent of world production). Mexico was second only to the United States in petroleum output and led the world in oil exports during much of the 1920s.

Giving the Mexican government a monopoly in the exploration, production, refining, and distribution of oil and natural gas, and in the manufacture and sale of basic petrochemicals, President Lázaro Cárdenas nationalized the petroleum industry in 1938. This left the oil companies uncomfortable. The United States government soon pressured the oil companies to come to terms with Mexico as a result of President Franklin D. Roosevelt's Good Neighbor Policy. In 1943 Mexico and the oil companies reached a final settlement under which the companies received US$24 million (a fraction of the book value) as compensation.

Mexico's oil output expanded at an average annual rate of 6 percent between 1938 and 1971. And production increased from 44 million barrels in 1938 to 78 million barrels in 1951 alone. Domestic demand progressively exceeded output, and in 1957 Mexico became a net importer of petroleum products. Production then rose to 177 million barrels by 1971 with the exploitation of new oil fields.

Extensive oil discoveries in the 1970s increased Mexico's domestic output and export revenues. Almost every drilling operation conducted after 1972 struck oil. In 1973 oil production surpassed the peak of 190 million barrels achieved in the early 1920s.

However, by early 1993, both crude oil production and exports had begun to decline. Down from almost 80 percent in 1982, in 1995 the oil sector generated slightly more than 10 percent of Mexico's export income. In 1995 Mexico was the world's sixth-largest producer of crude oil. In the Western Hemisphere, only the United States produced more oil than Mexico. Directly behind Mexico was Venezuela.

The Mexican government invested heavily to increase the capacity of existing refineries and construct new ones so that, by the early 1990s, some 40 percent of Mexico's crude petroleum output was refined domestically. In 1993 Mexico had the world's eighth largest crude petroleum reserves, amounting to some 5 percent of the world's total. Mexico's reserves are sufficient to guarantee the current production levels for fifty years.

Since the nationalization of the oil industry in 1938, the state-owned Pemex has monopolized the production and marketing of hydrocarbons. In August 1993, it became known that the government was considering proposals to allow private companies to buy, sell, and distribute imported gasoline, natural gas, and petrochemicals, and to invest in new pipelines.

In early 1996, the government unveiled its Program for the Development and Restructuring of the Energy Sector. The plan is intended to increase Mexico's petroleum exports, improve its competitiveness in the international energy market, and contribute to more balanced regional development, which it has.

Companies in the United States’ oil sector, like Triple Diamond Energy Corporation continue to look at Mexico’s oil output and assess any potential business dealings.

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