Robert Collier, Chronicle Staff Writer
Friday, June 30, 2006
(06-30) 04:00 PDT Cardenas, Mexico -- Gonzalo Rodriguez has an unenviable task as the boss of a major oil field -- ripping out a large part of the pumping and compressing machinery that collects the output from scores of wells.
"Unfortunately, we don't need this capacity anymore," he said. "This isn't like the old days, and they aren't coming back."Like much of Mexico's giant oil production apparatus, this area, known as the Bellota oil field, is in an apparently unstoppable decline. At current extraction rates, the nation has only 10 years of proven oil reserves remaining. And as Mexico prepares to vote in Sunday's presidential election, the leading candidates disagree bitterly about what, if anything, can be done to halt the impending collapse of the industry that forms the backbone of the national economy.
Left-of-center candidate Andres Lopez Obrador wants to de-emphasize production of crude oil and focus instead on refined products such as gasoline and plastics, while his main challenger, conservative Felipe Calderon, proposes opening the industry to foreign oil corporations to help increase crude exports. Because Mexico is the second-largest source of U.S. oil imports, the outcome of this struggle will have a huge effect on U.S. energy security in the coming decades. Oil income accounts for more than 40 percent of the Mexican federal government's annual revenues, so the decline of oil output could leave the country's next president with a nightmarish budget crisis.
Oil industry experts say that whoever wins Sunday's election will be forced to play an increasingly weak hand of economic cards. "There is no question that it will be very difficult to maintain (Mexico's) production levels under any institutional arrangement, no matter who wins the election," said Adrian Lajous, who was chief executive of Petroleos Mexicanos, or Pemex, the state-owned monopoly, from 1994 to 1999 and now is chairman of Oxford Institute for Energy Studies, a British think tank. "It will be a major fiscal problem over the foreseeable future."
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