Ex-official says Mexico may have to halt oil exports

The U.S. could soon find itself scrambling to make up 11 percent in lost oil imports.

Mexico, the third-largest foreign supplier of U.S. oil, faces the real possibility of having to halt oil exports in four years, a former top Mexican energy official was reported as saying Tuesday in Mexico’s El Universal newspaper.

Rogelio Gasca Neri, the former head of Mexico’s federal electricity commission, blamed the inability of the nation’s oil industry to produce enough oil to meet rising demand.

His prediction comes on the heels of the Mexican Congress last month overturning decades of resistance to allowing private and foreign participation in Mexico’s aging energy infrastructure.

Neri’s comment, made in Mexico at a business forum on reforms in the nation’s energy industry, also joins that of a growing number of energy experts who see an end to Mexican oil exports coming soon.

John Padilla, director of finance and advisory for IPD Latin America, argues that with Mexico’s oil production falling, and its demand for gasoline and other petroleum products on the rise, Mexico could cease to be an oil exporter around 2010 or 2011.

“Mexico, whether it’s 2011, 2012 or 2015, the country is poised to become a net importer,” said Amy Jaffe, associate director of the Rice University energy program. “It’s a tragedy really both for the country and in general. The tragedy is it’s avoidable. It was avoidable and it could be avoidable if they would change their policies.”

But “the grim reality is Pemex’s production is falling very dramatically,” Padilla said this week of the state-owned energy company at a conference hosted by the Center for Strategic and International Studies in Washington, D.C.

For the U.S., the end of Mexican oil exports means companies will have to find alternative suppliers.

“Mexico has been a reliable and stable supplier,” Jaffe said. “The only thing you have to worry about is a hurricane.”

It takes 50 days for oil to arrive in the U.S. from Saudi Arabia, compared to five days from Mexico, she said.

Output falling

The Paris-based International Energy Agency, in a report issued last month, estimated Mexico’s crude output would average 2.8 million barrels a day this year and then drop to about 2.6 million barrels a day in 2009.

Mexico has long relied on production from the country’s largest oil field, the offshore Cantarell field in the Bay of Campeche. But Cantarell’s output has been dropping precipitously.

Production at Cantarell peaked in 2004 at 2.14 million barrels a day, the U.S. Energy Information Administration reported.

During the first nine months of this year, Cantarell’s production averaged less than 1.1 million barrels a day, and during September output dipped below 1 million barrels a day, Padilla said.

With Cantarell’s output sliding, Mexican energy officials have pinned their hopes on the Chicontepec field, which holds 38 percent of the country’s total reserves.

Last year, Chicontepec produced 31,000 barrels a day, Padilla noted. The target for that field is 600,000 barrels a day.

But to achieve that goal, Padilla said, Pemex would have to drill more than 15,000 wells, and the state oil company to date has not come close to that.

More consumers

With a population expected to top 110 million by 2010, Mexico’s thirst for gasoline and other refined products is on the rise, although that growth softened as the credit crisis began gripping the world’s economies.

Mexico currently has 17.2 million cars on the road, up from only 7.3 million in 1995, Padilla said.

Mexico imports about 40 percent of the gasoline it uses, according to the International Energy Agency. And Pemex has estimated that could grow to 50 percent next year.

Mexico is the United States’ third-largest foreign oil supplier after Canada and Saudi Arabia, providing 1.4 million barrels of petroleum products a day, or about 11 percent of U.S. oil imports, according to the U.S. Energy Information Administration.

“The big oil companies in Houston all import oil from Mexico,” said George Baker, president of Houston-based Baker & Associates, Energy Consultants.

However, he casts doubt on the end of the oil exports.

“Mexico’s credit rating is linked to Mexico being an oil exporter. That’s the very last thing they are going to give up, is being an oil exporter,” Baker said. “Whatever they have to do to make that not happen, they are going to do it.”

jenalia.moreno@chron.com david.ivanovich@chron.com