Mexico is currently the world's eighth largest oil producer and the third largest in the Western hemisphere. According to the U.S. Energy Information Administration Mexico is now America’s second largest source of imports. All Mexican oil output is produced by state oil monopoly Petróleos Mexicanos, better known as Pemex. Oil is critical to the Mexican economy, contributing roughly 16 percent annually to the nation’s GDP, as oil revenues fund around a third of the federal budget. Pemex currently produces roughly 2.5 million barrels per day, down from its peak production in 2004 of 3.4 million bpd. In 2011 Mexico had 10.2 billion barrels of proven oil reserves, mostly in the form of heavy crude oil varieties occurring offshore in southern Mexico, especially in the Campeche Basin. There are also sizable reserves in Mexico's onshore basins in the northern parts of the country.
Since 2006 Pemex output has experienced a steady decline.
In the second fiscal quarter of 2013 Pemex posted a loss of $3.8 billion, according to a financial report issued on the Mexican Stock Exchange (BMV). It was the company's biggest loss since the third quarter of 2011.
One of the reasons for the decline is a 4.7 percent decline in oil exports as a result of increased demand for oil by domestic Mexican refineries to produce more fuels demanded by the indigenous market. Despite being a major oil producer Mexico still has to import nearly half of its gasoline due to a lack of domestic refining capacity.
Declining production is also a factor, along with fluctuations in the exchange rate of the peso against the dollar. In order to revive Pemex the Mexican government next month will introduce legislation to reform Pemex and President Enrique Pena Nieto is pressing for constitutional changes that would allow private investment into Mexico’s oil sector for the first time.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com