WASHINGTON, Nov. 13 (UPI) -- Mexico running out of oil
Mexico, the No. 2 U.S. supplier, is unable to produce enough oil to meet the demands of its customers, especially its neighbor to the north, due to outdated national economic policies that have hamstrung its oil and gas exploration and production.
Mexican President-elect Felipe Calderon met with Canadian officials last week to hold talks on trade and explore further cooperation as Mexico's production capacity takes a sharp dive.
Although Mexico has the potential to be an energy powerhouse, the country's national oil company PEMEX lacks the investment funds to improve production in mature fields.
But as oil prices rose and production increased, the government became addicted to PEMEX's revenues, taking more than 60 percent of the company's earnings, which provide a third of the national budget, Maclean's, Canada's weekly newsmagazine, reported.
Mexico "should be an energy megastar is performing way off Broadway in terms of production vitality, because PEMEX is required to turn over the bulk of its revenues to the government. This prevents exploration, infrastructure investment, and creates debt," Vincent DeVito, an international energy attorney with Pepper Hamilton LLP in New York and former Acting Assistant Secretary of the U.S. Department of Energy, told United Press International.
Canada and Mexico are the top two suppliers of oil to the United States, with exports of 2.1 million and 1.8 million barrels per day, respectively, but the two countries are worlds apart in the development of their energy resources.
"Oil and gas will continue to be significant part of our (U.S.) energy supply and PEMEX must devise a way to allow private investment into the Mexico market in order to remain a secure supplier," DeVito said. "If not, there will be a crisis in Mexico; and, a crisis in Mexico is a crisis in the United States and, conceivably, a crisis in Canada."
PEMEX has accrued a debt and recently posted a net loss of $7 billion for 2005, despite record high oil prices.
Production is expected to face a steep decline and as things stand currently, Mexico has only 10 years of oil reserves left.
All hydrocarbon resources are nationalized under the country's constitution, and in 1938, the industry was nationalized with the establishment of state oil company PEMEX.
This is onerous for Canada, which is already producing and exporting at capacity, Maclean's reported. Although Canada plans to boost production, it cannot make up for the shortfall caused by Mexico's export decline.
The shortfall will force the United States to seek alternative suppliers, which will most likely increase prices, according to analysts.
TNK-BP pays 1.44B in back taxes
British-Russian oil venture TNK-BP has paid off $1.44 billion it owed to Russian authorities in back taxes, which is the largest tax claim levied against a Russian company apart from the $27.5 billion claim that led to the collapse of Yukos.
The payment comes amid increasing pressure from the Kremlin over projects part-operated by foreign investors, the Moscow Times reported.
A senior executive of Rospan, a TNK-BP subsidiary, is also facing criminal charges over alleged violations of environmental and licensing agreements, a move that could result in Rospan losing its main license to large gas fields in western Siberia.
Some analysts say Russian authorities are pressuring foreign investors to encourage Russian shareholders to sell-up, allowing a Russian state firm such as Gazprom to takeover the project.
TNK-BP said Friday the tax claim came as no surprise, and it had settled the claim for 2002 and 2003 from a $1.46 billion reserve created for the tax case.
"This will have no impact on the company's financial results for this year, or on the company's operations," Alexander Shadrin, a TNK-BP spokesman, was quoted as saying in the Moscow Times.
The Kremlin has launched a campaign against oil and gas projects with foreign partners such as TNK-BP, as the government seeks to ensure the state has control in the sector that President Vladimir Putin has called the country's "holy of holies."
Since BP and Tyumen Oil Co. formed TNP-BP in 2003, no Western oil major has entered Russia. The country's third-largest oil producer, BP owns 50 percent and 50 percent is owned by a group of Russian shareholders Mikhail Fridman's Alfa Group, Viktor Vekselberg's Renova and Len Blavatnik's Access Industries.
Since the back tax claim dates back before the merger, the cost will be split among the Russian shareholders.
Saudi Aramco strengthens ties in Asia, opens local offices
In a move to strengthen relations with Asian customers, Saudi Aramco has opened the new Aramco Overseas Company office in the Malaysian capital Kuala Lumpur, and is also opening a similar office in Shanghai, China.
The decision is aimed at the strategic sourcing of new companies involved in manufacturing and contracting of material for Saudi Aramco, which would boost business opportunities for Malaysia through the company's massive capital programs.
"The opening of these two new offices reflects the growing importance of the Asia-Pacific region to Saudi Aramco, not only as a market for its crude oil and products, but also as a provider of essential goods, materials and services," Aramco said in a statement. "Details regarding the opening of these two new Aramco Overseas offices will be forthcoming."
Saudi Petroleum, another Aramco subsidiary, meanwhile, plans to keep an office in Singapore. "Its primary function is to provide sales and marketing support to Saudi Aramco customers in the region. The functions and location of this office will not change," Aramco said.
The company is pursuing a long-range business plan designed to focus on and capture the emerging markets in South East Asia, through a combination of the strategic location of the Kuala Lumpur office in the region and Saudi Arabia's strong commercial, cultural and religious ties with Malaysia.
"Saudi Aramco has strong ties with some Malaysian manufacturers and service providers, and we are eager to enhance and expand on these relationships," Abdulaziz F. Al-Khayyal, Saudi Aramco senior vice president of Refining, Marketing and International, was quoted as saying in the Saudi Press Agency. "This new office in Kuala Lumpur, in the heart of this nation's petroleum industry, will allow us to better coordinate future business opportunities here."
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Closing oil prices, Nov. 13, 3 p.m. London
Brent crude oil: $59.19
West Texas Intermediate crude oil: $59.04
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