Energy: Mexico has likely shut the door on new oil development just as its biggest fields approach depletion. Pay heed: That's our third-biggest supplier. Now we'll have to find and develop new oil — or else.
The expected election of Alejandro Encinas as leader of Mexico's leftist PRD party this week brings the most extreme and isolationist elements of Mexican politics to the fore.
Running on a platform of opposition to President Felipe Calderon's proposed energy reforms, the new PRD crew has enough political muscle in Congress to effectively end any prospect of modernizing Mexico's moribund energy industry — including developing Mexico's promising deep water oil discoveries.
For that, Mexico needs advanced technology, which it can only get through foreign partnerships. President Calderon had planned to unveil a new energy initiative for this but now may not even bother. Mexico's radical PRD leader claims he's "defending Mexico's patrimony and national interest" — by leaving its oil in the ground.
It comes at a very bad time because Mexico is running out of oil.
Its famed Cantarell oil field off its Atlantic coast has been its biggest producer since 1979. In its heyday, it pumped 2 million barrels a day, some 60% of Mexico's oil output. However, in just one year, it lost 20% of capacity, according to leaked internal Pemex documents in an April 2007 Wall Street Journal story.
Meanwhile, Mexico has discovered some comparable fields that could replace Cantarell. But it needs advanced drilling technology. With the latest crop of PRD leaders around, it won't happen.
For Mexico, the end of oil development will not only deprive the government of 40% of its revenues, but could send Mexico on the global market with everyone else scrounging for oil for its economy. This puts even Mexico's modest current economic growth of 4% at risk — and could lead to a new surge in illegal immigration.
But never mind about Mexico. It leaves the U.S. with the problem of a big oil supplier who may no longer be able to supply.
That ought to be a loud signal to us to get serious about developing new sources — especially our own. Alaska's Arctic National Wildlife Refuge and the outer continental shelf together hold billions of barrels of oil that could help replace Mexican oil.
Alaska's two persistent Senators proposed a new bill for it last week. Meanwhile, an Arkansas congressman is trying to open up opportunities in the outer continental shelf.
If Mexico's looming oil troubles can at last get Congress' attention, new production could come just in time to replace the oil lost by a vital, yet now potentially unreliable, foreign supplier.
For the U.S., there are no other options. When will it wake up?
By INVESTOR'S BUSINESS DAILY | Posted Tuesday, March 18, 2008 4:20 PM PT