Plans afoot for several mini-refineries in Mexico

 Mexico's geography in the Press, Updates to Geo-Mexico  Comments Off on Plans afoot for several mini-refineries in Mexico
Aug 292016
 

State-owned Pemex currently has six oil refineries in Mexico, which process around 1.05 million barrels/day (b/d) of crude.

The company has now shelved plans to add a $10-billion refinery at Tula (Hidalgo) owing to doubts about its long-term viability. It does seem that it is unlikely to be needed since Mexico’s energy reforms have led to several private companies submitting proposals to build less expensive, modular “mini-refineries” in Mexico. Each of these mini-refineries is 80-90% smaller than any of the six giant Pemex refineries.

Planned new refineries. Credit: El Economista / Refmex.com.mx

Planned new refineries. Credit: El Economista / Refmex.com.mx

A consortium of U.S. firms, Refinerías Unidas de México (Refmex), plans to invest 11.6 billion dollars to build 9 mini-refineries, starting with a $1.5billion refinery in Campeche with the capacity to refine between 40,000 and 60,000 b/d. Construction would take between 18 and 30 months.

Other proposed locations (map) include Cadereyta (Nuevo León), Dos Bocas (Tabasco), Minatitlán (Veracruz), Lázaro Cárdenas (Michoacán), Manzanillo (Colima), Salina Cruz (Oaxaca), Tula (Hidalgo) and Tuxpan (Veracruz). Several of these locations are in the recently announced federal Special Economic Zones, which offer fiscal incentives to investors.

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Remittances in 2015 exceed oil revenues

 Mexico's geography in the Press  3 Responses »
Feb 042016
 

Remittances sent home by Mexican migrants (almost all of them residing in the USA) rose to $24.8 billion last year, up 4.75% compared to 2014.

The average remittance sent to Mexico in 2015 was $292.00, a slight decline. Almost all remittances (97%) are now sent via electronic transfer.

Figure 1 of Pew Report

Figure 1 of Pew Report. Shaded area is period of recession.

Low oil prices have led to a sharp decline in the value of Mexico’s oil exports. Oil revenues last year totaled $23.4 billion, which means that remittances now exceed oil revenues as a source of foreign exchange. Before the implementation of NAFTA in 1994, oil revenues accounted for around 80% of all Mexico’s foreign exchange. In 2015, that figure was less than 20%, showing the degree of economic diversification that has been achieved post-NAFTA.

The value of oil exports in 2015 was also significantly lower than the value of manufactured goods exports, or the value of agricultural exports.

Want to learn more about remittances?

Illegal pipeline connection causes oil spill in northern Mexico

 Mexico's geography in the Press  Comments Off on Illegal pipeline connection causes oil spill in northern Mexico
Sep 222014
 

The illegal tapping of a Pemex oil pipeline in the northern state of Nuevo León caused an oil spill in August 2014 that contaminated a 6.5-kilometer-long stretch of the San Juan River.

According to Víctor Cabrera, state delegate for the Federal Attorney for Environmental Protection (Profepa), about 23 kilometers of channels (mostly irrigation channels) have been affected in total. Profepa advised residents to avoid using water from the places affected and not to consume local fish.

nuevo-leon-oil-spill-Hector Guerrero

Photo by Hector Guerrero

The illegal connection to the Madero-Cadereyta pipeline was first detected on 16 August 2014, and has been attributed to the criminal activities of organized crime. It allowed some 4000 barrels of crude oil to spill into the San Juan River.

The spill affected the agricultural communities of Mexiquito, La Fragua, Soledad Herrera, Santa Isabel, Hacienda Dolores, La Concepción and San Juan, home to approximately 6000 people.

The Nuevo León state governor Rodrigo Medina told reporters that an analysis carried out by water and drainage authorities and the National Water Commission (Conagua) had shown that the local aquifers had not been contaminated. The oil spill did not reach El Cuchillo Dam, located some 70 kilometers downstream from the spill, which is one of three main reservoirs supplying potable water to the Monterrey metropolitan area.

More than 500 workers from Pemex and other organizations have been employed to clean up the spill. Within two weeks, 90% of the oil spilled had been recovered and removed, according to a Pemex report. Officials expect the clean-up work on the river banks and in the irrigation ditches to take another two months to complete.

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Pemex works at its Clean Fuels Policy

 Mexico's geography in the Press  Comments Off on Pemex works at its Clean Fuels Policy
May 222014
 

As part of its Clean Fuels Policy, Pemex is modernizing its refineries in Ciudad Madero, Minatitlán, Salamanca, Salina Cruz and Tula.The total investment involved is 3.4 billion dollars. The plan, which will take 4 years to complete, includes the construction of new plants in several of the locations

Pemex installations in Mexico. (Adapted from Fig 15.5 of Geo-Mexico). All rights reserved.

Pemex installations in Mexico. (Adapted from Fig 15.5 of Geo-Mexico). All rights reserved.

The objective is to produce Ultra Low Sulfur diesel fuel (UBA) in the five refineries, in compliance with Mexican standards. The new technology will reduce vehicle emissions of carbon dioxide and nitrogen oxides by between 50 and 80%.

Since last September, 42,500 barrels/day of ultra low sulfur gasoline is already being produced at the Pemex refinery in Cadereyta, Nuevo León.

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Pemex defines its priority areas for oil and gas

 Updates to Geo-Mexico  Comments Off on Pemex defines its priority areas for oil and gas
Apr 212014
 

Recent reforms to the energy sector have meant that Pemex has had to define its priority areas, those areas where it wishes to continue exploration and development. At a later date, it is then possible for the government to ask for bids from other oil companies, and award contracts to explore and develop oil and gas fields in other areas of Mexico. The first stage is known as Round Zero.

In March, Pemex published its portfolio of areas for exploration for “Round Zero” (Ronda Cero), with preliminary data for 2P (proven, probable) and 3P (proven, probable, possible) reserves as of the start of this year. 2P reserves totaled 24.174 billion barrels of crude equivalent, while 3P reserves totaled 43.8 billion barrels. The figures, slightly lower than the equivalent figures from January 2013, have not yet been confirmed by independent auditors.

Map from Pemex "Round Zero" document

Map from Pemex “Round Zero” document

46% of probable reserves are located in Chicontepec (Proyecto Terciario del Golfo) in Veracruz, and 43% in offshore regions including the Akal, Balam, Ayatsil, Maloob, Kunah and Tsimín fields.

56% of possible reserves are located in Chicontepec, and an additional 34% in offshore regions.

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Energy reforms and Mexico-USA Transboundary Hydrocarbons Agreement

 Mexico's geography in the Press, Updates to Geo-Mexico  Comments Off on Energy reforms and Mexico-USA Transboundary Hydrocarbons Agreement
Jan 302014
 

Mexico recently approved the most significant energy reforms since the nationalization of the oil industry in 1938. The reforms end the 75-year monopoly over the energy industry enjoyed by state oil giant Petroleos Mexicanos (Pemex), opening the way for private investment in petroleum exploration and production.

The proposals do not allow foreign ownership of mineral or oil resources, but do allow private sector firms to participate in refineries and distribution networks, as well as sign profit-sharing contracts with state oil giant Pemex and the Federal Electricity Commission. The reforms include a revised tax regime for Pemex, the world’s fifth-leading oil producer, and its reorganization into two subsidiaries.

Mexico’s oil production has risen recently to 2.5 million barrels/day (b/d) and is expected to reach 3 million b/d by 2018.

The Mexico-USA Transboundary Hydrocarbons Agreement (THA) has been approved by senators in Washington. The accord allows both countries to explore and develop crude reserves that straddle their exclusive economic zones in the Gulf of Mexico. It establishes “an environmentally safe and responsible framework to explore, develop, and share revenue from hydrocarbon resources that lie in waters beyond each country’s exclusive, economic zones,” according to White House National Security Council spokesperson Caitlin Hayden.

location of doughnut holes

The two “doughnut holes” where Mexican and US Exclusive Economic Zone claims overlap

The American Petroleum Institute has hailed the possibility of Mexico-USA joint projects in the Gulf of Mexico. The reserves in the maritime boundary region are believed to total more than 170 million barrels of oil and 15 million metric tons of natural gas, according to the U.S. Department of the Interior’s Bureau of Ocean Energy Management.

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Mexico’s Pemex is one of the most competitive oil firms in the world

 Updates to Geo-Mexico  Comments Off on Mexico’s Pemex is one of the most competitive oil firms in the world
Dec 022013
 

Despite the criticisms regularly leveled at it, Mexico’s oil giant Pemex is actually one of the most competitive oil firms in the world.

First, its costs of exploration and production are much lower than those of most other major oil companies. Pemex’s production costs in 2012 averaged 6.84 dollars/barrel (d/b) of oil equivalent, well below the costs incurred by international rivals Exxon (9.91 d/b), Chevron (15.16), Total (8.17), Shell (12.47) and British Petroleum (12.50).

pemexPemex’s exploration and development costs are also among the world’s lowest. They fell from 16.13 d/b in 2011 to 13.77 d/b in 2012, mainly due to the discovery of several new reserves. Among major players, only Shell had lower costs (11.75 d/b), with Pemex well ahead of British Petroleum (17.37 d/b), Exxon (19.31), Total (22.68) and Chevron (28.81).

Thirdly, as new fields are fully explored, Mexico’s proven oil reserves are expected to continue to rise for a number of years, from the current level of 13.87 billion barrels to 14.92 billion barrels by 2018. (During this period, Pemex will extract an estimated 6.64 billion barrels, but they will be more than replaced by anticipated new discoveries)

How important is Pemex to the Mexican economy?

One third of Mexico’s national budget comes from the petro industry, which accounted for 7.6% of GDP in 2012.

In 2012, Pemex invested 23.9 billion dollars in Mexico, appreciably more than the 19.2 billion dollars invested that year by América Móvil, Femsa, Walmart, Frisco, Cemex, Liverpool, Alfa and Mexichem, combined.

In terms of revenues, Pemex had revenues in 2012 of 142.4 billion dollars, greater than the 139.1 billion dollars in revenues of América Móvil, WalMart, Femsa, Alfa and Cemex combined.

According to a Bloomberg analysis, between 1973 and 2012, Pemex generated a cash flow (before tax and depreciation) that was 63% higher than the total cash flow of all the firms listed on the Mexican Stock Market. In 2012, the Ebitda (Earnings before Interest, Tax, Depreciation and Amortization) of Pemex was 88.2 billion dolalrs, compared to the combined 54.2 billion dolalrs of Ebitda for América Móvil, Banorte, Femsa, Walmart de México, Grupo Modelo, Cemex, Kof, Televisa, Peñoles and Alfa.

How important is Pemex in the worldwide picture?

According to Petroleum Intelligence Weekly, U.S. Energy Information Administration and U.S. Crude Oil Imports by Country, Pemex is one of the world’s five most important crude oil producers, after Aramco (Sauid Arabia), NIOC (Iran), CNPC (China) and KPC (Kuwait).

Pemex is the third largest oil exporter to the USA, after Canada and Saudi Arabia, but ahead of Venezuela and Nigeria.

Pemex installations in Mexico. (Adapted from Fig 15.5 of Geo-Mexico). All rights reserved.

Pemex installations in Mexico. (Adapted from Fig 15.5 of Geo-Mexico). All rights reserved.

Mexico has the world’s 13th largest crude oil reserves and Pemex has the world’s 15th highest oil company revenues.

Mexico’s proposed energy reforms, which will allow private sector firms more access to some parts of the oil and gas sector, will only serve to boost the competitiveness of Mexico’s oil industry. The major problems facing Pemex are not directly related to revenues or to competitiveness, but are the persistence of corruption and a lack of transparency.

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Mexico has the world’s highest level of energy security among large economies

 Mexico's geography in the Press, Updates to Geo-Mexico  Comments Off on Mexico has the world’s highest level of energy security among large economies
Apr 042013
 

According to a recently published U.S. Chamber of Commerce study of the largest energy-consuming nations, Mexico is the most energy secure country of the 25 countries in the large energy user group with a score 14% below the OECD average (see graph).

energy security graph (US Congress)

The study compiled an “International Index of Energy Security Risk”, taking into account 28 metrics including fossil-fuel imports, power generation and carbon-dioxide emissions, using data from sources such as the U.S. Energy Information Administration and the Paris-based International Energy Administration.

Other countries with high levels of energy security included the U.K., Norway, New Zealand, Denmark, Australia and the U.S. (Which tanked 7th overall. Energy security was lowest in the Ukraine, followed by Thailand, South Korea, the Netherlands, Brazil, Italy, Turkey and Japan.

Mexico’s energy security has ranked as first or second among the large energy user group of countries every year since 1980. The metrics where Mexico has a significant comparative advantage over other OECD members include:

  • low amount it spends on fuel imports per dollar of GDP generated
  • low energy expenditures per dollar of GDP and per capita are also lower
  • low costs to produce electricity.
  • low amount of energy each person uses, both overall and in the transport sector
  • low amount of carbon dioxide each person emits

As the graph shows, however, Mexico’s energy security is edging closer to that of OECD countries, meaning that Mexico’s comparative advantage in energy security is slowly shrinking.

Mexico is the world’s seventh largest oil producer, and also a major oil exporter. While production levels had been declining, they have begun to rise again in recent months. Mexico also has large reserves of natural gas, but these have not been developed quickly enough to prevent imports of natural gas from rising sharply in recent years as demand for natural gas outstrips domestic supply.

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Pemex boosts reserves and reduces its emissions

 Mexico's geography in the Press, Updates to Geo-Mexico  Comments Off on Pemex boosts reserves and reduces its emissions
Dec 032012
 

It may come as something of a surprise to many observers, but during 2012, Mexico’s state-owned oil company Pemex (Petróleos Mexicanos) has received several well-deserved plaudits for its efforts to slash the emissions associated with oil and gas exploration, reserves and production.

For the fifth consecutive year, the Global Reporting Initiative awarded Pemex the highest possible rating for social responsibility. The company also received excellent ratings for sustainable asset management. During 2011, Pemex’s proven reserves increased 1.1%, while the petro-giant cut total emissions by 17.3% compared to the previous year. Crude oil output averaged 2.55 million barrels a day in 2011. Carbon dioxide emissions were down 8.8% in 2011, while sulfur oxides have now fallen more than 50% since 2007.

Meanwhile, the production division of Pemex has been praised by World Bank experts for having reduced burn-off from its giant Cantarell gas field from 31% in 2008 to 3% in July 2011. Pemex has invested more than 1.6 billion dollars in the Cantarell field over the last six years in order to improve efficiency, with the installation of compressors, flow separation devices and re-injection technology. In the past three years, it has reduced total emissions, including greenhouse gases, from 13.6 billion cubic meters a year to 2.1 billion. Pemex is well on track to beat its target of 99% efficiency in gas recovery by 2014.

Crude oil production has risen steadily in 2012. For example, in August 2012, Pemex produced 2.56 million barrels of oil a day (b/d), its highest output since May 2011. The Chicontepec field in Veracruz is doing especially well. Its single best-performing well, named Presidente Alemán 1565, uses innovative technology, including three dimensional seismic mapping and horizontal drilling, to yield as much as the combined output of 28 other wells in the region.

Mexico’s current 3P (proven, probable, possible) reserves are also on the rise, and currently total 43 billion barrels of crude oil equivalent. After years of depletion, Pemex is now adding more oil and gas each year to its reserves than it is extracting. The oil giant recently announced a huge deep water, light crude discovery in the Gulf of Mexico, off the coast of Tamaulipas, its first major find in the Perdido Fold Belt, where the total 3P reserves could be as high as 10 billion barrels. The Trión-1 well, drilled to a total depth of 4,500 meters (14,800 feet), is 40 km (25 miles) inside Mexico’s territorial waters and is expected to yield up to 400 million barrels of high quality crude.

Pemex also recently reported the largest land-based discovery of oil for about a decade. The Navegante-1 well, drilled in the South-East Basins 20 km from Villahermosa (Tabasco) found light crude oil with an APR gravity of 45 degrees, at a depth of 6800 meters. The field is 87 square kilometers in area and has estimated 3P reserves of about 300 million barrels of crude oil equivalent.

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How many oil refineries does Pemex have?

 Mexico's geography in the Press, Updates to Geo-Mexico  Comments Off on How many oil refineries does Pemex have?
Sep 222012
 

If many of the press reports about the tragic events that led to the death of 29 Pemex workers in Reynosa (Tamaulipas) are to be believed, the problem was an explosion in a Pemex oil refinery. There is just one small “detail” in these statements: there is no Pemex oil refinery in or near Reynosa!

The accident occurred during maintenance at a gas pipeline distribution center, which is a very different industrial installation to an oil refinery.

For the record, Pemex currently has six oil refineries in Mexico, shown on the map below, and listed here by their 2007 production in barrels/day (b/d):

  • Tula Refinery, Hidalgo (289,000 b/d)
  • Salina Cruz Refinery, Oaxaca (272,000 b/d)
  • Cadereyta Refinery, Nuevo León (217,000 b/d)
  • Salamanca Refinery, Guanajuato (188,000 b/d)
  • Minatitlan Refinery, Veracruz  (170,000 b/d)
  • Ciudad Madero Refinery,  Tamaulipas (141,000 b/d)
Pemex installations in Mexico. (Adapted from Fig 15.5 of Geo-Mexico). All rights reserved.

Pemex installations in Mexico (adapted from Fig 15.5 of Geo-Mexico). All rights reserved.

The six Pemex refineries produce liquid gas, gasoline, diesel, kerosene and other fuels. The state oil giant is expanding its refining capacity by building a second oil refinery, Refinería Bicentenario, in Tula (Hidalgo). Expected to cost around 10 billion dollars in total, it will have the capacity to process 300,000 barrels of crude a day and is expected to be operational sometime in 2016.

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Mexico and USA sign agreement for development of Gulf of Mexico oil reserves

 Updates to Geo-Mexico  Comments Off on Mexico and USA sign agreement for development of Gulf of Mexico oil reserves
Feb 272012
 

The USA and Mexico share the Gulf of Mexico, with periodic arguments about the precise offshore limits of each country’s jurisdiction. An earlier post includes a brief summary of the history of negotiations over this contentious maritime boundary:

The reason this boundary matters is because the deep waters of the Gulf of Mexico are thought to have massive deep-water oil and gas fields. The USA has encouraged major oil multinationals such as Shell and BP to explore relatively deep parts of the Gulf, those lying more than 500 meters or 1,640 feet below sea level.

location of doughnut holesDeveloping these fields requires advanced, specialist deep-water drilling techniques, which only a small number of major international (multinational) oil firms currently have the expertise to undertake. As was seen not long ago, accidents in these fields can be very difficult to avoid and any resulting damage very difficult to clean up:

The legal battle connected to that spill has been postponed; it had been due to start today (27 February 2012) in a New Orleans court. The April 2010 accident killed 11 oil workers and released up to 5 million barrels of oil into the Gulf.

In the Mexican sections of the Gulf of Mexico, very little oil exploration and development has yet been carried out. All oil exploration and development in Mexico is managed by state-owned oil giant Petroleos Mexicanos (Pemex), though they can contract other firms to undertake work on their behalf if or when needed. Pemex is the world’s third-largest oil producer and the largest contributor to Mexico’s federal budget. It is one of the very few oil companies worldwide that manages all aspects of the productive chain, from exploration to refining and marketing. Pemex has had more than its fair share of serious environmental issues:

Mexican experts believe that up to 29.5 billion barrels of oil might reside in Mexico’s share of the Gulf, but Pemex has little to show for almost a decade of deep-water drilling apart from some relatively minor gas finds.

A few days ago, Mexico and the USA finally signed an accord that, in the words of Mexican President Felipe Calderón, “ensures that each country can develop its corresponding oil and natural gas deposits in the trans-border area of the Gulf of Mexico.” In a joint formal statement, Mexico’s Foreign Affairs and Energy Secretariats said that the “historic” agreement “will generate the necessary legal certainty for the long-term development of resources that may be found in that area.” It remains to be seen just how quickly and efficiently Pemex can actually take advantage of the deep-water drilling opportunities that the new agreement is designed to safeguard.

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Unusual hazard: gasoline pours out of storm drains in Poza Rica, Veracruz

 Mexico's geography in the Press  Comments Off on Unusual hazard: gasoline pours out of storm drains in Poza Rica, Veracruz
Nov 262011
 

Recent floods in parts of the city of Poza Rica (Veracruz) resulted in an unusually dangerous situation. As groundwater rose following exceptionally heavy rains, a mixture of water and oil flowed out of some street drains.

street awash with oil photo

A Poza Rica street awash with oil and water. Credit: La Voz del Sureste

The precise cause is unknown. The city is blaming the state oil giant Petroleos Mexicanos (Pemex). Pemex claims that the hydrocarbons are natural tar, deposits of which underlie some parts of the region.

Whatever the cause, the flooding resulted in extremely hazardous conditions in the Chapultepec colonia, where Ébano, Nogal, Chopo, Eucalipto, Ciprés, Fresno and Sabino streets were badly affecfed, and in the Cazones colonia, where the aptly-named Pozo 13 (Well 13) was awash with oil. The mayor of Poza Rica was quoted as saying that “The rivers of crude left parked cars completely covered.”

Families living in the affected areas were evacuated temporarily for their own safety. Fortunately, local authorities, assisted by Environmental Protection officials and Pemex experts, were able to quickly bring the situation under control, without any loss of life or serious injuries.

Sources:

  • Brota hidrocarburo de drenajes en Poza Rica (Diario La Voz del Sureste online)
  • Concluyen limpieza de derrame de hidrocarburo en Poza Rica (xeu.com.mx)

 

Why does Mexico, an oil producer, need to import refined petroleum products?

 Mexico's geography in the Press  2 Responses »
Nov 162011
 

Mexico may have major reserves of petroleum but it lacks the necessary refining capacity to supply the domestic market with all the refined products such as vehicle fuels that its industrial, commercial and residential sectors demand.

As a result, Mexico has to import refined petroleum products, mainly from the USA. The high costs of these imports is a constant point of discussion in Mexico. If the country developed sufficient refining capacity, it could spend every dollar that currently goes on petro-based imports on something else, such as social services or infrastructure improvements.

Pemex imports. Credit: milenio.com
Pemex imports, by month. Figures in millions of US dollars. Credit: milenio.com

A small fortune is being spent each month on petroleum-related imports (see graph). Over the past year, the cost of imports has risen 12.3%. This is almost entirely due to higher oil prices on international markets; the volume of imports has increased only 1% over the period.

Imports of refined petroleum products will not end any time soon. Mexico does plan to build new refineries and expand its refining capacity, but they will take years to complete. Earlier this year, it was reported that Pemex engineers were adding the final touches to the blueprints for a new refinery in Tula (Hidalgo). Work began with the re-routing of existing irrigation channels and high tension power lines to take them well away from the site. It remains unclear, though, just how long it will take for this project to be completed.

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Gulf of Mexico energy reserves: updates in Mexico’s oil and gas sector

 Mexico's geography in the Press  Comments Off on Gulf of Mexico energy reserves: updates in Mexico’s oil and gas sector
Oct 252011
 

PEMEX awards first-ever contracts for the operation of oil fields.

In a move welcomed by international oil analysts, Pemex has awarded British company Petrofac Facilities Management Ltd. a contract to operate the Santuario oil fields in Tabasco. Prior to this contract, all oil field operations in Mexico since 1938 had been directly managed by Pemex.

Operations in two other areas – Magallanes and Carrizo – are also being contracted out. The areas cover 312 square kilometers between them, and have 3P (proven, probable, possible) reserves totaling 207 million barrels of crude oil equivalent. The contractual changes should attract considerable foreign investment in coming years, and are expected to play an important role in boosting national oil production from its current level of 2.5 million barrels a day.

Major natural gas discovery in the Gulf of Mexico

Pemex has announced that its Piklis 1 offshore well, located 150 km northwest of Coatzacoalcos in the Lakach field, has found a massive deposit of natural gas 5,431 meters below the water surface. The deposit holds more than 400 billion cubic feet of gas and, when production begins in 2014, it should yield 700-800 million cubic feet/day, reducing Mexico’s natural gas imports by up to 80% over the next 15 years. Compared to 2009, Pemex’s total revenues in 2010 rose 20.3% to 115 billion dollars, mainly due to high prices for petroleum and related products; export sales were 21.4% higher. Pemex is currently producing about 2.6 billion barrels of crude oil/day.

location of doughnut holes

How much does it cost to produce a barrel of oil?

According to Mexico City daily La Jornada, Pemex has maintained its enviable low costs per barrel of oil obtained (all figures in dollars):

  • 2006 $4.40
  • 2007 $4.90
  • 2008 $6.10
  • 2009 $4.90
  • 2010 $5.20

These costs per barrel are very competitive, and well below the costs recorded for other major firms as Total, BP, Exxon, Statoil, Chevron and Petrobras, who have production costs of between $6.10 and $10.00 a barrel.

Transborder oil fields

Several major oil and gas fields are known to straddle the international border in the Gulf of Mexico. Deepwater wells on the US side have already found massive deposits of oil, but, until recently, Pemex has not had the technology to drill in such deep waters. That is now changing. Pemex has begun drilling from the deepwater “Bicentenario” semi-submersible platform. The first well, Talipau-1, will descend 940 meters to the sea floor and then a further 5,000 meters into oil-bearing strata in the region known as the Cinturón Plegado de Perdido.

Pemex believes that deepwater wells in the Gulf of Mexico will eventually yield several billion barrels of oil.

The Bicentenario, built in South Korea, is capable of operating in water up to 3,000 meters deep; it is 100 meters in length, 78 meters wide and rises 138 meters above the surface, with a total weight of 58,000 metric tons. It will house up to 160 workers at a time.

In related news, bilateral talks were held in Washington DC at the end of August relating to offshore oil fields that straddle the Mexico-USA maritime boundary in the Gulf of Mexico. The talks will set the parameters for efficient and safe exploitation of these hydrocarbon reserves in the future. A formal agreement is expected to be completed before the end of this year.

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Examples of high risk settlements located near Pemex pipelines

 Mexico's geography in the Press  Comments Off on Examples of high risk settlements located near Pemex pipelines
Sep 292011
 

There have been several fatalities associated with Pemex pipeline explosions in recent years, sometimes resulting from illegal attempts to tap into the lines. They include the disastrous blast in San Martin Texmelucan, Puebla, in December 2010 that killed 28 people. It therefore comes as something of a surprise to find press reports highlighting areas where people continue to live in vulnerable locations exposed to unacceptably high risks. In this post, we look at three examples, from the states of Oaxaca, Veracruz and Hidalgo respectively.

According to a report by Martha Izquierdo in Mexico City daily Reforma, more than 300 families in the industrial port of Salina Cruz (Oaxaca) live in homes sitting atop Pemex pipelines.

Previous municipal administrations are alleged to have issued permits for their construction, in total disregard for the potential dangers involved. The current municipal and state authorities have no plans to relocate these families, despite the daily risk they face. The pipelines carry oil into Pemex’s Salina Cruz refinery.

Pemex pipeline danger sign
Pemex pipeline warning sign. Credit Revista Buzos

The areas at risk are in the Deportiva, Hugo Mayoral, San Pablo Norte and San Pablo Sur districts (colonias) of Salina Cruz. Besides the homes, there are also vehicle repair shops, restaurants and even a shopping center in the zone along the pipelines.

In Coatzacoalcos, Veracruz, near another Pemex refinery called Pajaritos, a small town called Mundo Nuevo has sprung up to house construction and refinery workers. Its 20,000 residents live in close proximity to no fewer than 26 pipelines entering and leaving the refinery and, according to this report from  Jesús Lastra Ríos, they are not even certain of what materials are being carried in the pipelines, let alone their toxicity, flammability and explosiveness. In this case, apparently, the state “risk atlas” includes details of the pipeline diameters, but not their contents.

Clearly, settlements of any kind should not be allowed so close to Pemex pipelines, but there are many similar instances in Veracruz, as there are in many other states.

In Hidalgo state recently, the Education Ministry identified three schools as having been built “in high-risk areas near Pemex pipelines”. The state is making emergency plans to relocate the schools at an estimated cost of around $5 million. The schools are in the municipalities of Villa de Tezontepec, Ajacuba and Tlaxcoapan. The Hidalgo state government has a “risk atlas” covering landslide and other risks, but, apparently, most existing maps are based mainly on events that have already occurred.

These three examples serve to illustrate the seriousness of the situation in many parts of Mexico where planning restrictions have not been effectively enforced, and where risk assessments permitting accurate mapping of the most vulnerable areas have still not been completed and are therefore not available to municipal or state authorities.

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To read more about the geography of hazards in Mexico, use the “Hazards” tag: http://geo-mexico.com/?tag=hazards

Natural hazards in Mexico are discussed in detail in chapters 2, 4 and 7 of Geo-Mexico: the geography and dynamics of modern Mexico.

Mexico’s Pemex: the government cash cow that environmentalists love to hate

 Excerpts from Geo-Mexico  Comments Off on Mexico’s Pemex: the government cash cow that environmentalists love to hate
Jul 252011
 

Petroleos Mexicanos (Pemex), the giant, state-owned petroleum company, is a symbol of national pride with revenues of over $100 billion in 2008. However, it is cash poor because most of its revenue goes to the government, covering 40% of the national budget. Pemex is $40 billion in debt and its maintenance budget is insufficient to keep its old infrastructure operating safely. About a third of Pemex’s 50,000 km of pipeline is over 30 years old and susceptible to failure.

Environmentalists love to hate Pemex because it has inflicted enormous environmental damage. The June 1979 blowout at the Ixtoc-I drilling rig in the Bay of Campeche resulted in the world’s second largest ever unintentional oil spill: over 450,000 tons, surpassed only by BP’s Deepwater Horizon, but more than ten times the size of the 1989 Exxon Valdez disaster. In November 1984 a series of explosions at a Pemex storage facility in San Juan Ixhuatepec in northern Mexico City started major fires killing about 500 people.

A massive gasoline leak into Guadalajara’s sewers in 1992 resulted in a series of explosions that resulted in over 200 deaths. In recent years numerous smaller, but still fatal, explosions and pipeline failures flooding rivers with oil have brought new attention to Pemex’s environmental damage and failing infrastructure.

cover of "como destruir el paraiso"

It has long been recognized that environmental damage is particularly severe near the conglomeration of Pemex facilities in southern Veracruz near the mouth of the Coatzacoalcos River. The river suffers from chronic heavy petroleum pollution, receiving massive doses periodically when pipelines break. Possibly the only beneficial outcome of the decades of widespread damage caused by Pemex in its principal areas of operation in Veracruz, Tabasco and Campeche was that it prompted the publication in 1983 of Cómo destruir el paraíso (How to destroy Paradise), a book which gave an immense boost to Mexico’s then fledgling environmental movement.

Federal environmental agencies have had only limited success in forcing Pemex to take corrective actions. Pemex recognizes the problems and applies each year for more maintenance funds from the government. The government, however, sets a higher priority on funding exploration since Mexico’s oil reserves are running out. Pemex is fundamental to the Mexican economy but needs investment in maintenance and must become more accountable for its environmental impacts.

Mexico’s environmental issues are analyzed in many chapters of Geo-Mexico: the geography and dynamics of modern Mexico, including chapter 30. Explore the book using Amazon.com’s Look Inside feature and buy your copy today!

Drug gangs diversify their business activities

 Mexico's geography in the Press  Comments Off on Drug gangs diversify their business activities
Jun 282011
 

Wise investors know that diversification is a sound way to protect their resources, and Mexico’s drug cartels have apparently been well educated in this regard. Recent news reports have highlighted two new ways in which Mexico’s drug cartels preserve and grow their wealth: the marketing of pirated merchandise, and the theft and sale of natural gas concentrates.

Marketing of pirated merchandise

According to an article originally published in the Dallas News, Mexico’s drug gangs now make almost as much money from pirated merchandise as from their trade in illicit drugs. By some estimates, the proliferation of pirated brand name goods has resulted in more than 450,000 manufacturing job losses and has caused the demise of many textile, clothing and shoe-making firms. Officials say that pirated videos account for as many as 9 out of every 10 movies sold across the country.

Pirated videos

"Almost original" DVDs for sale in Mexico

Theft of natural gas concentrates

Mexico’s giant Burgos natural gas field, which straddles the northern states of Tamaulipas, Nuevo León and Coahuila, lies in a zone which has become a center for violence in Mexico’s drug wars. Pemex, Mexico’s state-owned oil giant, claims that up to 40% of the gas concentrate produced has been stolen since 2006, as drug gangs have systematically targeted, kidnapped and intimidated oil workers. In some cases, cartels have even constructed their own pipelines to siphon off the gas, before filling their own tankers and driving them across the border using forged documentation.

Pemex has filed suit in Texas against eleven US firms (including Plains All American Pipeline LP, SemCrude, and Western Refining), alleging that they purchased up to 300 million dollars of fuel illegally acquired by drug gangs from Mexican pipelines and then shipped across the border. According to Pemex lawyers, the US firms may have been complicit in the forging of documents required for the gas concentrate shipments to cross the border, and profited (knowingly or unwittingly) from the trafficking of stolen fuel.

Previous posts about the geography of drug trafficking and drug cartels in Mexico:

Geo-Mexico: the geography and dynamics of modern Mexico discusses drug trafficking in several chapters. A text box on page 148 looks at trends in the drug trafficking business and efforts to control it. Buy your copy today to have a handy reference guide to all major aspects of Mexico’s geography!

How much longer will Mexico be an exporter of oil?

 Other, Teaching ideas  Comments Off on How much longer will Mexico be an exporter of oil?
Dec 152010
 

This interesting graph comes from a report published earlier this year by the Mexican Institute for Competitiveness (Instituto Mexicano para la Competitividad, IMCO). The purple line shows Mexico’s oil consumption in thousands of barrels/day from 2005 to 2009, with predicted values for the period 2010 to 2025. The yellow line shows Mexico’s oil production for the same period.

Graph of Mexico's oil production and consumption

Mexico's oil production (yellow) and consumption (purple), 2005-2025. Graph: IMCO.

Discussion questions:

  • In which year is Mexico’s consumption of oil predicted to equal its production?
  • What effects is this likely to have on Mexico’s economy?
  • What factors might cause this date to occur earlier than predicted?
  • What factors might cause this date to occur later than predicted?

A national map and summary of the methodology behind these rankings are provided in an earlier post:

For full details of the study:

Mexico’s economy and workforce are analyzed in chapters 14 to 20 of Geo-Mexico: the geography and dynamics of modern Mexico. Ask your library to buy a copy of this handy reference guide to all aspects of Mexico’s geography today! Better yet, order your own copy, which will still arrive in time for Christmas…

Mexico and USA agree to talk about oil rights in the Gulf of Mexico’s “Western Doughnut Hole”

 Books and resources, Mexico's geography in the Press  Comments Off on Mexico and USA agree to talk about oil rights in the Gulf of Mexico’s “Western Doughnut Hole”
Nov 152010
 

In 1970, the UN Law of the Sea Convention formally awarded each country the right to natural resources in its 200-mile (322 km) Exclusive Economic Zone (EEZ). Where claims overlapped, the Law of the Sea requires the competing countries to negotiate separate bilateral or multilateral agreements.

By 1979, the US and Mexico had agreed a treaty governing the basic delimitation of their respective EEZs. However, the treaty was never ratified by the US Senate. While the treaty had fixed seven points on the boundary, there were still two areas where the countries’ claims overlapped. The two portions were called the Western and Eastern Polygons (or Gaps), but were quickly nicknamed the Doughnut Holes. Together they straddle about 200 km of border.

The Western Doughnut Hole has a surface area of 17,467 square kilometers (6,744 square miles). The Eastern Doughnut Hole is about 20,000 square kilometers (7,720 square miles) and partially overlaps with the EEZ of Cuba.

location of doughnut holesTo date, no deposits of hydrocarbons have yet been found which straddle the maritime boundary, even though the Western Doughnut Hole is thought to hold untapped reserves of oil and gas. However, oil wells on one side of the boundary would likely extract some oil from the other side, hence the potential for conflict. In a parody of US politician Ross Perot’s famous 1992 line about the likely impact of the North American Free Trade Agreement (NAFTA) which would cause “a giant sucking sound” as US jobs moved south to Mexico, Mexican journalists have described the likely result of drilling in the Doughnut Hole as a “giant sucking sound” as US firms used their superior deep-water technology to suck up Mexican oil from the other side of the border.

Presidents Calderón and Obama agreed in May 2010 to extend the moratorium on any oil exploration drilling in the Western Polygon until January 2014, giving both sides time to hold joint discussions towards a permanent agreement.

The major oil spill from Deepwater Horizon has helped drive both governments to prioritize joint regulations governing oil and gas activities close to their shared border. Discussions are expected to cover not only deep water oil extraction, but also shallow water activities, including resources other than oil and gas.

For more details, see these two articles by Javier H. Estrada Estrada, Analitica Energética S.C.:

The changing political frontiers of Mexico are the subject of chapter 12 of Geo-Mexico: the geography and dynamics of modern Mexico. Oil reserves and exploitation are discussed in chapter 15.  If you have enjoyed this post, please consider purchasing a copy of Geo-Mexico so that you have your own handy reference guide to all aspects of Mexico’s geography.

Is the BP Deepwater Horizon accident the biggest Gulf of Mexico oil spill in history?

 Mexico's geography in the Press  Comments Off on Is the BP Deepwater Horizon accident the biggest Gulf of Mexico oil spill in history?
Jun 042010
 

Judging from the recent coverage in the US and world media, most people would immediately respond “Yes!”, citing the current BP spill resulting from the April 20 explosion of the Deepwater Horizon offshore rig.

Ixtoc-1 blow out

However, at present this would not be the correct answer.  The largest oil spill in the Gulf of Mexico followed the June 3, 1979 blowout from the PEMEX Ixtoc I exploratory well in the southern part of the Gulf of Mexico 100 kilometers from the Campeche Coast. Though the well was in only 160 feet of water, the leak was very difficult to plug.  The flow started at an estimated 30,000 barrels a day (b/d); but was reduced in July by pumping mud into the well.  In August PEMEX pushed steel, iron and lead balls into the well to further reduce the flow.  Though PEMEX drilled two relief wells to reduce the pressure, the leak continued for 295 days until March 23, 1980.  An estimated total of 140 million gallons oil escaped making the Ixtoc I the largest oceanic accidental oil spill in history.

The next largest accidental oceanic spill was that same year when in July, 1979 the two tankers, the Atlantic Empress and the Aegean Capitan, collided off Trinidad and spilled about 90 million gallons.  The largest oil spill ever was during the Gulf War Gulf when the Iraqi Army intentionally sabotaged the oil fields in 1991 spilling about 525 million gallons.  The second largest was the Lakeview Gusher which occurred on land near Bakersfield, California in 1909 and spilled an estimated 370 million gallons.

BP oil spill approaches the US coast

The current BP leak south of Louisiana spilled an estimated 19 to 39 million gallons during its first six weeks.  At this rate, it could surpass the Ixtoc I spill between by September or October.  Everyone hopes that the leak is stopped long before then…

Update (16 July 2010). BP has capped the well, and no more oil is leaking into the ocean. The total volume of oil that has already spilled from the BP well is estimated at between 90 and 180 million gallons, comparable to, and possibly even exceeding, the Ixtoc I spill.

Update (16 August 2010). A team of US scientists now estimates that BP’s Macondo oil well, which exploded on 20  April 2010 spewed 170 million gallons of crude into the Gulf of Mexico during the 87 days before 15 July, when it was  finally capped. A further 34 million gallons of oil were captured by BP during efforts to cap the well. This makes the BP disaster the world’s largest accidental offshore oil spill ever.

More details? Wikipedia’s extensive account of the Deepwater Horizon oil spill.

Map of the state of Campeche, Mexico

 Maps  Comments Off on Map of the state of Campeche, Mexico
May 082010
 

The state of Campeche (see map)  has an area of 57,925 square kilometers and a population of 608,535 (2010 estimate).

Its distinctive landscapes include a variety of coastal features and inland karst (limestone scenery). The state’s capital city  is Campeche, a colonial city which still preserves some of its ancient city walls and has UNESCO World Heritage status.  The most important city in the state economically is Ciudad del Carmen “the pearl of the Gulf”, center of the state’s involvement in Mexico’s oil industry, and an important base for offshore drilling.

Map of Campeche. Copyright 2009 Tony Burton. All rights reserved.

In the interior, the biosphere reserve of Calakmul has become an important tourist attraction.

The state’s economy looks set for a significant boost in coming decades as several major projects come to fruition. These include the first 6,000 hectares of a 30,000-hectare project on the coast of the Laguna de Términos for the commercial farming of rice and beans, and a similar sized forestry plantation project near Champoton specializing in the growing of scarce tropical hardwoods such as teak and mahogany.

Oil in the Gulf of Mexico (Canwest headline writers take note).

 Mexico's geography in the Press  Comments Off on Oil in the Gulf of Mexico (Canwest headline writers take note).
Mar 262010
 

Inaccuracies involving Mexico occur all too frequently in the press. This is the first of an occasional series recording such Mexico-related imprecisions.

Canwest News Service claims to be “the best source in Canada for editorial content because we have more journalists than any other organization.” Maybe its journalists are better than its headline writers.

The evidence? Canwest’s report (20 March 2010) about a recent oil discovery by Shell in the Gulf of Mexico, headlined Mexican oil find ‘significant’. Apparently, Canwest’s headline writers do not realize that much of the Gulf of Mexico is not actually Mexican. A more accurate title for the Canwest story would have been US oil find ‘significant‘.

The USA and Mexico share the Gulf, with periodic arguments about the precise offshore limits of each country’s jurisdiction. A few years ago, it was alleged, probably without foundation, that the USA was already  “sucking the oil” out from joint oil fields that straddled the divide.

What is certain is that the USA has encouraged the development of oil fields in relatively deep water (more than 500 meters deep or 1,640 feet) in the Gulf, which require advanced deep-water drilling techniques, and the expertise of Shell and other multinational oil firms.

However, in Mexico, all oil exploration in managed by state-owned oil giant Petroleos Mexicanos (Pemex). Mexican experts believe that up to 29.5 billion barrels of oil might reside in Mexico’s share of the Gulf, but Pemex has little to show for 7 years of deep water drilling apart from some relatively minor gas finds.

Only a few days before the Canwest story, though, Pemex did announce two  important new finds in shallow waters in the Gulf of Mexico. Ayatzil-Tekel, found in 2008, holds a total of one billion barrels of proven, probable and potential (3P) reserves of super-heavy crude. Tsimin-Xux, found last year, has a similar amount of super-light crude.

Mexico’s total 3P reserves now stand at about 46 billion barrels, which would last more than 40 years at current rates of extraction.

Oil exports to USA

 Updates to Geo-Mexico  Comments Off on Oil exports to USA
Feb 062010
 

According to the US Department of Commerce, Mexico overtook Saudi Arabia to become the third largest oil exporter to the USA in 2009, behind Canada and Venezuela. Mexico’s exports of crude to the USA last year totaled almost 380 million barrels.
Mexico had been the second largest exporter of oil to the USA in 2007, but fell back to fourth in 2008.

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