Mexican oil

Great article in today's WSJ about Mexico's state oil firm, Pemex. Apparently -- and who would have guessed -- nationalization hasn't worked out so well. In fact, it's been absymal:

Today, the philosophy that created Petróleos Mexicanos threatens to ruin it. Pemex, as it is called, is running out of easy oil fields to drill, and it is barred by the Mexican constitution from tying up with foreign companies that could bring in advanced technology and help it find more oil. In natural gas, Pemex's discovery efforts have been so weak that the country must now import from the U.S. even though energy executives think Mexico's gas resources are so big that they could generate billions of dollars a year in exports if tapped. Even after big job cuts and a cleanup of corruption, the company remains among the most inefficient in the industry.

:

...It takes 27 Pemex workers to operate a well versus an industry average of 10.

:

...Shorn of profits, Pemex has borrowed heavily to pay for investments and now has $44 billion in debt. It replaces about one-quarter of the oil it produces each year with new reserves, much better than before but still far below the general industry target of 100% replacement.

With capital short it misses many opportunities. Mexico's northern Burgos gas basin shares the same geology as south Texas and is roughly the same size. Yet south Texas boasts 85,000 wells and produces 3.99 billion cubic feet of gas per day, while Burgos has 5,000 wells and produces one-quarter of the Texas amount, according to Mexico's energy ministry. In the years between 1999 and 2003, when the price of natural gas in North America shot up, the U.S. drilled an average of 10,000 new wells a year and Canada 20,000. In Mexico, Pemex managed only a few hundred new wells each year.

:

...Mexican motorists pay about 10% to 20% more at the pump than Americans.

Mexican President Vicente Fox has made moves to introduce foreign investment into Pemex -- something that is currently prohibited -- but has run into considerable opposition from the PRI-dominated Congress:

"Oil built our country. Why would we want to give it up to the Americans?" asks Manuel Bartlett, a leading PRI senator.

This part actually made me laugh out loud. Um, Manuel, before you strain your arm from patting yourself on the back let's get something straight: you haven't built anything. Your country is a member of the third world. Millions of your citizens have emigrated to el Norte in hopes of finding a better life.

:

Maybe it's time to give foreign investment a try, even if it means letting in the dreaded gringos.