New natural-gas discoveries double Mexican estimates
New natural gas finds in northern Mexico, close to the US border, have doubled estimates of Mexico's proven gas reserves. The new finds -- totaling an estimated 200 trillion cubic feet -- are unique in that they have virtually no significant crude oil mixed in with the natural gas. Most other recent finds elsewhere in Mexico are a heavy mixture of oil and gas. This latest discovery is in the Sabinas Valley of Coahuila and Nuevo Leon States.Skip to next paragraph
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It is the latest element in Mexico's dramatic 10-year saga of oil and natural gas finds, which have propelled the Latin American nation into the major leagues of oil producers.
Just 10 years ago, Mexico was importing oil, and the future looked rather bleak for the Mexican economy. Today, Mexico is the world's fifth-largest oil producer. Tomorrow, if oil discoveries continue, this nation could become the rival of Saudi Arabia as holder of the world's largest oil reserves. It is a remarkable story.
Overnight, it seems, oil has become a black horn of plenty for a country whose geographic shape, a cornucopia, had long seemed a sad deception.
Oil has become the centerpiece of Mexico's economic wealth. It is also creating new problems for the country. President Jose Lopez Portillo is deliberating whether to hold down oil production in hopes that Mexico will not be a one-product country, like Saudi Arabia, or even like Venezuela, its neighbor in the Americas.
But oil is clearly the main factor in the economy. Oil dollars, to the tune of $14 billion in 1980 and a projected $20 billion in 1981, are pouring in, expanding Mexico's economy at an unprecedented 8 percent annually. Much of this income is being channeled into industrial expansion -- because the Lopez Portillo administration has made the calculated decision that this will best advance Mexico's economic and social fortunes over the long haul.
In the short term, however, oil dollars are fanning an inflation rate of over 30 percent, gouging the pocketbooks of Mexico's middle class and making it harder than ever on the half of the country's population who are poor.
Moreover, the country's infrastructure -- highways and railroads, for example -- simply cannot cope with the expansion. Roads were guilt to handle a fifth of the traffic they now do. Water is in short supply for both the sprawling urban areas like Mexico City (on its way to becoming the world's largest city, with 17 million people today) as well as for agriculture.
Indeed, agriculture could prove the achilles' heel of Mexico's remarkable economic growth. Farming is the weakest sector of the economy. A good part of oil revenue goes to import food from the United States -- a situation that is common in oil-developing lands.
The absurdity of it all is dawning on mexicans, but the answers to the dilemma are not yet in sight. There are, however, bright spots:
* There is new business in supplies that cater to the oil industry, and for next decade or so this industry is expected to grow.
* Pipeline construction, offshore oil rigs, tank "farms" for oil storage, and refinery construction are putting thousands upon thousands of Mexicans to work. One estimate suggests that oil-related supply and construction activities generate more than$4 billion a year in new income. No other industry in Mexico's history has been so profitable.
Mr. Lopez Portillo and Jorge Diaz Serrano, director of Petroleos Mexicanos (Pemex), the state oil company, are holding production at about 2.75 million barrels daily, about a million barrels of which stay at home.
Another 1.75 million barrels are exported under a formula that allows no nation to receive more than half the total exports and no nation to get more than 20 percent of its oil from Mexico.
Thus, while the US receives the largest share of Mexican oil, it is less than half of all exports and will remain so despite strong pressure from Washington for more.
Only about 13 percent of all of Mexico's national territory has been covered in the exploration efforts. Many experts think there is a lot more oil to be discovered.
The biggest producing wells are in Chiapas and Tabasco States, in Mexico's south, but new fields, as well as older ones, near the cities of Tampico and Vera Cruz and in the Poza Rica region are also producing large amounts of oil. Offshore sites, particularly in the Bay of Campeche, are each yielding a remarkable 30,000 barrels daily.
Pemex geologists roaming the countryside find that some oil fields are immediately exploitable, while others await new technology because of difficult terrain of mining conditions.
Natural gas finds, like those in the Sabinas Valley of northern Mexico, also keep popping up.
Mexico regularly includes natural gas and crude oil together in its total reserve estimates based on a complicated formula in which at least two-thirds or more is crude and the rest gas. This practice is perhaps logical, since most new discoveries in the past six years, other than the Sabinas Valley finds, have included a heavy mixture of oil and gas.
"What you can say is that we have a lot of petroleum; we are actually floating on a sea of oil," says Mr. Diaz Serrano.
"We are beginning to live up to our geographic shape: as the horn of plenty," another Pemex official comments. "It is all a new experience for a country that for so long seemed so poor. Now it is a question of using all this wealth wisely. Getting it out of the ground is no real problem. Putting it out of the ground is no real problem. Putting the revenue to good use and making sure that the country grows in the most orderly way possible is our big dilemma. Here we have few guidelines, except for countries that have allow allowed oil to dominate too much.
"So we flounder a little and hope our an swers prove correct."