Pemex A Crumbling Company

Mexico's state oil facility plagued by aging, spills.

Published: 30-Jan-2005

COATZACOALCOS, Mexico - Alejandro Mendoza, a supervisor for Mexico's state-owned Pemex oil company, gazes out at a pipeline that dumped thousands of barrels of crude into the city's river.

"It's as old as I am," he notes. "It was built in 1976, the year I was born."

Beset by diminished reserves, scandals, accidents and opposition to nearly every reform, the company formally known as Petroleos Mexicanos seems frozen in time. Created out of a nationalization of the oil industry in 1938, it hasn't built a refinery since 1976 and its infrastructure is crumbling, causing spills like the one on Dec. 22.

Soon after, Dec. 31, thousands of gallons spilled from a pipeline in neighboring Tabasco. A week after that, on Jan. 11, a gas well exploded in nearby Tlacuilolapan.

No injuries were reported in the Jan. 11 blast, but four people were killed and two dozen were burned in a June 2003 rupture and explosion of a pipeline farther west, in the town of La Balastrera.

"We've lost all confidence. We've lost all our peace of mind," said Sara Romero Reyes, whose husband, Diego Dominguez Arenas, has scarring across his face, arms and back from the 2003 explosion.

Asked what Pemex should do, Romero Reyes said, "They should just go away . . . go."

Dec. 22's spill injured hundreds of birds and animals and shut down fisheries for months to come. It all marks a change from the traditional acceptance of the company along the Gulf Coast, where Pemex traditionally has provided the best jobs.

"Pemex is a necessary evil. It harms us, but it is good for many people. It builds roads, hospitals, schools," said Rosendo Quintana, 40, cooperative leader who expects about 1,000 fishers will be out of work because of the spill.

Pemex Director Luis Ramirez Corzo acknowledged that "we have a very serious maintenance backlog."

The company said last week it needed $3 billion to carry out urgent repairs.

Jose Luis Luege, the attorney general for environmental protection, called the accidents "a giant warning light" and has threatened to shut down dangerous ducts even "if it means shutting down gasoline to half the country."

On Jan. 16, Luege's agency closed a corroded, aging export pipeline that spilled 3,000 gallons of oil in Tabasco on Dec. 31. The next day, his office ordered the Tlacuilolapan well closed because Pemex hadn't carried out environmental impact studies.

Pemex hands over all its income to the government, which depends heavily on oil revenue. Congress returns some money to fund maintenance, but 85 percent of the 2005 budget is earmarked for badly needed exploration.

Damian Garcia, an environmental officer, said that the company can continue to patch its existing infrastructure, "but in the long run, it's more expensive."

Exploration remains top priority. "If we don't exploit potential deep-water reserves, within 10 years we could become an oil-importing nation," Energy Secretary Fernando Elizondo said.

The company is expected to produce 3.44 million barrels a day of crude oil in 2005, exporting 1.9 million barrels a day at a projected average price of $27 per barrel.

Outside swamps of the Gulf Coast, Pemex seems to founder in a bureaucratic morass, with responsibility for ducts split between the company's divisions: refineries, gas, exploration and production.

"Nobody's in charge of the pipeline system," said George Baker of Houston newsletter Mexico Energy Intelligence.

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