![Oil production Mexico](https://upload.wikimedia.org/wikipedia/commons/5/5e/Oil_production_Mexico.svg)
The
petroleum industry
The petroleum industry, also known as the oil industry or the oil patch, includes the global processes of exploration, extraction, refining, transportation (often by oil tankers and pipelines), and marketing of petroleum products. The larges ...
in Mexico makes
Mexico
Mexico (Spanish: México), officially the United Mexican States, is a country in the southern portion of North America. It is bordered to the north by the United States; to the south and west by the Pacific Ocean; to the southeast by Guatema ...
the eleventh largest producer of
oil
An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) & lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturated ...
in the world and the thirteenth largest in terms of net exports. Mexico has
the seventeenth largest oil reserves in the world, and it is the fourth largest
oil producer in the Western Hemisphere behind the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
,
Canada
Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by tot ...
and
Venezuela
Venezuela (; ), officially the Bolivarian Republic of Venezuela ( es, link=no, República Bolivariana de Venezuela), is a country on the northern coast of South America, consisting of a continental landmass and many islands and islets in th ...
. Mexico is not a member of the
OPEC
The Organization of the Petroleum Exporting Countries (OPEC, ) is a cartel of countries. Founded on 14 September 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela), it has, since 1965, been headquart ...
(the Organization of Petroleum Exporting Countries) or any petroleum production related organizations, but since 1994 it is a member of the
North American Free Trade Agreement
The North American Free Trade Agreement (NAFTA ; es, Tratado de Libre Comercio de América del Norte, TLCAN; french: Accord de libre-échange nord-américain, ALÉNA) was an agreement signed by Canada, Mexico, and the United States that crea ...
.
The petroleum sector is crucial to the
Mexican economy
The economy of Mexico is a developing mixed-market economy. It is the 15th largest in the world in nominal GDP terms and the 13th largest by purchasing power parity, according to the International Monetary Fund. Since the 1994 crisis, admin ...
; while its oil production has fallen in recent years, oil revenues still generate over 10% of Mexico's export earnings. High taxes on the revenues of Pemex provide about a third of all the tax revenues collected by the Mexican government.
History
Development of the oil industry in Mexico before 1938
![Edward L](https://upload.wikimedia.org/wikipedia/commons/b/b8/Edward_L._Doheny.jpg)
Petroleum was known in Mexico before the arrival of the Spaniards and used by the natives for incense and to repair canoes. In Mexico's colonial era (1521-1821), ranchers lost cattle to tar pits in the Gulf Coast Region,
[Brown, "Petroleum: Pre-1938" p. 1076.] so it was considered more of a hazard than a valuable resource. Exploratory wells were first drilled in Mexico in 1869 by U.S. entrepreneurs.
In 1846, the first modern oil well in the world was drilled in the South Caucasus region of Russian Empire, on the Absheron Peninsula north-east of Baku (in settlement Bibi-Heybat).
Development of petroleum took place as Mexico's railway system was developed in the 1880s and 1890s, allowing petroleum to reach export markets; before that there was no internal market for Mexican petroleum and no way for petroleum to be easily exported.
By 1901, commercial production of crude oil in Mexico had begun. California oil entrepreneur
Edward L. Doheny
Edward Laurence Doheny (; August 10, 1856 – September 8, 1935) was an American oil tycoon who, in 1892, drilled the first successful oil well in the Los Angeles City Oil Field. His success set off a petroleum boom in Southern California, a ...
opened the Ebano oil field along the Mexican Central Railway.
In 1889, the Veracruz legislature passed a law titled ''Ley sobre subdivision de la propiedad territorial'', under which the state gave land titles to private owners. The privatization of land allowed state to declare any land that was not privatized to be public land. In 1883, the Mexican Congress passed the ''Ley de Colonización'', which allowed private land companies to survey public lands for the purpose of subdivision and settlement. For their work surveying this public land, the company would receive one-third the surveyed land, and gave them the opportunity to buy the remaining two-thirds at a very low cost.
[Santiago, Myrna I. ''The Ecology of Oil : Environment, Labor, and the Mexican Revolution, 1900-1938.'' Cambridge: Cambridge University Press, 2006. Print. Studies in environment and history; Studies in environment and history. pg 51] This allowed more than 132 million acres of Mexican land to be owned by the surveyors. By the early twentieth century the reapportionment was complete.
The law divided former communal land and large estates into small, privately owned lots. Dealing with private landowners made it easier for foreign oil companies to buy or lease oil property. Many property owners considered the up-front bonus they received for leasing their property to be “easy money.” A typical oil lease allowed the property owners remain on the land; if the company did not start producing oil from the land within the term of the lease, commonly five years, the company would leave, and the owner still had the lease bonus money.
July 1908, British entrepreneur
Weetman Pearson struck oil in San Diego de la Mar, a co-proprietorship, that had been divided up into 87 individual lots, due to the privatization of lands. In 1889, President
Porfirio Díaz
José de la Cruz Porfirio Díaz Mori ( or ; ; 15 September 1830 – 2 July 1915), known as Porfirio Díaz, was a Mexican general and politician who served seven terms as President of Mexico, a total of 31 years, from 28 November 1876 to 6 Decem ...
had contracted British Weetman Pearson, to engineer several major projects in Mexico, such as the drainage of Mexico City, the dredging of Veracruz harbor, and the building of the southern Vera Cruz Tehuantepec Isthmus railroad line. Mexican President
Porfirio Díaz
José de la Cruz Porfirio Díaz Mori ( or ; ; 15 September 1830 – 2 July 1915), known as Porfirio Díaz, was a Mexican general and politician who served seven terms as President of Mexico, a total of 31 years, from 28 November 1876 to 6 Decem ...
also encouraged Pearson to develop petroleum reserves, resulting in the highly successful ''Compañia Mexicana de Petróleo "El Águila"'', exploiting the Potrero del Llano reserves located near the central
Gulf of Mexico
The Gulf of Mexico ( es, Golfo de México) is an oceanic basin, ocean basin and a marginal sea of the Atlantic Ocean, largely surrounded by the North American continent. It is bounded on the northeast, north and northwest by the Gulf Coast of ...
coast town of
Tuxpan
Tuxpan (or Túxpam, fully Túxpam de Rodríguez Cano) is both a municipality and city located in the Mexican state of Veracruz. The population of the city was 78,523 and of the municipality was 134,394 inhabitants, according to the INEGI census ...
.
This further fueled a massive land rush by the foreign oil companies. The two main companies Edward Doheny's Huasteca Petroleum, and Weetman Pearson's El Aguila were able to secure a large sum of land rights through ownership, and leasing. By 1922 Huasteca petroleum owned or leased 1,223,780 acres, and El Aguila 1,890,286 acres of land respectively. Pearson subsequently sold his shares "El Aguila" to
Royal Dutch Shell
Shell plc is a British multinational oil and gas company headquartered in London, England. Shell is a public limited company with a primary listing on the London Stock Exchange (LSE) and secondary listings on Euronext Amsterdam and the New Yo ...
, although "El Aguila" continued to have a majority of British investors. Mexico became an oil exporting nation in 1911, with the first shipment leaving the Gulf Coast port of Tampico.
Article 27 of the
constitution of 1917
The Constitution of Mexico, formally the Political Constitution of the United Mexican States ( es, Constitución Política de los Estados Unidos Mexicanos), is the current constitution of Mexico. It was drafted in Santiago de Querétaro, in th ...
granted the Mexican government the permanent and complete rights to all subsoil resources. This would cause conflicts between the Mexican government and foreign companies, and “lay basis for a twenty-one-year struggle” between Mexico and foreign oil companies. Foreign oil companies questioned if Article 27 would be applied retroactively, leading to expropriation of oil rights by the Mexican government. At the end of World War I, the United States was concerned with rapid exhaustion of domestic oil resources. United States imports of crude oil, nearly all of it from Mexico, rose rapidly from 30 million barrels in 1917, to more than 100 million barrels per year from 1920 to 1922, before declining. The demand for Mexican oil imports was increased by the United States conservation of oil movement. The United States saw Mexican oil as an opportunity and the US business interests were heavily backed by the United States government
In 1925, President
Plutarco Elías Calles
Plutarco Elías Calles (25 September 1877 – 19 October 1945) was a general in the Mexican Revolution and a Sonoran politician, serving as President of Mexico from 1924 to 1928.
The 1924 Calles presidential campaign was the first populist ...
decreed that foreign oil companies must register their titles and limited their concessions to fifty years.
Starting in 1918 and extending into the 1920s, Mexico was second behind the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
in petroleum output and led the world in oil exports. Oil production and exports from 1921 to 1925 were at historic high levels. In 1921, production was, in barrels of 42 gallons each, 193 million, with exports of 172 million. Production and exports declined each year through 1925, when production was 116 million, with exports of 97 million.
[Cline, ''The United States and Mexico'', p. 418, chart 13 "Production, Exports, and Imports of Petroleum, 1921-1947", utilizing sources from the ]Banco de México
The Bank of Mexico ( es, Banco de México), abbreviated ''BdeM'' or ''Banxico,'' is Mexico's central bank, monetary authority and lender of last resort. The Bank of Mexico is autonomous in exercising its functions, and its main objective is to ac ...
, Annual Report for 1947, in Committee on Interstate and Foreign Commerce, "Fuel Investigation: Mexican Petroleum," 80th Congress, 2nd session, HR 2470, Washington D.C., Government Printing Office 1949, p. 8. In 1926 production dropped below 100 million barrels, and in 1942, net exports dropped below 10 million barrels.
In the 1930s, as a consequence of worldwide economic depression, the lack of new oil discoveries, increased taxation, political instability, and
Venezuela
Venezuela (; ), officially the Bolivarian Republic of Venezuela ( es, link=no, República Bolivariana de Venezuela), is a country on the northern coast of South America, consisting of a continental landmass and many islands and islets in th ...
's emergence as a more attractive source of petroleum, output fell to just 20% of its 1921 level. Production began to recover with the 1932 discovery of the
Poza Rica
Poza Rica (), formally: Poza Rica de Hidalgo is a city and its surrounding municipality in the Mexican state of Veracruz. Its name means "rich well/pond". It is often thought that the name came to be because it was a place known for its abundance ...
field near
Veracruz
Veracruz (), formally Veracruz de Ignacio de la Llave (), officially the Free and Sovereign State of Veracruz de Ignacio de la Llave ( es, Estado Libre y Soberano de Veracruz de Ignacio de la Llave), is one of the 31 states which, along with Me ...
, which would become Mexico's main source of petroleum for the next several decades.
1938 expropriation
![Logo Petróleos Mexicanos](https://upload.wikimedia.org/wikipedia/commons/9/99/Logo_Petr%C3%B3leos_Mexicanos.svg)
The expropriation of lands by the Mexican government started with the ratification of the Mexican constitution of 1917. By nationalizing the land, Mexico and the people would be better able to control working conditions, pay, and environmental impact. However, this expropriation of land further marginalized the indigenous population.
In 1935, all companies in the business of oil production in Mexico were foreign companies. Labor practices in these companies poorly benefited the workers since the companies were able to block the creation of
labor unions
A trade union (labor union in American English), often simply referred to as a union, is an organization of workers intent on "maintaining or improving the conditions of their employment", ch. I such as attaining better wages and benefits ( ...
through legal and illegal tactics. Despite legal opposition, the
Confederation of Mexican Workers
The Confederation of Mexican Workers (''Confederación de Trabajadores de México'' (CTM)) is the largest confederation of labor unions in Mexico. For many years, it was one of the essential pillars of the Partido Revolucionario Institucional ( ...
was created and proposed a project of general contracts for each oil company. A strike was planned to push towards an agreement but the matter went to the court instead. On December 18, the
Arbitration Board declared in favor of the union and ordered the oil companies had to pay 26 million
peso
The peso is the monetary unit of several countries in the Americas, and the Philippines. Originating in the Spanish Empire, the word translates to "weight". In most countries the peso uses the Dollar sign, same sign, "$", as many currencies na ...
s in lost wages because of the strike.
"Faced with political difficulties in Mexico, as well as the intrusion of saltwater into some of the major producing field, the United States and other foreign oil companies began to seek other sources of supply particularly in Venezuela, and interest in the middle east intensified as well." Foreign oil companies continued to pump as much oil as quickly as possible for exportation, until the Mexican expropriation in 1938, “Ignoring reasonable conservation measures to export as much oil as quickly as possible”. “Mexico only found itself compelled by the rebellious and defiant conduct of the oil companies that is decreed the expropriation of their properties.” The United States refusal to recognize and work with Mexico's post-revolution government, along with a very hazardous work environment that lead to workers strikes and revolts, forced the Mexican government to expropriate the land.
On March 18, 1938, Mexican President
Lázaro Cárdenas
Lázaro Cárdenas del Río (; 21 May 1895 – 19 October 1970) was a Mexican army officer and politician who served as president of Mexico from 1934 to 1940.
Born in Jiquilpan, Michoacán, to a working-class family, Cárdenas joined the M ...
announced the
nationalization
Nationalization (nationalisation in British English) is the process of transforming privately-owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization usually refers to pri ...
of all oil resources and facilities in Mexico. The government assumed control of all property of nearly every oil company operating in Mexico, including machinery, equipment, buildings, refineries, gas stations, ships and pipelines. At the time, the country's oil industry was dominated by
Mexican Eagle Petroleum Company
Compañía Mexicana de Petróleo El Águila SA, (''El Águila'' for short, called in English the Mexican Eagle Oil Company or Mexican Eagle Petroleum Corporation, was a Mexican oil company in the 20th century. The company, established in 1909, pro ...
(a subsidiary of
Royal Dutch Shell
Shell plc is a British multinational oil and gas company headquartered in London, England. Shell is a public limited company with a primary listing on the London Stock Exchange (LSE) and secondary listings on Euronext Amsterdam and the New Yo ...
) and American oil firms such as
Jersey Standard
ExxonMobil Corporation (commonly shortened to Exxon) is an American multinational oil and gas corporation headquartered in Irving, Texas. It is the largest direct descendant of John D. Rockefeller's Standard Oil, and was formed on November 3 ...
and
Standard Oil of California.
On June 7, 1938, the state-owned company
Petróleos Mexicanos
Pemex (a portmanteau of Petróleos Mexicanos, which translates to ''Mexican Petroleum'' in English; ) is the Mexican state-owned petroleum company managed and operated by the Mexican government. It was formed in 1938 by nationalization and ex ...
(or "Pemex") was founded, with exclusive rights over exploration, extraction, refining, and commercialization of oil in Mexico.
International reaction to expropriation
The British government demanded immediate compensation for the Mexican Eagle Petroleum Company. However, the company had been founded as a Mexican company under Mexican law. Therefore, the British government couldn't intervene directly in the company's favor. Diplomatic relations between the countries were soon broken, but not before Mexico paid a debt claimed by the British government for damages caused during the
Mexican Revolution
The Mexican Revolution ( es, Revolución Mexicana) was an extended sequence of armed regional conflicts in Mexico from approximately 1910 to 1920. It has been called "the defining event of modern Mexican history". It resulted in the destruction ...
.
The government of the
Netherlands
)
, anthem = ( en, "William of Nassau")
, image_map =
, map_caption =
, subdivision_type = Sovereign state
, subdivision_name = Kingdom of the Netherlands
, established_title = Before independence
, established_date = Spanish Netherl ...
sent business manager Arthur Methöfer to defend the interests of their citizens. Methöfer refused to recognize the legality of the expropriation and demanded the immediate return of expropriated property or immediate payment as compensation. Mexican
Secretary of Foreign Affairs In many countries, the Ministry of Foreign Affairs is the government department responsible for the state's diplomacy, bilateral, and multilateral relations affairs as well as for providing support for a country's citizens who are abroad. The entit ...
Eduardo Hay reaffirmed that the Mexican government was willing and committed to pay compensation within the stipulated time period. As the Dutch government began to realize the Cárdenas government would not reverse the expropriation decree, the Anglo-Dutch company
Royal Dutch Shell
Shell plc is a British multinational oil and gas company headquartered in London, England. Shell is a public limited company with a primary listing on the London Stock Exchange (LSE) and secondary listings on Euronext Amsterdam and the New Yo ...
decided to pressure Mexico without the help of the government.
Negotiations with the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
went differently. During Cárdenas's speech, he claimed that the resources in the subsoil belonged to the Mexican nation, and therefore would not be considered as part of the compensation to foreign businesses. The companies, however, assumed compensation should include the fuel that was estimated to be found in the soil. President
Franklin D. Roosevelt
Franklin Delano Roosevelt (; ; January 30, 1882April 12, 1945), often referred to by his initials FDR, was an American politician and attorney who served as the 32nd president of the United States from 1933 until his death in 1945. As the ...
in a public speech recognized the right of Mexico to expropriate the oil properties and agreed to accept compensation for the properties of the companies excluding underground oil.
Boycott
In retaliation for the expropriation,
Standard Oil of New Jersey
ExxonMobil, an American multinational oil and gas corporation presently based out of Texas, has had one of the longest histories of any company in its industry. A direct descendant of John D. Rockefeller's Standard Oil, the company traces its root ...
and
Royal Dutch Shell
Shell plc is a British multinational oil and gas company headquartered in London, England. Shell is a public limited company with a primary listing on the London Stock Exchange (LSE) and secondary listings on Euronext Amsterdam and the New Yo ...
began a boycott against Mexico.
[Meyer, 2000; 877] The companies tried to prevent Mexico from acquiring chemicals necessary to the process of
refining
{{Unreferenced, date=December 2009
Refining (also perhaps called by the mathematical term affining) is the process of purification of a (1) substance or a (2) form. The term is usually used of a natural resource that is almost in a usable form, b ...
(such as
tetraethyl lead
Tetraethyllead (commonly styled tetraethyl lead), abbreviated TEL, is an organolead compound with the formula Pb( C2H5)4. It is a fuel additive, first being mixed with gasoline beginning in the 1920s as a patented octane rating booster that al ...
), and specialized machinery. This plan was supported by several American companies which refused to sell certain products to Mexico such as drilling equipment, pumps,
ethyl fluid
Tetraethyllead (commonly styled tetraethyl lead), abbreviated TEL, is an organolead compound with the formula Pb( C2H5)4. It is a fuel additive, first being mixed with gasoline beginning in the 1920s as a patented octane rating booster that all ...
, air compressors and electrical equipment.
Soon after, students at the
Instituto Politécnico Nacional
The National Polytechnic Institute of Mexico ( es, Instituto Politécnico Nacional de México; ), abbreviated IPN, is one of the largest public universities in Mexico with 171,581 students at the high school, undergraduate and postgraduate level ...
and the
National Autonomous University of Mexico
The National Autonomous University of Mexico ( es, Universidad Nacional Autónoma de México, UNAM) is a public research university in Mexico. It is consistently ranked as one of the best universities in Latin America, where it's also the bigges ...
were able to synthesize tetraethyl lead, a popular
gasoline additive at the time used for boosting octane ratings. Gradually, companies that sold parts and equipment gave in as Mexico opted to buy from
Germany
Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
,
Italy
Italy ( it, Italia ), officially the Italian Republic, ) or the Republic of Italy, is a country in Southern Europe. It is located in the middle of the Mediterranean Sea, and its territory largely coincides with the homonymous geographical re ...
and other European countries.
The U.S. State Department assisted with the boycott in various ways. Purchases of Mexican silver were suspended, which represented an average amount of $30 million annually, although after 1938 sales were resumed in smaller quantities and lower prices.
In the United States, government departments prohibited the use of Mexican fuel. Preference was given to the importation of
Venezuela
Venezuela (; ), officially the Bolivarian Republic of Venezuela ( es, link=no, República Bolivariana de Venezuela), is a country on the northern coast of South America, consisting of a continental landmass and many islands and islets in th ...
n oil. The import tax for Mexican oil increased from 15 to 50 cents on the dollar while Venezuelan oil was only taxed at 25 cents.
Shipping agencies were pressured not to transport Mexican oil.
World War II
In 1938, Mexico had voted during the
Pan-American Conference
The Conferences of American States, commonly referred to as the Pan-American Conferences, were meetings of the Pan-American Union, an international organization for cooperation on trade. James G. Blaine, a United States politician, Secretary ...
in favor of establishing continental solidarity against non-American and non-democratic influences, an allusion to the governments of
Adolf Hitler
Adolf Hitler (; 20 April 188930 April 1945) was an Austrian-born German politician who was dictator of Nazi Germany, Germany from 1933 until Death of Adolf Hitler, his death in 1945. Adolf Hitler's rise to power, He rose to power as the le ...
,
Benito Mussolini
Benito Amilcare Andrea Mussolini (; 29 July 188328 April 1945) was an Italian politician and journalist who founded and led the National Fascist Party. He was Prime Minister of Italy from the March on Rome in 1922 until his deposition in 194 ...
, and
Emperor Hirohito
Emperor , commonly known in English-speaking countries by his personal name , was the 124th emperor of Japan, ruling from 25 December 1926 until his death in 1989. Hirohito and his wife, Empress Kōjun, had two sons and five daughters; he was ...
. Nonetheless, owing primarily to the boycott, Mexico maintained economic and commercial relations with these countries. Gradually, commercial and diplomatic relations between Mexico and
Germany
Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
and
Italy
Italy ( it, Italia ), officially the Italian Republic, ) or the Republic of Italy, is a country in Southern Europe. It is located in the middle of the Mediterranean Sea, and its territory largely coincides with the homonymous geographical re ...
deteriorated. After the Japanese
attacked Pearl Harbor
The attack on Pearl HarborAlso known as the Battle of Pearl Harbor was a surprise military strike by the Imperial Japanese Navy Air Service upon the United States against the naval base at Pearl Harbor in Honolulu, Territory of Hawaii, j ...
in 1941, Mexico cut diplomatic ties with Germany and Italy.
Cárdenas's hand picked successor,
Manuel Ávila Camacho
Manuel Ávila Camacho (; 24 April 1897 – 13 October 1955) was a Mexican politician and military leader who served as the President of Mexico from 1940 to 1946. Despite participating in the Mexican Revolution and achieving a high rank, he cam ...
, was elected president of Mexico in 1940. With the outbreak of
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
, "the quarrel over oil effectively ended" between the U.S. and Mexico.
Franklin Delano Roosevelt
Franklin Delano Roosevelt (; ; January 30, 1882April 12, 1945), often referred to by his initials FDR, was an American politician and attorney who served as the 32nd president of the United States from 1933 until his death in 1945. As the ...
was more interested in forming a strategic alliance with Mexico to create an anti-fascist front than in protecting private companies and had already proclaimed the
Good Neighbor Policy
The Good Neighbor policy ( ) was the foreign policy of the administration of United States President Franklin Roosevelt towards Latin America. Although the policy was implemented by the Roosevelt administration, President Woodrow Wilson had prev ...
in 1933. The U.S. government required cooperation to guard its borders and coastlines and to secure the supply of raw materials, including oil. The Mexican government agreed to pay $40 million for claims originating from the Mexican Revolution, and the U.S. government opened a line of credit in order to stabilize the Mexican currency. The State Department also resumed purchases of silver from Mexico and investments were made in Mexico's transportation infrastructure.
Post-nationalization
Between 1938 and 1971, Mexico's oil output expanded at an average annual rate of 6%. In 1957, Mexico became a petroleum net importer after domestic demands exceeded domestic production. However, production rose to by 1971 with the exploitation of new oil fields in the isthmus of
Tehuantepec
Tehuantepec (, in full, Santo Domingo Tehuantepec) is a city and municipality in the southeast of the Mexican state of Oaxaca. It is part of the Tehuantepec District in the west of the Istmo Region. The area was important in pre Hispanic peri ...
and natural gas reserves near the northeastern border city of
Reynosa
Reynosa () is a border city in the northern part of the state of Tamaulipas, in Mexico. It is also the municipal seat of Reynosa Municipality.
The city is located on the southern bank of the Rio Grande in the international Reynosa–McAllen Metr ...
, but the gap between domestic demand and production continued to widen.
1973 witnessed Mexican oil production surpassing the peak of achieved in the early 1920s. In 1974
Pemex
Pemex (a portmanteau of Petróleos Mexicanos, which translates to ''Mexican Petroleum'' in English; ) is the Mexican state-owned petroleum company managed and operated by the Mexican government. It was formed in 1938 by nationalization and expr ...
announced petroleum discoveries in
Veracruz
Veracruz (), formally Veracruz de Ignacio de la Llave (), officially the Free and Sovereign State of Veracruz de Ignacio de la Llave ( es, Estado Libre y Soberano de Veracruz de Ignacio de la Llave), is one of the 31 states which, along with Me ...
,
Baja California
Baja California (; 'Lower California'), officially the Free and Sovereign State of Baja California ( es, Estado Libre y Soberano de Baja California), is a state in Mexico. It is the northernmost and westernmost of the 32 federal entities of Mex ...
,
Chiapas
Chiapas (; Tzotzil language, Tzotzil and Tzeltal language, Tzeltal: ''Chyapas'' ), officially the Free and Sovereign State of Chiapas ( es, Estado Libre y Soberano de Chiapas), is one of the states that make up the Political divisions of Mexico, ...
, and
Tabasco
Tabasco (), officially the Free and Sovereign State of Tabasco ( es, Estado Libre y Soberano de Tabasco), is one of the 32 Federal Entities of Mexico. It is divided into 17 municipalities and its capital city is Villahermosa.
It is located in ...
. In 1976, President
López Portillo announced that Mexico's proven hydrocarbon reserves had risen up to . By 1983, that figure further rose to . López Portillo increased Mexican petroleum production and used the value of the reserves as collateral for negotiating large international loans, most of which went to Pemex.
From 1977 to 1980, Pemex received $12.6 billion in international credit, representing 37% of Mexico's total
foreign debt
A country's gross external debt (or foreign debt) is the liabilities that are owed to nonresidents by residents. The debtors can be governments, corporations or citizens. External debt may be denominated in domestic or foreign currency. It incl ...
but nevertheless used the money to construct and operate
offshore drilling platforms. Pemex further expanded by building onshore processing facilities, enlarging its
refineries
A refinery is a production facility composed of a group of chemical engineering unit processes and unit operations refining certain materials or converting raw material into products of value.
Types of refineries
Different types of refineries ar ...
, and vastly improving its production capabilities. These investments led to an increase in petroleum output from in 1977 to by 1982, the end of López Portillo's six-year term as president.
By 2007, Mexico had a net oil export of .
In early 2008 the
price of oil
The price of oil, or the oil price, generally refers to the spot price of a barrel () of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPEC Ref ...
hit record highs exceeding $100/barrel for the first time ever. By July the price had reached $147.27 and based on demand projections, outlooks were optimistic. At this time a group met at the Mexican finance ministry and reached an agreement to
hedge
A hedge or hedgerow is a line of closely spaced shrubs and sometimes trees, planted and trained to form a barrier or to mark the boundary of an area, such as between neighbouring properties. Hedges that are used to separate a road from adjoin ...
Mexican oil revenues. They placed orders with
Barclays
Barclays () is a British multinational universal bank, headquartered in London, England. Barclays operates as two divisions, Barclays UK and Barclays International, supported by a service company, Barclays Execution Services.
Barclays traces ...
,
Goldman Sachs
Goldman Sachs () is an American multinational investment bank and financial services company. Founded in 1869, Goldman Sachs is headquartered at 200 West Street in Lower Manhattan, with regional headquarters in London, Warsaw, Bangalore, H ...
,
Morgan Stanley
Morgan Stanley is an American multinational investment management and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in more than 41 countries and more than 75,000 employees, the fir ...
and
Deutsche Bank
Deutsche Bank AG (), sometimes referred to simply as Deutsche, is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Sto ...
to buy
put options
In finance, a put or put option is a derivative instrument in financial markets that gives the holder (i.e. the purchaser of the put option) the right to sell an asset (the ''underlying''), at a specified price (the ''strike''), by (or at) a s ...
at prices ranging from $66.50 to $87 barrel for a total of $1.5 billion or 330 million barrels. Shortly afterward the price of oil collapsed during the
subprime mortgage crisis
The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the Financial crisis of 2007–2008, 2007–2008 global financial crisis. It was triggered by a large decline ...
and by 2009 the average price of oil was less than $55. The $5.1 billion deal is sometimes called "the Agustínian hedge" after
Agustín Carstens
Agustín Guillermo Carstens Carstens (born 9 June 1958 in Mexico City) is a Mexican economist who has served as the general manager of the Bank for International Settlements since 1 December 2017. He served as governor of the Bank of Mexico from ...
who was finance minister at the time.
Oil production
![Mexico Oil Production](https://upload.wikimedia.org/wikipedia/commons/8/81/Mexico_Oil_Production.png)
Mexico produces three grades of
crude oil
Petroleum, also known as crude oil, or simply oil, is a naturally occurring yellowish-black liquid mixture of mainly hydrocarbons, and is found in geological formations. The name ''petroleum'' covers both naturally occurring unprocessed crude ...
: heavy Maya-22 (accounting for more than half of the total production); light, low-sulfur Isthmus-34 (28% of production); and extra-light Olmeca-39 (20% of production). At the beginning of 2002 Mexico had the second largest proven oil reserves in the
Western Hemisphere
The Western Hemisphere is the half of the planet Earth that lies west of the prime meridian (which crosses Greenwich, London, United Kingdom) and east of the antimeridian. The other half is called the Eastern Hemisphere. Politically, the term We ...
with . However, according to Pemex, Mexico's
reserves/production ratio fell from 20 years in 2002 to 10 years in 2006, and Mexico had only of proven oil reserves left by 2007. Mexico stands ninth in the worldwide ranking of conventional oil reserves with only Venezuela higher in the Western Hemisphere (although Canada ranks higher if proven reserves of
unconventional oil
Unconventional oil is petroleum produced or extracted using techniques other than the conventional method (oil well). Industry and governments across the globe are investing in unconventional oil sources due to the increasing scarcity of conventio ...
in
oil sands
Oil sands, tar sands, crude bitumen, or bituminous sands, are a type of unconventional petroleum deposit. Oil sands are either loose sands or partially consolidated sandstone containing a naturally occurring mixture of sand, clay, and wate ...
are included).
Pemex
Pemex (a portmanteau of Petróleos Mexicanos, which translates to ''Mexican Petroleum'' in English; ) is the Mexican state-owned petroleum company managed and operated by the Mexican government. It was formed in 1938 by nationalization and expr ...
is Mexico's state-owned petroleum company and, for decades, was the sole supplier of all commercial gasoline (petrol/diesel) stations in the country.
Cantarell Field
Cantarell Field or Cantarell Complex is an supergiant offshore oil field in Mexico. It was discovered in 1976 after oil stains were noticed by a fisherman, Rudesindo Cantarell Jimenez, in 1972. It was placed on nitrogen injection in 2000, and pr ...
is the largest oil field in Mexico and one of the largest in the world producing. As of Jan 2001, Mexico has approximately in proven oil reserves. In November 2006, Pemex reported that Cantarell has produced of oil. Several oil fields have also been discovered in the Chicontepec Basin and neighboring
Golden Lane. The
Chicontepec fields contains Mexico's largest, certified hydrocarbon reserve, totaling more than with original oil in place of over ; recovery is complicated by challenging, low recovery rate reservoirs, but is made more attractive due to the presence of light and super-light oil.
The "South Zone" for Pemex includes the states of Chiapas, Tabasco, Campeche, Yucatán, Quintana Roo and the southern portions of Guerreo, Oaxaca and Veracruz with exploration beginning in 1863 with Father Manuel Gil y Sainz's San Fernando Mine near Tepetitan Town, Tabasco, Dr. Simon Sarlat's well in 1883, and commercial production from the Capoacan and San Cristobal oil fields in 1905 and 1906 respectively. Fields discovered with associated
salt diapir
A salt dome is a type of structural dome formed when salt (or other evaporite minerals) intrudes into overlying rocks in a process known as diapirism. Salt domes can have unique surface and subsurface structures, and they can be discovered using ...
s in the Saline Basin, near
Coatzacoalcos
Coatzacoalcos () is a major port city in the southern part of the Mexican state of Veracruz, mostly on the western side of the Coatzacoalcos River estuary, on the Bay of Campeche, on the southern Gulf of Mexico coast. The city serves as the munic ...
, include Tonala-El Burro (1928), El Plan (1929), Cinco Presidentes (1946), Magallanes (1957) and Ogarrio (1957). Fields producing from the Chiapas-Tabasco
Mesozoic
The Mesozoic Era ( ), also called the Age of Reptiles, the Age of Conifers, and colloquially as the Age of the Dinosaurs is the second-to-last era of Earth's geological history, lasting from about , comprising the Triassic, Jurassic and Cretaceo ...
area around
Villahermosa
Villahermosa ( , ; "Beautiful Village") is the capital and largest city of the Mexican state of Tabasco, and serves as the Municipalities of Mexico, municipal seat (governing county) of the state. Located in Southeast Mexico, Villahermosa is an ...
include Sitio Grande (1972), Cactus, and
Antonio J. Bermúdez (1958). Fields discovered with associated
anticline
In structural geology, an anticline is a type of fold that is an arch-like shape and has its oldest beds at its core, whereas a syncline is the inverse of an anticline. A typical anticline is convex up in which the hinge or crest is the ...
s in the Macuspana Basin, between Villahermosa and
Ciudad del Carmen
Ciudad del Carmen is a city in the southwest of the Mexican state of Campeche. Ciudad del Carmen is located at on the southwest of Carmen Island, which stands in the Laguna de Términos on the coast of the Gulf of Mexico. , Ciudad del Carmen ...
, include Jose Colomo (1951), Chilapilla (1956) and Hormiguero.
In 2002, the
Ku-Maloob-Zaap Ku-Maloob-Zaap () is an oil field in Mexico. It is made up of three relatively large fields, Ku, Maloob, and Zaap, which are located to the immediate northwest of the Cantarell field. The field lies in of water.
Ku-Maloob-Zaap is located offshore ...
oil field was discovered offshore in the
Bay of Campeche
The Bay of Campeche ( es, Bahía de Campeche), or Campeche Sound, is a bight (geography), bight in the southern area of the Gulf of Mexico, forming the north side of the Isthmus of Tehuantepec. It is surrounded on three sides by the Mexico, Mexic ...
, 105 kilometers from
Ciudad del Carmen
Ciudad del Carmen is a city in the southwest of the Mexican state of Campeche. Ciudad del Carmen is located at on the southwest of Carmen Island, which stands in the Laguna de Términos on the coast of the Gulf of Mexico. , Ciudad del Carmen ...
. Pemex plans to drill 82 fields and install 17
oil platform
An oil platform (or oil rig, offshore platform, oil production platform, and similar terms) is a large structure with facilities to extract and process petroleum and natural gas that lie in rock formations beneath the seabed. Many oil platfor ...
s, as well as build an
oil pipeline of 166 kilometers to transport the oil produced. By 2011, production is expected to reach and of
natural gas
Natural gas (also called fossil gas or simply gas) is a naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane in addition to various smaller amounts of other higher alkanes. Low levels of trace gases like carbo ...
.
![Gulf Offshore Platform](https://upload.wikimedia.org/wikipedia/commons/b/ba/Gulf_Offshore_Platform.jpg)
Annual production has dropped or failed to increase each year since 2004. Furthermore, it has been reported the 2005-2006 daily oil production was down by approximately on the previous year. Nevertheless, Mexico still produced approximately of oil per day (2010 est.) ranking it seventh in the world in terms of total production.
Environmental impacts
Beginning with the desire for gold and silver in the sixteenth century, both foreign and domestic powers have mined the landscape of Mexico for natural resources and precious goods with a primarily financial focus and not an environmental one. The original
open pit mining
Open-pit mining, also known as open-cast or open-cut mining and in larger contexts mega-mining, is a surface mining technique of extracting rock or minerals from the earth from an open-air pit, sometimes known as a borrow.
This form of minin ...
for metals like iron had devastating impacts such as loss of mountain landscapes, toxic waste disposal, and the demolition of entire ecosystems. Native populations viewed this search for oil with disdain as it affected their agricultural way of life by removing cattle fields to make room for
oil fields
A petroleum reservoir or oil and gas reservoir is a subsurface accumulation of hydrocarbons contained in porous or fractured rock formations.
Such reservoirs form when kerogen (ancient plant matter) is created in surrounding rock by the presence ...
. With the onset of petroleum mining in the early twentieth century, environmental impacts escalated. While foreign powers were often successful in shaping the economic environment of the petroleum-containing countries they entered, they largely ignored the natural environment they would be affecting.
Although the most popular incident in the public's mind concerning oil accidents is the
Deepwater Horizon Spill
The ''Deepwater Horizon'' oil spill (also referred to as the "BP oil spill") was an industrial disaster that began on 20 April 2010 off of the coast of the United States in the Gulf of Mexico on the BP-operated Macondo Prospect, considered ...
that occurred in the Gulf of Mexico in 2010, many incidents have occurred on the physical territory of Mexico. Rather than simply affecting marine life and bodies of water, petroleum and the materials used to harvest it can also have negative impacts on dry land. For example,
hydraulic fracturing
Fracking (also known as hydraulic fracturing, hydrofracturing, or hydrofracking) is a well stimulation technique involving the fracturing of bedrock formations by a pressurized liquid. The process involves the high-pressure injection of "frack ...
can damage water access for local populations and produce harmful chemicals that are leaked into the surrounding environment.
Since the initial surge of oil drilling in 1889, several accidents have occurred throughout mainland Mexico.
In 1908, a fire at the
Dos Bocas drilling site caused fear and panic among the residents of
Tantima, the local village, as the explosion rocked the area. After burning for over a month and killing a small number of people, the Dos Bocas fire created a dangerous area that most residents avoided.
Besides the rumors and superstitions that characterized the locals' discussion, the event had significant environmental impacts as well.
Hydrogen sulphide
Hydrogen sulfide is a chemical compound with the formula . It is a colorless chalcogen-hydride gas, and is poisonous, corrosive, and flammable, with trace amounts in ambient atmosphere having a characteristic foul odor of rotten eggs. The unde ...
gas had turned the previously vibrant area into a silent and dead expanse.
The transition of the land from verdant to empty resulted in a negative opinion towards the petroleum industry in
Veracruz
Veracruz (), formally Veracruz de Ignacio de la Llave (), officially the Free and Sovereign State of Veracruz de Ignacio de la Llave ( es, Estado Libre y Soberano de Veracruz de Ignacio de la Llave), is one of the 31 states which, along with Me ...
. Other blowouts that followed the incident at Dos Bocas continued to damage the surrounding area's vegetation, wildlife, and general ecosystem.
Often, these small-scale fires and spills are viewed as insignificant to the grander environment, which many believe can heal itself. However, the consequence of many small events, according to theorists, is a lasting impact that may not be curable.
Some researchers claim that the degrading infrastructure of many drilling sites in Mexico made areas unfit for habitation. The habitats in question include those used by animals, vegetation, and the human population of the area. The contamination of the ecosystem after drilling occurs often causes towns to lose residents or disappear entirely.
Poza Rica
Poza Rica (), formally: Poza Rica de Hidalgo is a city and its surrounding municipality in the Mexican state of Veracruz. Its name means "rich well/pond". It is often thought that the name came to be because it was a place known for its abundance ...
, a typical oil town in Mexico, was the subject of a study that revealed the difficulties associated with living in an area dominated by petroleum drilling.
The inhabitants of Poza Rica are constantly renegotiating their everyday lives to fit the changing landscape around them; this includes practicing large and small safety measures, ignoring toxic smells in the air, and recovering from the loss of jobs when oil fields are retired.
Any area with drilling present became a town in which it was believed deadly accidents could occur. However, people often compromised to remain in their homes, ignoring or simply accepting the potentially dangerous side effects.
One way to analyze the presence of oil companies in places such as Veracruz is to see how the natives responded to outside forces that changed their way of life. The
Huastecs
The Huastec or Téenek (contraction of ''Te' Inik'', "people from here"; also known as Huaxtec, Wastek or Huastecos) are an indigenous people of Mexico, living in the La Huasteca region including the states of Hidalgo, Veracruz, San Luis Potos ...
, a native population in the area, fought to hold their traditional practice of agriculture when oil companies entered their homeland. The native population's land was often taken without respect for the centuries of native presence there, turning pastures and forests into oil camps. The natives viewed this change as an unhygienic and cruel transformation from forest to industry.
See also
*
2017 Mexican protests
*
Chart of exports and production of oil by nation
*
Economy of Mexico
The economy of Mexico is a Developing country, developing mixed-market economy. It is the List of countries by GDP (nominal), 15th largest in the world in nominal GDP terms and the List of countries by GDP (PPP), 13th largest by purchasing power ...
*
Energy in Mexico
*
Electricity sector in Mexico
As required by the Constitution, the electricity sector is federally owned, with the Federal Electricity Commission (Comisión Federal de Electricidad or CFE) essentially controlling the whole sector; private participation and foreign companies ...
*
List of oil-producing states
Further reading
*Brown, Jonathan C. ''Oil and Revolution in Mexico''. Berkeley and Los Angeles: University of California Press 1993.
*Brown, Jonathan C. "Petroleum, Pre-1938," in ''Encyclopedia of Mexico'', vol. 2. pp. 1076-1082. Chicago: Fitzroy and Dearborn 1997.
*Brown, Jonathan C. and Alan Knight, editors. ''The Mexican Petroleum Industry in the Twentieth Century''. Austin: University of Texas Press 1992.
*
*
*Hall, Linda B. ''Oil, Banks, and Politics: The United States and Postrevolutionary Mexico, 1917-1924.'' Austin: University of Texas Press 1995.
*
*Meyer, Lorenzo, ''Mexico and The United States in the Oil Controversy, 1917-1942''. Austin: University of Texas Press 1977.
* Mirbabayev, Miryusif F. (2008) ''Concise history of Azerbaijani Oil''. Baku, SOCAR Publishing House.
* Mirbabayev, Miryusif F. (2017) Brief history of the first drilled oil well; and people involved - "Oil-Industry History" (USA), v.18, #1, pages 25–34.
*
*Philip, George D.E., ''Oil and Politics in Latin America: Nationalist Movements and State Oil Companies''. Cambridge and New York: Cambridge University Press 1982.
*Randall, Laura. ''The Political Economy of Latin American Oil.'' New York: Praeger 1989.
*Randall, Laura. "Petroleum, 1938-1996," in ''Encyclopedia of Mexico'', vol. 2, pp. 1082-1085. Chicago: Fitzroy and Dearborn 1997.
*Rippy, Merrill. ''Oil and the Mexican Revolution''. Leiden: Brill 1972.
*
*
*Wirth, John D., ed. ''Latin American Oil Companies and the Politics of Energy''. Lincoln: University of Nebraska Press 1985.
References
External links
Mexico's crude oil production chart (1980-2004)- Data sourced from the US Department of Energy
Energy Secretariat (SENER)Energy Regulatory Commission (CRE)Energy Savings National Commission (CONAE)
{{North America topic, Oil in