CHAPTER 3
Oil and Gas
T
he potential to reduce greenhouse gas emissions in Mexico’s oil and gas sector through both low-cost and no-regrets interventions is significant. Specific interventions that have good economic rates of return include reducing gas distribution leakage, exploiting cogeneration potential at Petróleos Mexicanos (Pemex) facilities, and improving the efficiency of energy use at refining and processing facilities.1 The success of Pemex’s plans to reverse the decline in oil production and further increase gas production will also play a major role in future greenhouse gas emissions from Mexico, because the alternative is the likely increase in imports of fossil fuels, including coal. The oil and gas industry in Mexico is a major source of revenue, employment, and national pride. Since being nationalized, in the late 1930s, the oil industry has contributed enormously to the country’s development. Pemex is currently among the largest companies in the world in terms of assets. It is the largest source of export earnings for Mexico and directly employs more than 130,000 people. Although Pemex’s contribution to the economy has declined in the past two decades—it accounted for 6.5 percent of GDP in 2008—oil revenues still account for more than one-third of the federal budget. Among the greatest challenges facing Mexico’s oil industry is the need to reduce the decline in oil production. Crude oil production increased from 3.0 million barrels a day (mbd) in 2000 to a peak of 3.4 mbd in 2004. By August 2009, however, production had fallen to about 2.6 mbd, led by the rapid decline in production from Mexico’s largest field, Cantarell. As recently as 2004, Cantarell accounted for nearly two-thirds of Mexico’s total oil production (2 mbd); since then, production has declined sharply. In July 2009, production at Cantarell was only about 600,000 bd. Production is likely to fall by 15 percent a year between 2009 and 2012. If production from new fields cannot offset the losses from Cantarell, Mexican oil pro35