💾 Archived View for gmi.noulin.net › mobileNews › 6408.gmi captured on 2023-09-08 at 17:27:14. Gemini links have been rewritten to link to archived content
⬅️ Previous capture (2023-01-29)
-=-=-=-=-=-=-
1970-01-01 02:00:00
rlp
But a ham-fisted assault on NAFTA could jeopardise it
A CHEMICAL engineer at Pemex, Mexico s state-owned oil company, opens a tap
atop a maritime platform in this offshore oilfield in the southern part of the
Gulf of Mexico. She decants a jar of heavy Mexican crude that comes, hot to the
touch, from 3,500 metres below the seabed. It looks like a succulent chocolate
sauce, but smells like the back end of a cow. Taste it, she laughs.
The crude that she is testing is pumped a short distance across the sea to a
vast floating storage tank, known as an FPSO, where it is blended with lighter
crude for export. The FPSO stores about 2m barrels roughly the equivalent of a
day s worth of Mexican oil production. A quarter of that is fed into a
supertanker tied alongside, contracted by Chevron, America s second-largest oil
firm. It then sails north across the maritime border to Texas or Louisiana
where the crude runs through refineries. The refined petrol or diesel often
then returns to Mexico.
These transactions are part of a historic transformation of North American
energy that President Donald Trump appears to have overlooked as he fumes over
his country s trade deficit with Mexico and pours scorn on the North American
Free Trade Agreement (NAFTA). In 2015 the energy trade balance flipped (see
chart). Between 2011 and 2016, it swung from an American deficit of $20bn to an
American surplus of $11.5bn. America earned almost as much from exporting
hydrocarbons to Mexico as from cars and trucks.
This about-turn has been caused by several factors, namely America s shale
boom, Mexico s slumping oil output (down by more than 1m barrels a day in a
decade) and energy liberalisation in 2014 that ended Pemex s 75-year-old
hegemony over the domestic oil industry. This shifting landscape has already
had an effect on Pemex: a recent bump in oil prices, combined with
cost-cutting, has led to its first consecutive quarterly profit in six years.
The ripple effect through North America s energy business has also been quick,
and should expand provided it is not derailed by a hamfisted effort to
renegotiate NAFTA.
The cross-border flow of hydrocarbons is the most tangible change. Petrol from
American refineries amounts to about half of Mexico s domestic consumption.
Last month Tesoro, a Texan refiner, became the first private firm to win an
auction to move imported petroleum products through Pemex s own tanks and
pipelines.
Mexico has also become the destination of choice for surplus American natural
gas, produced in the shale revolution. Sales south of the border have almost
doubled since 2014, as Mexico switches its power generation from coal and oil
to cheaper, cleaner fuels. The capacity of natural-gas pipelines crossing the
border is expected almost to double over the next three years. Since Cheniere
Energy became the first firm to export American liquefied natural gas last
year, much has flowed to Mexico.
Investment is also flowing. American oil companies won five out of the eight
blocks auctioned in Mexico s first sale of deepwater oil licences last year.
That forms part of what Pedro Joaqu n Coldwell, Mexico s energy secretary, says
are $49bn-worth of international investment commitments in exploration and
drilling since 2015. Jos Antonio Gonz lez Anaya, Pemex s boss, says he hopes
to encourage American refiners such as Tesoro and Valero to co-invest in some
of Mexico s six refineries. But all were built before 1980, are decrepit, and
lose about $9bn a year.
The changes are becoming visible at the petrol pump. ExxonMobil, America s
largest oil company, announced in May that it would open its first petrol
station in Mexico this year and invest $300m in fuel distribution over the next
decade. Currently, only one petrol station in Mexico is owned by a supermajor,
BP (its enthusiastic pump attendants work for salaries, not tips, unlike those
at Pemex-branded ones).
At a congressional hearing in Washington this month, experts noted that the
United States, Mexico and Canada are on track to achieve North American energy
independence by 2020 meaning the region will produce more liquid fuels than it
consumes. Cheap, abundant energy will boost the region s industrial
competitiveness; it will also reduce its dependence on less stable producers
such as Venezuela and Persian Gulf States.
But in both America and Mexico, uncertainties loom. The process under way to
renegotiate NAFTA could jeopardise energy co-operation if Mr Trump pulls
America out of the treaty, as he has threatened to do. Since Mexico s energy
liberalisation, NAFTA s provisions have helped provide certainty to foreign
investors. Those safeguards could be valuable if Andr s Manuel L pez Obrador, a
staunch opponent of energy reform, wins Mexico s presidential election next
year. He could take issue with the growing dependence on American fuel. A
vibrant network of North American energy markets is taking shape, but it
remains fragile especially with populists blundering about in positions of
power.