Petroleum Industry in Mexico

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Petroleum Industry inMexicoPEMEX: The Monopoly

By Esteban Hernndez

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A Little Bit of History 2


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Source of Petroleum Problem 3


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How to take advantage of thisnatural resource?

The PofiriosSolution

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1912

At the Fall of Porfirio Diaz, the revolutionary government ofPresident Francisco I. Madero issued on 3 June of that yeara decree to establish a special tax on oil production andsubsequently ordered to be held a record of the companiesoperating in the country.

1914 They discover one of the most spectacular wells, not only in

Mexico but in the world, was the Cerro Azul No. 4

1917 The Constitution of the United Mexican States promulgatedin Queretaro, returns to the Nation, in its Article 27, the

absolute ownership of all mineral resources. In response, oil companies formed the Association

of Petroleum Producers

http://www.mexicomaxico.org/Voto/pemex.htm
http://www.mexicomaxico.org/Voto/pemex.htmhttp://www.mexicomaxico.org/Voto/pemex.htm


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1918

Carranza's government imposed a tax on oilfields and contracts to have control of industryand regain some of what Diaz gave away, factthat caused the protest and resistance to foreigncompanies.

1918

As a result of this change in the constitution, theowners of oil companies increased to themaximum oil production, aiming to get the highest

benefit before the law should becomeeffective against their properties.

1921 Mexico's production represented 25% of the world,

producing 193 million of barrels in that year but thebenefit to the country remained minimal.



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Well Cerro Azul 4 today, which as the commemorative plaque to October 30,2003,accumulated a production of 1,404,559,588 barrels of oil, one of the most

productive wells arround the world.



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The New Solution

Since they have few benefits. In 1935, workers organize to form unions.

Companies do not like the idea, but at the end, they were going to allowthem to form unions.

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http://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopolio

In January 1936, the Oil Workers' Union joined the Committee ofProletarian Defense, giving rise to the Confederation of Workers ofMexico, CTM.
http://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopolio


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The bomb Exploits

May 28th

, 1937; general strike breaks out against foreign oilcompanies that paralyzed the country. Suspending the supplyof gasoline service stations for 12 days, causing a national chaos.

Through the intervention of President Cardenas, the strike and

workers remain suspended pending the outcome that would give theBoard of Conciliation and Arbitration.

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The Board finds in favor of workers, but companies appeal before theSupreme Court.

The Supreme Court denied the appeal, forcing them to fullfil labor

demands. They denied the injunction and accordingly, on March 18th,1938 President Lazaro Cardenas del Rio decreed the expropriation infavor of the nation, declaring the availability of Mexico to compensatethe oil companies the amount of their investments.

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New Problem: PEMEX

On June 7th, 1938 of that year was created Petrleos Mexicanos.

Seventy years later, the arguments to defend the statesmonopoly,Pemex is political: the oil should be administered by

the State through Pemex, not, as opponents of private participationin oil exploitation, involves privatization, which involves ...

Give up sovereignty of Mexico?

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http://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopolio
http://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopoliohttp://www.cnnexpansion.com/negocios/2008/03/24/pemex-historia-de-un-monopolio


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Not Necessarily

One example of this is Brazil

Many would ask them sevels, why the comparition between Brazil andMexico?

And no, among other countries?

According to QUTIENEPETROBRASQUENOTIENEPEMEX? FranciscoFlores Macas y Aldo Musacchio

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http://www.worldbank.org
http://www.worldbank.org/http://www.worldbank.org/


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http://www.worldbank.org
http://www.worldbank.org/http://www.worldbank.org/


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Mexico Brazil

Location also is a factor,both are in Latin America

Income per capita in eachcountry is similar

Corruption is a problemwith the two governments

Are the two most populouscountries in Latin America

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http://www.nexos.com.mx/?P=leerarticulo&Article=2099422
http://www.nexos.com.mx/?P=leerarticulo&Article=2099422http://www.nexos.com.mx/?P=leerarticulo&Article=2099422


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In Mexico, the union's influence in the administration of thecompany is large.

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Lack of welltrainedpeople

One principalproblem in PEMEXis employees havelot of benefits

LowStandardsConsecuenses

Nule

Competitivity

Stops Initiatives


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Differences = Success

Lot of resourses.

Nule Research and developmenttechnology.

65 million of pesos, 0.005% ofsales that Pemex generated.

In the 90sPemex adoptedinternational standards tomesure the amount of oilreserves.

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Lack of Oil.

Large Invertions .

Petrobras: 800 millons of dlars(Research and development oftechnology.

1.0% of Petrobras sales.

Petrobras adopted this mesuresin the 80s.

Data from 2006



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http://www.pemex.com/index.cfm?action=content&sectionid=136&catid=11895

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The Key: Technology First, the most advanced technologies for exploration and oil production are

freely available on the market. In fact, international oil companies likeChevron, Exxon or Shell hire companies that specialize in specific servicessuch as Schlumberger and Transocean.

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In deep water, for example, only rent a drill exploration can cost up

to half a million dollars a day. A delay of two months due to lackof skills leads to a drain on resources.


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27 For these reasons, said that Pemex lack oftechnology" is not entirely

correct. Pemex has the same access to the technology for seismic ordrilling wells that international oil companies. In fact, it is stated that

Pemex lacks the ability to use such technology-in short, lacks humancapital.


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How to have better PersonalResources

On the one hand, they can hire staff and trained outside the country, offeringlarge sums of money in exchange for work contracts severalyears. Saudi Aramco has chosen this alternative, which is relatively

quick returns but is expensive and depends on the knowledgethese foreigners can be absorbed by local staff.

Second, you can develop the human capital internally. This is torecruit talented young people, encourage academic study in high-level andmonitor their maturation in various operational andadministrative charges. This path solves the problem long term, but has thedisadvantage that the results are slow in coming.

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Finally, oil companies less advanced in productive projects findassociations with leading companies in the field, waiting for theirengineers to interact with industry leadersand so learn the bestpractices in the industry.

For the company to accept more developed knowledge transfer generallyrequires collateral production sharing at the sites in question or thereneeds to be laws that would force the international company toemploy local people from the country.

Allmost all state-owned companies in the world, except for Pemex,participate in such agreements.

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http://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventas
http://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventashttp://www.cnnexpansion.com/negocios/2008/03/13/pemex-explora-con-0-005-de-sus-ventas


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Training strategy of Petrobras workers

The selection of high levelstaff through open competitions

Creation of a national trainingcenter for all new employees ofthe company, known asPetrobras University

Training of staff within and

outside Brazil

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Overstaffing, protected by theunion.

Lack of constant training

Pemex suffersfrom constant departure ofpersonnel to other public sectorareas.


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http://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swf
http://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swf


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http://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swf
http://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swfhttp://media.ft.com/cms/8f4066aa-9934-11dc-bb45-0000779fd2ac.swf


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http://www.crudeoilpeak.com/?page_id=1571
http://www.crudeoilpeak.com/?page_id=1571http://www.crudeoilpeak.com/?page_id=1571


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http://www.crudeoilpeak.com/?page_id=1571
http://www.crudeoilpeak.com/?page_id=1571http://www.crudeoilpeak.com/?page_id=1571


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Is Private Asociation the only wayto improve Pemex?

OF COURSE NO

According to my view, privatization is not the only way but it would

be one of the faster solutions.AMLO, proposes, for example, build refineries to stopbuying oil derivatives.

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Documents

Petroleum Industry in Mexico