Sunday, March 9, 2008

South of the Border

Just got back from a glorious week in Cabo San Lucas. It was one of those weeks spent on the beach with very little contact with the outside world. I guess I missed quite a week in the financial markets. We'll now see how closely coupled Wall Street and Main Street are.

One thing for sure, Cabo is still experiencing huge growth. Developments were going up everywhere. Granted Cabo is a playground for the rather well to do ( and I guess that now includes the Spring-breakers) but to me there are some clouds gathering on the distant horizon . Ponder this tid-bit I came across in the 10 page mini-newspaper that was dropped off at our door in the mornings there.

Pemex profits decline, product imports increase

That's a headline that screamed at me as I drank my morning coffee. WOW--$105 a barrel crude oil and the Mexican National Oil Company lost a billion and a half dollars last year. When I asked some of the locals about the story they all assumed I was mistaken. No way my story was true--- remember Pemex is the major source of revenue for the Mexican Government and a tremendous amount of social spending is tied to this oil revenue. I have a suspicion that we will be hearing more about this in the not too distant future and I'm betting that the news South of the Border will not be good.

Pemex profits decline, product imports increase
Eric WatkinsSenior Correspondent
LOS ANGELES, Mar. 6 -- Petroleos Mexicanos saw a decline in profits during 2007, reporting a decrease of some 16.13 billion pesos ($1.51 billion) after posting a net profit of $4.26 billion in 2006, according to media reports.
El Financiero, citing company figures, said Pemex posted the loss even though its total sales increased 2.9% over 2006 and hit an all-time high of $110 billion in 2007.
Pemex explained the loss as due primarily to purchases of imports such as gasoline, natural gas, LPG, and petrochemicals—all of which came to $16.97 billion.
Pemex also paid $63.15 billion in taxes to the federal government, up 11.8% from its 2006 tax total. Before taxes, the company posted profits of $61.63 billion.
In its 2007 financial report, Pemex said imports of oil products increased to 494,000 b/d from 431,000 b/d. The main import was gasoline, with the amount rising to 307,700 b/d in 2007 from 204,700 b/d in 2006.
These imports were up because fuel demand was higher and domestic production lower. Production averaged 1.511 million b/d in 2007, a decline of 34,000 b/d from 2006.
By contrast, natural gas imports averaged 397 bcfd, down 12% from 2006, mainly as a result of higher domestic gas production—up 13.1% over 2006 at 6.058 bcfd on average.
The country's oil production in 2007, however, dropped 5.3% from 2006, to 3.082 million b/d, due to the decline of Cantarell, to deferred output because of Hurricane Dean, and to several bouts of cold weather during the year.
Exports of oil averaged 1.686 million b/d in 2007, down 5.9% from 2006. The value of oil and condensate exports hit $44.39 billion, as the average price of the Mexican mix on the international market was $61.60/bbl.
El Financiero, quoting Pemex, said the drop in production was partially offset by an increase in the extraction of superlight oil from the Tabasco "Activo Litoral" and record output from Ku-Maloob-Zaap field.
Pemex also attributed higher output from the Lankahuasa, Burgos, and Veracruz projects, and gas extraction from the Marine light crude and Ixtal-Manik projects in the Southwest Marine region and higher output from wells in the Northeast Marine region.

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