Mexico, the world's fourth largest oil producer, is planning to increase oil production beyond its previously set limits, according to a newspaper report based on a leaked government document.
The decision by Mexico, which is not a member of the Organization of Petroleum Exporting Countries, means that more non-OPEC oil will become available on the world market at the time when the Arab members of the oil cartel are talking of imposing sharp production cutbacks to bolster declining oil prices.
In two months' time, Mexico expects to be producing 2.93 million barrels per day, a level close to 200,000 barrels above its official production limit.
Word of the decision, which apparently was made several months ago, was leaked last week when a Mexican newspaper published a confidential production schedule of Pemex, the state oil company.
The leak of the decision to increase production appears to have had more to do with disagreements within the government about whether to step up oil exports of conserve energy resources for the future, than with aiming a blow at OPEC. While not a member, Mexico is not hostile to the oil grouping. It attends OPEC meetings as an observer, broadly follows OPEC prices and has repeatedly said it would never play the role of Trojan horse to weaken the organization.
Several OPEC members have already said they will not go along with an imposed restriction on production, and the matter is expected to be debated at the upcoming OPEC meeting in Geneva that begins May 25.
Changes in exports always trigger a national debate in Mexico where oil, following the 1938 nationalization, became more of a patriotic cause than a money earner. Since the present administration broke the taboo against large-scale export in 1976, however, there has been a sharp dispute between the Ministry of National Resources, which advocates preservation, and Pemex, which wants to expand.
Oil now accounts for 74 percent of Mexico's exports and critics repeatedly have warned against further dependence of the economy on oil. And, kindling nationalist fires, these critics point to a recent study for the U.S. Senate Energy Committee recommending that the United States encourage Mexico to develop production capacity well beyond its needs. According to this study, which was excerpted in the press here, Mexico could respond quickly in case of an international energy crisis given such capacity. Any perceived pressure from the United States on Mexico's oil policies is enough to set off a wave of indignant speeches by politicians from every segment of the spectrum here.
Yet Mexico's planned production increase, which Pemex declined to confirm, clearly stems from its need for more cash to finance its long-term, ambitious development program.
Mexican officials are nonetheless worried about the declining oil prices. Mexico, which sells via contracts and does not deal on the spot market, has recently been forced to cut back the price of its heavy crude by $2.50 per barrel. This year it has not increased the prices of its lighter oil, which it normally does on a quarterly basis.
Yet even if Mexico's oil is slightly overpriced, industry sources say, the long waiting lines of clients are likely to continue because Mexico is seem as a stable and safe source.
A firm advocate of Third World causes, it does not want to be perceived as undermining raw material prices. Officials here are therefore embarrassed when OPEC members point an accusing finger and say that enlarging the non-OPEC oil pool weakens the international oil cartel.
Venezuela's oil minister, Humberto Calderon Berti, said last week that the combination of conservation efforts, the growing North Sea production and Mexico's rapidly expanding industry had partly neutralized OPEC's own production cutback from 31 million barrels per day in 1979 to close to 25 million barrels per day at present. OPEC's oil production accounts for half the oil production in the nonsocialist world. The current glut, according to Calderon Berti, amounts to close to 1 million barrels per day. Some analysts say it may be as much as 2 million a day.
Mexico's oil industry has grown at a spectacular rate. It has tripled its production during the past five years and it is well known that it could increase that much again within a short period. The country's production ranks behind that of the Soviet Union, Saudi Arabia and the United States.
Much of Mexico's production growth comes from its rich offshore wells in the Gulf of Campeche, which started production in June 1979 and now account for more than half of Mexico's current 2.6 million barrels per day. Of the 1.5 million barrels per day Mexico is exporting at the moment, 680,000 go to the United States.