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18 Green Social Thought 65: A Magazine of Synthesis and Regeneration, Fall 2014

Mexicos Looming Fracking and Offshore Oil


and Gas Bonanza
by Steve Horn
After generations of state control, Mexicos vast oil and gas reserves will soon open for business to the
international market. In December 2013, Mexicos Congress voted to break up the longstanding monop-
oly held by the state-owned oil giant Petroleos Mexicanoscommonly called Pemexand to open the
nations oil and gas reserves to foreign companies.
The constitutional reforms appear likely to kickstart a historic hydraulic fracturing (fracking)
and deepwater offshore oil and gas drilling bonanza in the Gulf of Mexico. This reform marks a major
breakthrough in Mexicos economic history only comparable to the signing of the North America Free
Trade Agreement (NAFTA) in 1992, international investing and banking giant Banco Bilbao Vizcaya
Argentaria (BBVA) wrote in a J anuary 2014 economic analysis.
What does this mean for the oil and gas indus-
try in Mexico? And for the workers and those who
live above these oil and gas plays or along the pipe-
line routes that will funnel the liquids to refineries?
And how about the Earths atmosphere?
Can Mexicos fossil fuel infrastructure handle
the boom? Can the country spare the precious fresh-
water supplies needed for thirsty fracking operations
in an era of increasingly severe droughts and drink-
ing water shortages? Can environmental, safety and
public health regulations possibly keep up with this
industrial boom?
Full circle: History of Mexican energy
reforms
The contemporary history of Mexicos energy
industry started in 1938 when the federal govern-
ment kicked out foreign oil companies and national-
ized the oil and gas sector under the Pemex banner.
As a recent report published by the Congres-
sional Research Service explains, nationalization
occurred in the aftermath of a bitter labor dispute
between Mexican workers and the international oil
and gas firms who wanted to gain a foothold in the
country. The report explains:
Tensions culminated in President Lzaro Crdenas
historic 1938 decision to abandon efforts to mediate
a bitter labor dispute between Mexican oil workers
and foreign companies and instead follow through
on his threat to expropriate all U.S. and other for-
eign oil assets in Mexico.
Upon its creation in 1938, Pemex became a
symbol of national pride andunited a disparate
Mexican society against foreign intervention.
For 75 years, Pemex alone had access to Mex-
icos massive oil and gas reserves. Mexico is the
worlds ninth largest producer of oil, and revenues
from developing the resource fund roughly one-third
of the countrys budget.
But Enrique Pea Nieto of the Institutional
Revolutionary Party (PRI), elected in J uly 2013, has
made the open door energy reformson top of
reforms in a whole host of other policy spheresa
top priority for his administration as part of his Pact
for Mexico.
Theres some historical irony at play here: Nie-
tos PRI is the party that nationalized the Mexican
oil industry to begin with.
And the constitutional amendments also bring
labor relations full circle, as the new board of direc-
tors for Pemex wont include union representation,
even though a labor dispute served as the rationale
for nationalization back in 1938.
All five union representatives have been re-
moved from the board of Pemex, which is shrinking
from 15 to 10 members.
Gold rush
Proponents for Mexicos energy reforms envi-
sion a gold rush. They argue the constitutional
amendments and accompanying secondary legisla-
tion still up for debate in the Mexican legislature
could add as much as $35 billion in outside invest-
ment into the national coffers.
Pemex says $25 to $60 billion could come its
way as a result of joint ventures it can now sign with
international oil and gas companies, while the indus-
try-funded Manhattan Institute says 2.5 million jobs
and more than $1 trillion in revenue could be created
by 2025.
Texas Observer investigative journalist Shan-
non Young is skeptical of the figures being tossed
around, however. [E]ven without the details, the
business press has predicted energy reform could
Can the country spare the precious
freshwater supplies needed for fracking?
the new board of directors for Pemex
wont include union representation.
Green Social Thought 65: A Magazine of Synthesis and Regeneration, Fall 2014 19
bring in [billions of dollars] in private investment in
Mexico, Young wrote in February 2014. How that
figure was reached is unclear, as is how much
money investors expect to take out of Mexico.
Regardless, the reforms seem certain to boost
oil and gas production, which have lulled in recent
years. Since reaching an all-time high in 2004, oil
production has fallen by 25%, down to 2.5 million
barrels per day currently. Contrast that to Texas, just
across the border. There, production increased by
more than 150% during those same 10 years, accord-
ing to Daniel Yergin.
Texas gains are tied primarily to fracking,
which has allowed drilling companies to tap into the
Eagle Ford Shale and Barnett Shale basins. We can
see what is going on in the United States. Shale gas
in the United States created a sense of urgency for
us, Pemex CEO Emilio Lozoya told Yergin in an
article appearing in The Wall Street Journal. The Oil
and Gas Journal pegged it at 10.2 billion barrels at
the end of 2011. But thats just what they know they
have.
The countrys unexplored oil reserve
potential is second only to the Arctic Cir-
cle, according to Bloomberg and others
reporting on the reforms. Pemex estimates,
as reported by Bloomberg, that deep-water
Gulf of Mexico prospects could be as large
as 26.6 billion barrels of oil. Onshore, there
are potentially 60 billion barrels yet un-
tapped.
So where exactly are the goods?
While new companies looking for a foothold in
Mexico are likely to explore and develop oil pros-
pects in all regions, to some degree, the big prizes
and most attention will likely center around:
the deep-water offshore oil plays in the Gulf of
Mexico;
the shale gas plays in the Burgos Basin;
and the tight oil and shale gas plays in the Chicon-
tepec field.
The players
Speaking at the recent CERAWeek energy con-
ference in Houston, Lozoya invited the oil and gas
industry big boys into Mexico with open arms.
Capital from all over the world is welcome in Mex-
ico, he said. We hope to have hundreds of compa-
nies operating in any type of rock formation, be it
shale, or shallow water, or mature fields, or deep
water projects.
So what companies are likely to accept Lo-
zoyas invitation and cash in on the bonanza?
ExxonMobil
Chevron, Shell, BP
EOG Resources
Eni S.A.
Anadarko Petroleum
Lukoil
ConocoPhillips
Chesapeake Energy
GDF Suez
In its J anuary 2014 report on the energy reform,
investing and banking giant Banco Bilbao Vizcaya
Argentaria (BBVA) listed a number of American,
foreign and multinational companies that could
potentially get involved in Mexican expansion. On
top of some listed above, BBVA named: Hess (for
deep offshore drilling); Diamond Offshore, Na-
tional-Oilwell Varco, Cameron, FMC, Trico Ma-
rine, SeaDrill, TransOcean, Geoservies, Baker-
Hughes, Smith International and Schlumberger (for
offshore logistics and drilling); Schlumberger,
Baker-Hughes, Halliburton and Weatherford Inter-
national (for oilfield services).
No turning back
The reform laws are currently undergoing nego-
tiations for another round of secondary legislation,
which will formalize how the contracts will be
awarded and how royalties and revenues will be cal-
culated.
Recently, Pemex chose the oil and gas fields it
wants to control, a process known as round zero,
with The Wall Street Journal and Bloomberg report-
ing Pemex wants to keep 83% of Mexicos techni-
cally recoverable reserves to itself or to be shared
between Pemex and other companies as part of joint
ventures. Pemex also wants all of Mexicos proven
and productive reserves.
To the chagrin of some, Pemex didnt publicly
disclose which fields it desired to keep under its
wings.
The fact that Pemex didnt reveal [the list]
speaks badly about the practices of this government
in terms of transparency, and its a very bad prece-
dent for what comes next with the reform, Miriam
Grunstein, an energy specialist who works at the
Mexico City-based Centro de Investigacin y Do-
cencia Econmicas, said in an interview with
Reuters. Reuters reported the first international bid-
ding process will likely take place in summer 2015,
covering 25,000 square kilometers.
[Thereafter], Mexico is expected to launch an
international bid round for oil and gas development
rights each year through 2019, each one covering
about 20,000 square km, explained Reuters.
[T]here could be additional shale bid rounds in a
given yearin line with international best prac-
tices.
On March 12, J uan Carlos Zepeda Molina,
president of Mexicos National Hydrocarbons
Commission, said Mexico was ready to release years
of oil exploration testing data. Its a major step for-
The countrys unexplored oil reserve
potential is second only to the Arctic Circle.
Pemex wants to keep 83% of Mexicos technically
recoverable reserves to itself or to be shared
20 Green Social Thought 65: A Magazine of Synthesis and Regeneration, Fall 2014
ward as Mexico moves to open its oil and gas indus-
try to the international players.
DeSmogBlog will be monitoring the coming
bonanza closely and will cover the developments
and especially the risks, dangers and oil/gas industry
wheeling and dealingthroughout this revolution-
ary time in the history of the North American oil and
gas industry. In particular, well be investigating:
Public opposition to the energy reforms as a whole,
and local opposition to drilling;
Ecological threats to ecosystems, wildlife, rivers
and waterways;
Does Mexico have enough water to support frack-
ing operations, particularly in this time of long-term
drought (or desertification)?
How will Mexico move all this oil and gas? Exam-
ining the infrastructure: pipelines, refineries, ship-
ping terminals;
What regulations will be enacted and enforced to
protect the local environment, public health and
safety?
How will such an influx of shale gas and oil impact
the global economics of liquid fossil fuels? How
does this extend the lifeline of the popping of the
shale gas bubble?
As the Atlantic Council wrote ominously in its
December 2013 report titled Mexico Rising: Energy
Reform at Last? The scale of the reform is breath-
taking in its scope and ambitionIt will be a bumpy
road, but these reforms mean there is no turning
back.
Steve Horn is a Madison, WI-based freelance investiga-
tive journalist and Research Fellow at DeSmogBlog,
where this piece first appeared. Horn previously was a
reporter and researcher at the Center for Media and De-
mocracy.
Globalization: Ideology and Reality
review by R. Burke
Capitalist Globalization: Consequences, Resistance and Alternatives, by Martin Hart-Landsberg,
Monthly Review Press, New York, 2013, 223 pages, ISBN-978-1-58367-352-2, $15.95.
For the past three decades, the world has been subjected to the ideology of free trade. Remove all bar-
riers to trade, and a consumerist paradise would be the international result. Or so we were promised.
Three decades later this ideology rings hollow; not only have the promised benefits failed to materialize,
but those who have benefited have been overwhelmingly the ruling class, the 1%, while the rest of us
have been forced to face a grimmer reality. Fortunately we have writers such as Martin Hart-Landsberg
on our side to examine the actuality of capitalist globalization, as he does in his book by the same name.
Mr. Hart-Landsberg begins by investigating the
internationalization of production. Using an abun-
dance of statistics he shows how production chains
have been extended across the globe. Increasingly,
consumer goods
are not being
produced in one
country, but
components
from many loca-
tions are assembled. Often this process involves the
creation of intermediate products which are then
shipped elsewhere for final assembly. Over the past
3 to 4 decades the global economy has been increas-
ingly dominated by transnational corporations
(TNCs) whose activities are carried out in several
different countries.
The development of an international architec-
ture of trade was not something that happened spon-
taneously. It is instead the result of years of interna-
tional agreements bringing down tariffs, import quo-
tas, and other barriers to trade that individual coun-
tries had erected in order to safeguard their national
development. These agreements have often been
used to free up controls on flows of capital across
borders.
One result of the globalization of production
has been the rise of East Asia, and particularly
China, in the worlds economy. Much of Capitalist
Globalization is focused on this area of the world.
Mr. Hart-Landsberg demonstrates that this
economic development has been the result of
demands of global capitalism rather than the
needs of national development, so that the
development these countries undergo is
largely oriented to production for export. They
are reduced to serving the needs of the developed
world rather than their own. Developing world coun-
tries economic development is being neglected in
favor of the demands of the larger world market and
the TNCs which dominate it.
Capitalist Globalization takes on the myths that
have become widely accepted about free trade and
its supposed superiority. Hart-Landsberg shows that
the theory of comparative advantage, which plays an
important role in providing intellectual justification
for free trade policies, is based on unrealistic as-
sumptions. These include the assumption of perfect
competition, that labor and capital do not move
across borders, and that market prices always reflect
the true social costs of production.
Obviously, none of these conditions is actually
met, and in the case of capital great effort has been
They are reduced to serving the
needs of the developed world...
Green Social Thought 65: A Magazine of Synthesis and Regeneration, Fall 2014 21
made in recent decades to remove barriers to the free
flow of capital across international borders. The em-
pirical evidence regarding trade liberalization does
not justify the claims made by the advocates of free
trade. The neo-
liberal era has
been marked by
slower eco-
nomic growth
and reduced
progress on so-
cial indicators for the vast majority of low and mid-
dle income countries when compared with the pre-
vious decades.
For a system that is based on the demand of
endless growth, this is a fatal weakness. Trade lib-
eralization contributed to the deindustrialization of
many third world countries, thereby increasing their
import dependence. Under pressure from the Inter-
national Monetary Fund and the World Bank many
of these countries have been forced to impose aus-
terity measures, such as cuts to social programs, as
well as to privatize and deregulate their economies
for the benefit of international investors.
While China is seen as something of a success
story for globalization, Hart-Landsberg demon-
strates that this success has been one-sided. Much
of the development has been not for Chinas own
needs but those of the global market. The beneficiar-
ies of Chinas growth have been a relatively small
but numerically significant upper-income group of
Chinese, who enjoy greatly expanded consumption
opportunities. Chinese work-
ers have largely not benefited
from the growth of Chinas
economy.
Mr. Hart-Landsberg
places the drive for globaliza-
tion within the context of the
capitalist world system and its
dynamics. He argues that it is
not simply neoliberalism but
capitalism itself which must be
challenged and overcome. The
rise of capitalist globalization
is the result of economic insta-
bilities within the developed
world, along with the third
world debt crisis of the 1980s.
These, as well as new tech-
nologies which made interna-
tional production a possibility,
such as container ships, com-
puters and expanded commu-
nication, were factors contrib-
uting to the development of
globalization.
One chapter of Capitalist
Globalization is devoted to
examining free trade agree-
ments between the US and
South Korea. Hart-Landsberg
emphasizes the role that such
agreements play in further ex-
tending capitalist globalization. The fight against
such agreements is for him a vital area of resistance
in the struggle to challenge and overcome capital-
ism.
Far from simply analyzing globalization, Capi-
talist Globalization gives ample space to the discus-
sion of what is to be done. One chapter, written in
the aftermath of the WTO protests in Seattle in No-
vember 1999, investigates the possibilities for strug-
gle that this event opened up. Our attention and
organizational efforts should be focused on develop-
ing campaigns that speak directly to workers con-
cerns in the United States and other countries, and
that promote rather than weaken international
worker solidarity. To this end he advocates, among
other things, the revitalization of the May Day tradi-
tion in the US as a way of promoting greater interna-
tional solidarity.
The final chapters in the book look toward
Latin America and the attempts by left-leaning gov-
ernments in the region to
promote a program of co-
operative development as
an alternative to capitalist
globalization. In particular
he focuses on ALBAthe
Bolivarian Alliance for
the Americasand the proposed Bank of the South,
a potential source of investment for national devel-
opment. While the efforts do not explicitly set out an
anti-capitalist agenda, they provide possible alterna-
tives to projects that exist primarily in order to bene-
fit TNCs and the ruling class
of the developed world.
Capitalist Globalization
is a good, down to earth inves-
tigation of the phenomena of
economic globalization and
the internationalization of
production. It is a book that is
less theoretical and more prac-
tical in its aim. Martin Hart-
Lansberg has aimed at produc-
ing a useful sourcebook for
those engaged in challenging
capitalist globalization. He has
largely succeeded in this.
Capitalist Globalization is
filled with useful facts and
promotes activities that are
helpful in building a success-
ful movement against global-
ization. Above all he displays
his desire to help those
crushed by trade liberalization
to fight back. Capitalist Glob-
alization: Consequences, Re-
sistance and Alternatives is a
book for activists.
R. Burke is an activist, artist,
teacher and writer living in St.
Louis

free trade is based on
unrealistic assumptions.
Capitalist Globalization
is a book for activists.