Pemex’ operations have come under close scrutiny following a string of accidents that began on 22 December that has resulted in environmental contamination and even loss of life. In a statement, Pemex’ chief executive Luis Ramirez pledged to coordinate with the ministries of the Environment and Energy to address the deterioration of its facilities.
The company said last week that it needed about $3 billion to maintain its 36,738km of pipeline. Now, however, the state company says it needs more investment to prevent accidents and ensure the safety of inhabitants living near its facilities and pipelines. For 2005, the company has just over $2 billion set aside for maintenance, but will likely need another $750 million to carry out repairs and improvements. Between now and the end of 2008, the company said it will need to invest more than $9 billion to make its operations safer.
Mexico’s Congress approves the annual budget for the state company, and the 2005 spending plan already has taken effect. Pemex has annual revenue of nearly $60 billion; however, more than 60% of its revenue goes to the federal government in the form of taxes and royalties, leaving the company with net losses. Over three years ago, the company requested that Congress change its tax scheme to facilitate company investment: the lower house passed a bill on the issue last year, but the Senate has yet to approve this legislation. The company has focused in recent years on exploration and improved productivity, but admits that it has fallen behind on investing in maintenance and security.
The recent incidents expose the company’s lack of centralized authority responsible for industrial safety and environmental protection, according to energy analyst George Baker. “It’s not just [about] how many barrels spilled, or why did this particular pipeline break, but what fault lines are exposed by the event,” the Houston-based analyst commented. “There is no central authority in Pemex responsible for pipelines.” He attributed the lack of central authority to the 1992 reorganization of Pemex into four units – gas, exploration and production (PEP), chemicals, and refining – with each one in charge of its own pipelines. This left an “oversight vacuum” that is contributing to the current lack of maintenance, Baker said. “So when this pipeline breaks, the first questions we can ask are: who is responsible for maintenance of this pipeline, and is there anybody in the corporate office that is responsible for this pipeline?” he said, adding that last May Pemex board voted to eliminate the corporate vice presidency of industrial safety and environmental protection.
Story courtesy Global Pipeline Monthly – www.gasandoil.com/gpm.