Mexico says oil woes hurting it and world

MEXICO CITY (Reuters) - A steady drop in Mexico's crude oil output is threatening the nation's energy security and means jittery world oil markets cannot look to it for reassurance, Energy Minister Georgina Kessel said on Thursday.

As world oil prices shot above $145 a barrel on a mixture of Middle East tensions, speculation and supply worries, Kessel told Reuters Mexico was under more pressure than ever to push through reforms to its struggling state-run energy industry.

"We are seeing that for Mexico, energy security is currently at risk," Kessel said in an interview.

"For the rest of the world, as long as we haven't resolved our problem of energy security, there will be no way that we can contribute to the rest of the world."

Kessel said getting Congress to approve a controversial plan by President Felipe Calderon to change oil laws will be crucial to avoid a plunge in production in the coming years. Without new exploration and production projects, Mexico's oil output could drop by nearly two-thirds by 2021, she said.

She also said a goal to double Mexico's proved oil reserves replacement rate to 100 percent by 2012 -- meaning every barrel of extracted oil is replaced with a barrel of newly proven reserves -- would be "difficult" to reach.

"Achieving that goal will depend a lot on what we do," Kessel said. "That is why it's so important that the reforms are approved, because we are going to have to be doing an enormous amount of activity in exploration and production."

Mexico is a top three U.S. crude supplier, and Washington has grown to rely upon it as a reliable and politically stable source of oil.

But a worse-than-expected drop in production since historic peaks in 2004 means state oil monopoly Pemex's exports to the United States have slid by almost a third in just four years.

Mexico's proved oil reserves have also waned to around nine years' worth, amid a lack of spending on exploration.

"WE HAVE A PROBLEM"

The trend also means that Mexico, which relies on foreign oil sales to fund about a third of its federal budget, is losing out on potentially lucrative new markets like China and India where demand for oil is soaring, Kessel said.

"Mexico is losing income and also opportunities," she said. "We've had to cut back exports not just to the United States but also to the rest of the world. We've had to reduce our commitments due to the fall in our production."

Mexico sees its total oil exports dropping to 1.4 million barrels per day in July, down 18 percent on the year and 4.6 percent lower than in June, the finance ministry said on Thursday. In July 2004, Mexico was exporting 1.8 million bpd.

Mexico's oil sales have continued to rise in dollar terms, as Mexican crude sells at a record $128 per barrel, but the government says it is losing most of its oil profits by paying a ballooning bill for gasoline imports. A shortfall in domestic refining capacity means Mexico must import about 40 percent of its gasoline.

The grim figures come as the government is trying to persuade opposition parties to agree to an oil reform that could spur on new exploration and drilling projects by allowing state-run Pemex to hire private or foreign companies under attractive contracts based on incentive fees. Calderon's conservative party lacks a majority in Congress.

Some leftists have accused Pemex of exaggerating its woes to pressure lawmakers to pass the reform proposal, which opponents say smacks of a creeping privatization of the cherished oil sector.

But Kessel said the message from Pemex was the same both for recalcitrant lawmakers and world markets.

"What we are observing is a reality," she said. "We can't give different messages because the reality is a single one. We have a problem in the hydrocarbons sector."

(Editing by Christian Wiessner)