The Washington Post
Tuesday, January 18, 2005; Page A12

Past Catches Up With Mexico's Oil Monopoly

River Contamination That Sickened 800 Draws Scrutiny of Lax Maintenance by Pemex

By Kevin Sullivan

Washington Post Foreign Service

NANCHITAL, Mexico -- The air stank of oil, and workers with pitchforks stabbed at the thick black gunk fouling the river where Elva Garibo Romano's family used to catch shrimp and crabs. More than two weeks after a pipeline burst here and caused a major spill, Garibo's riverside house was still slick with oil, her husband was out of work and she and her children still suffered headaches and nausea.

"Pemex doesn't care about us," she said, referring to Mexico's state-controlled oil monopoly, Petroleos Mexicanos, whose spill left at least 800 people sick, cost hundreds of fishermen their livelihoods and caused extensive damage to coastal vegetation and wildlife. "They don't even care if they ruin an entire town."

The Dec. 22 pipeline rupture dumped 5,000 barrels of crude oil into the Coatzacoalcos River close to the Gulf of Mexico. It was the latest in a string of Pemex accidents throughout the country and has touched off a national debate about the global oil giant that is Mexico's largest source of revenue.

Pemex's operating budget is subject to congressional approval, and for generations Mexico's leaders have been reluctant to reinvest Pemex's earnings in expensive maintenance and modernization projects, preferring to use the money for roads, schools and other urgently needed, politically popular projects.

Now, after a year of record oil profits, government and Pemex officials acknowledge that much of Pemex's aging pipeline system is dangerously outdated. Some government officials and members of Congress say it is no longer acceptable for the country's richest company to be a principal source of environmental accidents.

"They are killing the golden goose," said Jose Luis Luege, Mexico's top prosecutor for environmental crimes. "It's an illogical situation. Pemex is the richest company in Mexico, yet it lacks the resources to modernize."

Pemex, which had sales of more than $55 billion in 2003, has been Mexico's economic engine for decades, providing about a third of the revenue the government spends each year. Since Mexico's oil industry was nationalized in 1938, political leaders have used Pemex as a piggy bank.

During the one-party rule of the Institutional Revolutionary Party, or PRI, from 1929 to 2000, presidents were able to spend Pemex revenue with no independent oversight. For decades, Mexican leaders have allegedly used Pemex profits to fund political campaigns. They also used oil profits to develop the nation while reinvesting relatively little to make refineries and pipelines safer and more productive. As a result, Pemex now pumps millions of barrels of oil and gas products through a pipeline system that Luege called an environmental "red alert."

Luege's prosecutorial agency registered 1,459 "environmental emergencies," including spills, explosions, leaks and fires, at Pemex facilities between 2000 and 2004, including another spill in Nanchital that dumped 18,000 barrels of oil into a tributary of the Coatzacoalcos in 2001. Luege said many of the spills have been small, and some are caused by thieves trying to tap into Pemex pipelines. But he said many more have been significant spills caused by corroded pipes or aged ducts and valves.

Pemex has a long history of fatal accidents. A 1984 fire in a Pemex plant in Mexico City killed more than 500 people, and a gasoline pipeline explosion in Guadalajara in 1992 killed more than 200. At least seven people have died in the past two years in accidents at Pemex facilities, including a June 2003 explosion on a gas pipeline in Veracruz.

Luege's agency on Sunday ordered Pemex to shut down a 32-mile pipeline in the Gulf Coast state of Tabasco that spilled 3,000 gallons of oil on Dec. 31. The agency said the pipe was taken out of service because of corrosion and lack of maintenance, and because it had "exceeded its useful life."

"Many of their installations and pipelines are so obsolete that they pose a high risk," said Luege, whose agency has sought federal criminal charges against Pemex over the recent spill. "Mexico urgently needs to let Pemex reinvest its profits and modernize itself."

Luis Ramirez Corzo, the Pemex director general, acknowledged the problem shortly after the spill, when he met with local officials and affected families. "We have a very important lag in maintenance, which doesn't come from yesterday or from four years ago, it comes from 30 years ago," Ramirez said.

Oscar Pimentel Gonzalez, secretary of the energy commission in the lower house of Congress, agreed that for many years, the government has "been practically milking Pemex" and ignoring its maintenance and modernization needs. He said politicians have preferred to build roads, hospitals and other needed projects, but that without more investment, "we are going to break Pemex, technically and financially."

Juan Bueno Torio, chief of Pemex's refinery division, said that under President Vicente Fox, who ended the PRI's 71-year reign with his election in 2000, there has been a dramatic increase in the amount of Pemex revenue reinvested in the company.

Bueno said Pemex had begun a program of pipeline modernization, more than doubling the budget for pipeline maintenance to about $1.3 billion. But he said it is still only about a third of what the company should be spending to ensure the safety of its 32,000-mile pipeline network. "The past has caught up with us," he said.

Bueno said Pemex profits have increased as world oil prices have reached record highs in recent months. Pemex announced sales of nearly $49 billion through first nine months of 2004, putting it on track to significantly surpass the previous year's sales. But even with increasing revenue, he said, it is difficult to balance Pemex's needs with social needs when more than half the population lives in poverty.

Fox has also proposed allowing some private investment in Mexico's energy sector to improve productivity and efficiency, but the PRI-dominated Congress has blocked those efforts, because of strong nationalistic sentiments and a constitutional prohibition on foreign exploitation of Mexican oil and gas.

The subject of Pemex is particularly delicate in Nanchital, where about one-third of the 29,000 inhabitants work for the oil company. Nanchital, 400 miles east of Mexico City in the coastal state of Veracruz, was built as a bedroom community for workers in the vast petrochemical plants here. Pemex dominates this town: The oil workers' union built schools, parks, churches, grocery stores, the town hall and even the funeral home.

But Nanchital's mayor, Francisco Ocejo Meza -- the first person without ties to Pemex or the union to be elected to the post -- said the population has become fed up with Pemex's neglect.

"If they don't immediately start maintaining their equipment adequately, many human lives are at risk, as well as the ecosystem," Ocejo said. "Pemex needs to accept its responsibility right now."

Ocejo said Pemex has responded quickly to the latest spill, bringing in equipment to contain and mop it up, and has hired hundreds of local fishermen to help. He said the company provided medical care for the 800 people sickened by the fumes.

On Christmas Eve, two days after the spill, Pemex officials delivered rotisserie chickens to poor families in 200 waterfront homes. Because of the heavy fumes, people in those houses were prohibited from using electricity or cooking for more than a week. Nanchital's Christmas and New Year's fireworks displays had to be canceled.

The mayor said Pemex's efforts were too little, too late.

Along the river, where volunteers were scrubbing scores of oil-covered pelicans, and dozens of men in yellow and white slickers hauled black mud and debris from the water, Garibo said the future looked grim. She said her husband has lost his $30 daily wage as a fisherman, and her family is running out of money.

"They say no one's going to be able to fish here anymore," she said, sitting on her porch overlooking the oil-stained river. "And we don't have any money. Not even a peso."

© 2005