Obama Funds Pemex, Not American Oil

Oil Drilling Rig at Sea

Original Image

We all know that Obama has put a moratorium on Gulf of Mexico drilling for the USA. Over 10,000 us jobs are on the line and the impact is accelerating as the rigs in the gulf finish up and have nothing to do for income. A large floating rig can run $1/4 Million / day on lease income, so you don’t just sit around for 6 months (or 3 years?) waiting for a policy to change. You move to another country with oil to drill.

And that may not be such a long ways to move…

PEMEX Invests In Oil

So from the Wall Street Journal, we have a report that Mexico is investing heavily in the Mexican part of the Gulf via the state owned oil company, Pemex:

From: http://online.wsj.com/article/BT-CO-20100909-714217.html

MEXICO CITY (Dow Jones)–Mexico’s state oil monopoly, Petroleos Mexicanos, or Pemex, would get a boost in its investment funds for next year to about $22.2 billion under the 2011 federal budget proposal presented by the executive branch to Congress.

Pemex’s estimated investment budget for this year is $20.4 billion, according to the company’s latest figures.

The oil company’s 2011 investment would be equal to 2% of the country’s estimated gross domestic product–the same as for 2010. But Finance Minister Ernesto Cordero, who submitted the budget to Congress late Wednesday, said the ministry is expecting the economy to grow by 3.8% next year.

Pemex will still provide close to one-third of the government’s income through taxes and royalties, according to the proposal.

That’s a lot of money for drilling. So we will have a load of drilling rigs in the Gulf, just Mexican rigs, not US rigs. My advice for folks in Louisiana and the Gulf Coast drilling community is to learn to speak Spanish. (I’d suggest it for the folks in Texas, but they already speak Spanglish ;-)

But Pemex is State Owned. Part of the Mexican Government. Any way we could invest some money in it?

You already have…

Obama’s Government Invests in Mexican Government

From a somewhat right wing site, we get some details:

from: http://www.cnsnews.com/news/article/72342
(I don’t know who these folks are, but they seem to have their facts straight).

EXCLUSIVE: U.S. Government Loaned Mexican Government More Than $1 Billion to Drill Oil in Gulf of Mexico Last Year; Has $1 Billion More Planned For This Year

The U.S. Export-Import Bank, an independent federal agency, loaned more than $1 billion to the Mexican state oil company PEMEX in 2009 to support the company’s oil drilling in the southern Gulf of Mexico.
Tuesday, September 07, 2010
By Matt Cover

(CNSNews.com) – The U.S. Export-Import Bank, an independent federal agency, loaned more than $1 billion to the Mexican state oil company PEMEX in 2009 to support the company’s oil drilling in the southern Gulf of Mexico. The bank has another $1 billion in loans in the pipeline for 2010, unless Congress objects.

On May 27, after the British Petroleum oil spill, President Obama imposed a moratorium on U.S. deepwater drilling in the Gulf, effecting 33 deepwater drilling rigs in the region.

PEMEX was the Export-Import Bank’s largest borrower in 2009 and has borrowed $8.3 billion from the U.S. federal government since 1998. Under the 2009 loan agreements, PEMEX agreed to contract with American firms and purchase equipment from American manufacturers in exchange for the money.

So even while the Federal Government says US companies can not drill in the Gulf, it is funding the Mexican Government company PEMEX to drill in the gulf.

There are two possible explanations.

1) It is a deliberate attempt to damage American Oil and enhance government run monopolies, as socialist policies typically lean that way.

2) It was done from ignorance and error. One part of the government having no idea what the other was doing, and being horridly uncoordinated.

I have a dilemma here. I can’t decide which of these two is worst…

The Excuse

The excuse given is that the Mexican drilling will be done with shallow water rigs, so not subject to the ban. I have trouble seeing how the USA could tell Mexico what to do anyway, but besides that, we don’t own the Gulf of Mexico. We have a 200 mile economic zone, but beyond that, we don’t ‘own’ it. (Cuba is drilling closer to the coast of Florida than “we allow”…)

Types of Drilling Rigs

Furthermore, it looks like money is flowing into Brazil as well. From the same source above, down in comments, there was a link to another WSJ article about a $Billion going to Brazil last year just a couple of months after Soros put $883 Million into Petrobras (the Brazilian State Oil company, but one where you can buy a share and invest alongside):

From: http://online.wsj.com/article/SB10001424052970203863204574346610120524166.html

You read that headline correctly. Unfortunately, the Obama Administration is financing oil exploration off Brazil.

The U.S. is going to lend billions of dollars to Brazil’s state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil’s Tupi oil field in the Santos Basin near Rio de Janeiro. Brazil’s planning minister confirmed that White House National Security Adviser James Jones met this month with Brazilian officials to talk about the loan.

The U.S. Export-Import Bank tells us it has issued a “preliminary commitment” letter to Petrobras in the amount of $2 billion and has discussed with Brazil the possibility of increasing that amount. Ex-Im Bank says it has not decided whether the money will come in the form of a direct loan or loan guarantees. Either way, this corporate foreign aid may strike some readers as odd, given that the U.S. Treasury seems desperate for cash and Petrobras is one of the largest corporations in the Americas.

But look on the bright side. If President Obama has embraced offshore drilling in Brazil, why not in the old U.S.A.? The land of the sorta free and the home of the heavily indebted has enormous offshore oil deposits, and last year ahead of the November elections, with gasoline at $4 a gallon, Congress let a ban on offshore drilling expire.

Well, we now know how that expiration of the prior drilling ban worked out…

So let me see. We have the US Government providing funding for oil drilling by a couple of State Owned oil companies, one with partial public ownership and where a major Socialist Supporter and political donor to the Democrats had just made a major investment. Then we have a new US ban on US drilling, that just happens to benefit most the large Socialist leaning donor… Hmmm….

I’d also note that Petrobras is doing some of the deepest water drilling in the world, so that whole idea that money is only going to shallow water drilling looks a bit weak to me.

What About Markets Now?

Well, it looks to me like the larger offshore oil drillers have bottomed out and started a new rise. RIG (which moved from the USA to Switzerland for better legal treatment) and DO are both looking like a bottom to me, as is oil (USO). Mexico EWW is rolling sideways, so suited for range trading. (We already saw last week that EWZ Brazil showed an entry call as did PBR / PBRA Petrobras).

Oil Drillers, Mexico, and Oil 1 year chart

OK, I think the “game” here is pretty clear. Find a Socialist Whale who is politically well connected, watch what he invests in, then buy it; wait for him to buy off the needed politicians to assure the investment has a guaranteed return. Looks like about a 2 month lead time on buying in.

I’m probably late to learning this particular ‘trade style’, and that leads me to think someone probably already has a ‘Soros Watch” web site somewhere. Have to look into that…