The managing director of PEMEX, Jorge Diaz Serrano, extends his warm wishes to this conference of the Society of Petroleum Engineers. Mr. Diaz Serrano wanted to be here for the meeting; however, his already heavy travel schedule precluded this. I will do my best to present our shared views of the world petroleum industry, a dynamic, ever-changing industry, now so critically important world-wide.
In many ways, I am sure that our views coincide with those of the U.S. industry; on the other hand, I want to emphasize that Mr. Elas Serrano is from Mexico, from PEMEX. It follows that some of his opinions will reflect this fact.
The management of Mexico's indigenous hydrocarbon resource is the single most important issue facing Mexico today. There is a high probability that our hydrocarbon resource base is enormous, on the order of 200 billion bbl. Our export revenue will soon provide the basic vehicle to recoup our traditional provide the basic vehicle to recoup our traditional economic world trade increase of 6 to 7% per year, and the management of this resource embraces technical, economic, and political aspects. But the political aspects are beyond the scope of PEMEX. political aspects are beyond the scope of PEMEX. The technological management of this precious resource is one subject on which I am sure we would all agree in general principle. We rely on an established practice utilizing the best technicians, engineers, and advisers, and we purchase the best equipment available. We intend to maintain production from each field at the most efficient rate for maximizing long-term recovery and will install gas and water injection and secondary recovery systems as necessary to achieve the most economic operation.
In the past 12 months we have had to accept gas flaring of up to 600 MMcf/D. This was done to maximize our oil exports and finance Mexico's economic recovery. This, however, will be brought quickly under control to less than 50 MMcf/D by next year. In the near future, we will not flare to any significant extent because the gas is worth as much, or more, than the oil per Btu. As to our technical capability, we have been surprised to learn on recent travels around the world that many otherwise knowledgeable people discounted our technical ability to achieve our production goal. PEMEX has been in existence for 40 years, and the petroleum industry has existed in Mexico for almost a century. PEMEX has over 7,000 engineers with a PEMEX has over 7,000 engineers with a long-established infrastructure covering all facets of the petroleum industry. We already have achieved am annual incremental increase in oil production and capacity of over 400,000 B/D and we can maintain an annual incremented growth of 500,000 B/D for many years - if we try to, of course.
As to economic management of the resource, we do appreciate the enormous complexity of the subject, and I an sure you can understand that this very complexity makes it impossible to generalize on the most important factors.
You know that economics is sometimes a very particular profession. You can construe the word particular profession. You can construe the word "particular" in any way you like. You recall that in the 1960's, some economists attempted to persuade the oil industry that the world oil price should and would drop to 25 cents per bbl. Currently, it seems that some economists are trying to persuade PEMEX that we should continue to be forced by conditions in our country to produce as much as possible, even though the world oil price, thereby, would be forced down! They infer, too, that Mexico has no economic alternative for incremental gas supply except to export it to the United States at any price. There is as much merit to this premise as there is to oil at 25 cents a barrel, and there may be an even greater parallel because the price of oil actually quadrupled instead of declined and Mexico's ability to manage economically its own resources will be complete, rather than bankrupt.
But we still establish our hydrocarbon policies within the context of the world's economic and energy outlook.