Mexico's Struggling State Of Veracruz Hopes To Capitalize On Black Gold Rush
International oil corporations are rushing to the Mexican side of the Gulf of Mexico. For the first time in decades, the country is opening up its energy sector. And the interest in its deep-water reserves has come from global big guns like ExxonMobil and even the Chinese government to the tune of an expected $60 billion in investment.
In the first of a two-part series, Cross-Border Energy Boom — or Bust, the story of how one of the country’s most struggling states is hoping to capitalize on this black gold rush.
Right in the middle of Mexico’s Gulf Coast is a long strip — the state of Veracruz.
And here in the biggest city, also called Veracruz, is a convenience store chain called Super Little Jesus. Bright, tropical music plays outside one store, but owner Jesús Antonio Muñoz has much to be unhappy about.
“It has been a very sad period that we live here in Veracruz,” he said.
Robberies are common enough that some of his employees are scared of going to work. And there’s worse.
"Several of our colleagues, our friends that have businesses here, they have decided to go live in a new place because of the fear of being kidnapping or because they have been kidnapped,” Muñoz said.
Muñoz says the previous government sometimes extorted businesses or didn’t pay out large contracts with construction companies.
"Yeah, every time it comes to the top, but we don't want to talk about it. We want to give all the world good news about Veracruz," he said.
Alejandro Zairick Morante, the secretary of economic and port development in Veracruz, came in with a new administration this year. The former governor, Javier Duarte, is now in jail. So, Zairick says, there’s a new day — and brand-new interest in the state’s energy economy. There’s solar, wind, gas and oil. Zairick says estimates show 40 percent of Mexico’s oil reserves are right here in Veracruz.
“Of course, 40 percent of the whole country reserves are here in Veracruz. So we are like the center of the energy reform," he said.
Mexico is in the early stages of what could become a black gold rush. The government is dismantling its decades-old monopoly on oil extraction. It’s hoping corporations will set up more than 200 wells in the gulf. Veracruz officials want to capitalize on that by building a port to serve those wells.
“We now have some port developers, we have refineries and some other services that are very useful for all the companies off shore. So we have all the pieces," Zairick said.
The port would be in what’s currently a small fishing town called Alvarado. It’s geographically in the center of Mexico’s Gulf Coast, and Zairick says the river that meets the ocean there is more than 40-feet deep, big enough for deep-draft ships.
Veracruz has no money to build the port, so it would have to be done with private partnerships. Zairick’s team wants to replicate the success of a port a few hundred miles north.
Davie Breaux oversees construction at Port Forshon in Louisiana. That port accounts for more than 90 percent of the deep-water oil production in the U.S. Over the last 20 years, Breaux has seen the port grow from 14 tenants to more than 250. It is by far the biggest economic engine in southern Louisiana.
“If you need a piece of property, you will be waiting about a year and a half, and that’s in the slow time. Sorry," Breaux said.
Breaux says operating a well costs more than $1 million per day, which is why they need a port nearby with supplies.
Veracruz officials visited Port Forchon this year, and Breaux told them the port has been around for more than 50 years.
"So it’s hard to build a Fourchon tomorrow," he said.
Here in Alvarado, third-generation fisherman Jaime Santiago says that even though the project for his hometown would represent new wealth for his state and country, he’s worried.
He says he doesn’t know how the town’s fishers would fit in with the new port. He asks: who’s going to explain it to us?
Part II: How local fishermen want to continue doing their work beside an underwater pipeline that will bring natural gas from Texas.