I've been doing quite a bit of research on the Mexican oil industry as part of a SAMS exercise over the last two weeks.

Mexico is in really bad shape and it's only going to get worse.

Their largest field, Cantarell, is dropping off the charts in terms of daily production. It's expected to go below 700,000 barrels a day by the end of the year, and under 400,000 barrels a day by 2012. The US Energy Information Agency said earlier this year that Mexico will be a net importer of crude oil by 2017. Why is this important?

1. The Mexican oil industry is nationalized. 40% of the federal budget comes directly out of oil profits. If they become a net importer, not only do they lose a significant percentage of the federal budget, they will lose additional federal funds in order to meet the import requirements.
2. Mexican demand is expected to rise 10-15% by 2017.
3. Mexico is the third largest importer of crude oil to the US. In 2005/6, the US was getting 1.2/3M barrels a day shipped northward.
4. The US is actually subsidizing Mexico's economy by running a trade deficit of $65-90B dollars per year (the numbers vary depending on what source), of which about $40B comes from oil profits.
5. If the Mexican federal state cannot develop new fields (and they've spent literally nothing in terms of exploration or infrastructure sustainment) , they will not anything to replace that lost income, and I suspect there will be a crisis of political legitimacy within Mexico.