Woes mount for Mexico's state oil titan

But at a ceremony marking the 69th anniversary of the nationalization of Mexico's oil industry last year, Pemex General Director Jesus Reyes Heroles wasn't in a celebratory mood.

"The situation of Petroleos Mexicanos is critical and merits immediate attention," the company's top executive said.

Indeed, 2007 tapped a gusher of concerns for the world's sixth-largest oil producer.

Pemex managed to lose $1.2 billion in the third quarter. Output is declining, as are exports and proven reserves. Mexican Energy Secretary Georgina Kessel said last month that Mexico's crude production, which averaged about 3.1 million barrels a day in 2007, could fall as much as one-third in less than a decade if the nation didn't move fast to reverse the slide.

The consequences could be painful, not only for Mexico, which relies on oil revenue to fund about 40% of its federal spending, but also for world markets, which are feeling the pinch of tight supplies. Mexico is the No. 2 provider of petroleum to the United States, behind Canada.

The bad news isn't confined to the financial pages. An emblem of national pride and the nation's most important company, Pemex lurched from one humiliating episode to another in 2007. Among them:

* Leftist guerrillas pulled off a series of pipeline bombings that sent the government scrambling to deploy troops to protect company installations.

* An accident at an offshore oil platform killed 22 workers in October and crippled a major well. Public outcry forced Pemex to take the unprecedented step of appointing an independent commission to investigate the incident, reflecting lack of trust in the institution.

* A federal watchdog fined a former head of Pemex for using company funds to pay for his wife's liposuction and illegally funneling more than $150 million to the oil workers' union as part of a murky contract settlement. Separately, government audits turned up lucrative supplier contracts awarded to former company insiders.

* The national daily newspaper Excelsior reported in November that 11,500 oil workers, about 10% of Pemex's unionized workforce, get paid for sitting idle.