September 15, 2009 / 6:11 PM / in 10 years

Mexico's Carstens warns oil slump will last years

MEXICO CITY, Sept 15 (Reuters) - Mexican Finance Minister Agustin Carstens urged lawmakers on Tuesday to approve new taxes to offset lower oil revenues, saying the country’s struggling energy industry would not recover quickly.

The government of President Felipe Calderon has proposed hiking income and consumption taxes in 2010 to offset lower revenues from crude exports as output from Mexico’s state-run oil industry is expected to remain weak.

“This fall (in oil production) is going to last for years ... The future has caught up to us ... we’ve been living as oil addicts,” Carstens said at a congressional hearing on the budget proposals.

Oil production has fallen by nearly one-quarter since peaking at 3.38 million barrels per day in 2004, far faster than state oil monopoly Pemex [PEMX.UL] had expected.

Mexico has traditionally relied on taxes on oil production to pay for nearly 40 percent of government spending, but yields at its aging fields have pushed production down to near 20-year lows.

Standard & Poor’s and Fitch Ratings have both warned they could cut Mexico’s sovereign debt rating unless action is taken to shore up public finances.

The Calderon government’s budget proposal forecast that oil output will average 2.5 million bpd in 2010, and that production will remain flat through 2012.

Mexico produced an average of 2.619 million bpd over the first seven months of this year, according to state oil monopoly Pemex. (Reporting by Noel Randewich and Luis Rojas Mena; writing by Robert Campbell; editing by Jeffrey Benkoe)

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