Mexico's declining oil production is starting to have a ripple effect at home and abroad. The decline of the prolific Cantarell field, along with the inability of state oil company Pemex to bolster production elsewhere, is motivating Mexico’s Congress to hammer out an energy reform deal, while U.S. refineries are being forced to look elsewhere for some of their crude. And in late September, Central America's energy sector faced a major setback due in large part to Pemex's problems, as efforts fell apart to build the Mesoamerican refinery in Panama.

Colombia's state oil company Ecopetrol, Japan's Itochu, Reliance of India and San Antonio, and Texas-based Valero Energy had signed up to bid for the refinery, but decided not to submit offers by the September 22 deadline. Although Central American planners have expressed interest in relaunching the bidding, little hope remains, in large part because Mexico reduced its supply commitment to the project last year. Without crude commitments, project planners cannot guarantee potential bidders that the refinery will utilize enough capacity to remain profitable.

In April 2007, President Felipe Calderón reduced his country's supply target for the Mesoamerican refinery to 80,000 barrels per day of heavy Mayan crude, down from predecessor Vicente Fox's promise of 230,000 bbl/d. "The 80,000 bbl/d is an objective estimate of Mexico's oil production," Calderón said at a regional integration meeting at the time. “We want to give honest alternatives for the project and at the same time look after our country's production."

Mexico's production woes left project proponents in a tight spot, with detractors questioning where the 360,000 bbl/d-capacity heavy crude refinery would get its crude. Other heavy crude producers in the region such as Venezuela and Ecuador have suffered declining production, while Colombia, which halfheartedly offered to help with Mesoamerica, struggles every year to ensure oil self-sufficiency.

Of course, lack of supply was not the only thing to kill the project. In July 2007, Valero suggested the refinery, which would require up to $8 billion in new investment, was unappealing. "We're not about to jump into a grassroots refinery that doesn't have more assurance as to margins," C.E.O. Bill Kless said on a Webcast then. “Throughout our industry, projects are costing much more, are taking much longer to complete than originally envisioned. Some are being cancelled."

The project would have provided a crucial boost to Central American countries, which generally are too small to operate successful refineries on their own. The ports of Armuelles in Panama and Quetzal in Guatemala were eager to host the project, and Costa Rica was also eyeing a role. The integration of their markets would have enabled Central American countries to seriously reduce expensive imports of gasoline, jet fuel, and diesel. But they'll have to wait – perhaps for a long, long time – until they can find a reliable source of crude to revitalize the project.