Analysts watch, wince as Mexico's oil supply dwindles

They warn of an irreversible output decline.

By DAVID ADAMS, Times Latin America Correspondent
Published September 24, 2007

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MIAMI - When left-wing guerrillas in Mexico bombed several pipelines in simultaneous attacks this month, it sent a shudder through that country's large oil and gas industry.

The threat of economic sabotage by a shady group known as the Revolutionary Popular Army EPR poses a major new headache for the Mexican government. But Mexico's energy industry problems run far deeper than terrorist attacks on its infrastructure, analysts say, and have major implications for U.S. oil supply.

"Mexico's oil production is in decline. There's probably no way to stop it," said Mike Rodgers, an expert at one of the top oil industry consulting firms, PFC Energy in Houston.

Mexico is the second largest supplier of oil to the United States (about 1.5-million barrels a day). But output from its major fields is dwindling fast, according to official figures from the state-owned oil giant Petroleos Mexicanos (Pemex). The country's known oil reserves will run out in nine years, the government says, potentially undermining the nation's oil-dependent budget.

Mexico's decline only adds more pressure to prices in a tight global oil market, which hit $83 a barrel Thursday. Worse still, its emptying wells are only a reflection of a global decline in aging oil fields around the world.

With no major oil fields left to discover, analysts say the world is approaching "peak oil," the moment at which oil production hits its maximum capacity and slowly starts to fall.

Mexican output peaked at just over 3.4-million barrels a day in 2004. "I don't believe we'll ever see it that high again, no matter how much is invested," said David Shields, an oil industry consultant in Mexico City.

Daily output at Mexico's biggest oil field, Cantarell, highlights the problem. Production there dropped by a staggering half a million barrels in the last 18 months, to 1.5-million barrels from 2-million. Once the world's second-biggest oil field, it is expected to continue losing production, down to as little as 600,000 barrels a day by 2013.

In Mexico, geology and politics go hand in hand.

The oil industry was nationalized in 1938. State control of oil and gas is protected under Mexico's constitution, which strictly limits foreign investment in the extraction of the nation's energy resources.

The Cantarell field, which lies offshore in the Gulf of Mexico, takes its name from a Mexican fisherman named Rudesindo Cantarell who discovered it accidentally in the 1960s after noticing his nets were coming up smeared in tar.

It turned out to be a dream find. Unlike most fields which are spread out over a large area, Cantarell is highly concentrated, spanning only 70 square miles of ocean floor. As a result, Cantarell's 200 wells do a job that would normally require thousands more drillings.

Geologists attribute this possibly to an asteroid that hit the Yucatan peninsula some 65-million years ago. Its impact may have caused subterranean cracks that allowed oil to run into a vast underground chasm. The same asteroid is believed to have led to the extinction of the dinosaurs.

But instead of reinvesting profits in new wells to sustain production once Cantarell runs out, Mexican governments used the oil revenue to pad their budgets. Taxes and dividends from Pemex's production last year amounted to $52-billion, 40 percent of government revenue.

Pemex's lack of access to foreign financing and technology has left it hamstrung as it looks around for new fields. Pemex has said it can offset declines at Cantarell with new production from other fields. While several sites, onshore and offshore, have potential, it would take a decade of massive investment to bring them on stream, analysts say.

"They really don't have a way to fix the problem," says Rodgers. "They could have if they had used some foresight. Now it's virtually impossible."

In his recent state of the union speech, Mexican President Felipe Calderon mentioned the nation's dwindling reserves.

"Our petroleum reserves have been reducing constantly. It has to be said," he said, as if broaching a taboo subject.

Rather than proposing ways to increase production, Calderon seemed to accept there was no way for Mexico to drill its way out of the problem. Instead, he called for "an urgent reduction in public spending to reduce the enormous dependence on oil revenue."

The fact that Mexico may be running out of oil should not alarm U.S. consumers in the short term, analysts say. The United States will most likely buy more from Canada, which is the nation's number one supplier.

New technology and high prices are helping tap vast new sources of so-called unconventional crude oil, such as Canada's tar sands. Global oil production (currently 85-million barrels a day) could reach as high as 100-million barrels per day in the next few years, analysts say.

But that may not be enough to keep pace with demand from growing economies such as China and India. In the long term, Mexico's problems are likely to be everyone's.

Lets do a little punching holes in ted kennedys Mass. compound. Maybe he will fall in the hole.

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Did you ever stop and just think about this. When all that oil is pumped out of the ground every day, what does it leave in its place? Are there millions of caverns being emptied all over the world? I was just kind of contemplating this today. What will happen with all this oil comming out and leaving empty spaces with all this pressure on top of it? Personally I would really like some solar panels about now.

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bugsygirl said: Did you ever stop and just think about this. When all that oil is pumped out of the ground every day, what does it leave in its place? Are there millions of caverns being emptied all over the world? I was just kind of contemplating this today. What will happen with all this oil comming out and leaving empty spaces with all this pressure on top of it? Personally I would really like some solar panels about now.

In the case of mexico the wells are filling with water.  Actually, that is a major part of their problem.  They did not continue to invest in maintaining their infrastructure and now face major areas of salt water intrusion.

How about windmills in Ted Kennedy's view....

SovereignMan

No need to hang around them any longer!  No need to let the illegals tramp across our borders anymore!  Isn't oil what they were after in the first place?  They make me sick!  I don't know about you, but I don't find it my problem that the Mexicans are running out of bargaining power!  If they ran out of more then they really wouldn't be welcome here! 

Hmmm,...ya have to rethink this oil agenda,.....Israel is sitting on a HUGE amount of oil,...even more then Iran & Iraq,....so why would America care about Mexico's oil so much,....Ted Kennedy just hates America and will do anything to see us go down, as does Billary, Obama  Edwards, Ron Paul and John Kerry,...they get there talking points from "Hate America & the right to do it" book.

President Bush and the rest of the Amnesty regime are pushing for Mexico and the Illegal
Aliens,  in a movement to merge the United States, Mexico, and Canada. The NAU.

America is being sold out.

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blaze77535 said: Lets do a little punching holes in ted kennedys Mass. compound. Maybe he will fall in the hole.

 

Ted Kennedy -- the name makes me cringe.  This is a man who should have resigned or been voted out long ago yet his name keeps him alive in a game where who you know is everything.  Connections, connections, connections -- you grease my palm and I'll grease yours.

He is the perfect example of why term limitations should be in place.  He is the poster person for immigration, illegal and legal, that has gone insane. 

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Sheilah said:

President Bush and the rest of the Amnesty regime are pushing for Mexico and the Illegal
Aliens,  in a movement to merge the United States, Mexico, and Canada. The NAU.

America is being sold out.

 

President Bush and 95% of the Dem's and ALL the Dem's president runners want this.

Want to know who is selling out America?  Go to Numbers USA.com and look up the "illegal alien / amnesty supporters Grade for all Senators and Congressmen by State and also all current Presidential Candidates.  If you look State by State you will see rather quickly a long list of D's and F's by all the Congressmen and Senator's with Hispanic last names.  I guess the ties to "Mexico" are hard to cut.

Some suprises exist too!  Like who knew Al Gore as a Senator earned the grade of A- by how he voted "against open borders".

The Democrat's running for President are basically all open borders.  Many of the Republicans are the same thing.  Very few choices other than Duncan Hunter, Tom Tancredo, Ron Paul.

We need to get rid of all the current "Open Borders" Senators and Congressmen and replace them with American's who believe in our countries soverignty and language and culture.  I think getting a non-open borders President is going to be hard but we can keep pushing.  But on the local level, like Mayor, and State Reps we can have more of an impact.

Cooper said:

Sheilah said:

President Bush and the rest of the Amnesty regime are pushing for Mexico and the Illegal
Aliens,  in a movement to merge the United States, Mexico, and Canada. The NAU.

America is being sold out.

 

President Bush and 95% of the Dem's and ALL the Dem's president runners want this.

And all of the CFR & Trilateral Memebers. There are Republicans besides just Mr. President.

http://www.libertygunrights.com/CFR_TrilateralChart.html

Be very careful to whom you give your vote.

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Sheilah said:

Cooper said:

Sheilah said:

President Bush and the rest of the Amnesty regime are pushing for Mexico and the Illegal
Aliens,  in a movement to merge the United States, Mexico, and Canada. The NAU.

America is being sold out.

 

President Bush and 95% of the Dem's and ALL the Dem's president runners want this.

And all of the CFR & Trilateral Memebers. There are Republicans besides just Mr. President.

http://www.libertygunrights.com/CFR_TrilateralChart.html

Be very careful to whom you give your vote.

 

Oh,..I know whom I hope to vote for,....as of right now,..EVERY Dem running for Pres wants this,....I don't recall any republican,....I also know that a majority of Dem's if not as I posted 95% are or want want this,....and yes a few money grubbing, self indulged Republican sell outs,....but the majority are Dem's.

Suffering in AZ.1 said:

blaze77535 said: Lets do a little punching holes in ted kennedys Mass. compound. Maybe he will fall in the hole.

 

Ted Kennedy -- the name makes me cringe.  This is a man who should have resigned or been voted out long ago yet his name keeps him alive in a game where who you know is everything.  Connections, connections, connections -- you grease my palm and I'll grease yours.

He is the perfect example of why term limitations should be in place.  He is the poster person for immigration, illegal and legal, that has gone insane. 

...and swimming lessons, driving lessons, drunk driving, how NOT to cross a bridge, how to call 9-11 and last but not least the poster boy for how NOT to save a life.

CJBL, I think getting a decent president is going to be almost impossible. I was at the corner store today. I had been talking to one of the young men there for quite a while on different issues. He said I was one of the few people he would listen to because he could tell I understood what was going on. Ive been telling him about Tom Tancredo and Duncan Hunter and Ron Paul. He said if I hadnt mentioned the names he wouldnt have known who they were. He never hears their names on the news or anywhere else. Its such a shame that even talk radio seems to be a sell out on this. All the media is bought. If we dont talk about them, people simply wont hear their names.

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bugsygirl said: Did you ever stop and just think about this. When all that oil is pumped out of the ground every day, what does it leave in its place? Are there millions of caverns being emptied all over the world? I was just kind of contemplating this today. What will happen with all this oil comming out and leaving empty spaces with all this pressure on top of it? Personally I would really like some solar panels about now.

 

I do too busy girl, I saw something I think it was on HGTV website about solar roof shingles, rather than have big ugly solar panels on roofs, now they have developed them into shingle sized panels, and they lay them down just like a normal roof on the south or southwest side of the house,  they look pretty good, did not state the cost but WISH I could get some of those installed on my house, as I said, I am just $50 shy of paying off my last years heating bills (and I kept the house at 62 degrees to try to keep it affordable) and it is time to turn the heat on AGAIN!!  I don't know what I am going to do and I wish some of that gov't money we waste on bridges to nowhere would go to help people on limited incomes get things like solar roofs, or windmills etc.  Heck, I would even take a gov't loan in the form of a lean on my house to get somthing like that installed, as I am really worried that we are going to be screwed big time on gas/oil prices in the very near future while our stupid elected officials sit there and file their nails trying to figure out how give illegals amnesty rather than PUSHING for new energy sources ASAP!  If we can send a man to the moon in less than 10 years, then we should, if we made it a priority, find ways to get solar, wind, magnet, crop whatever, types of energy going.

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Hey Bugsy:  Not to worry about the cavities left after we pump out all the oil.  There's this stuff called "magma" that will fill them in and if not that, water or collapsing dirt will do just fine.  We aren't going to implode.

 

Now, insofar as Mexico's oil supply..........they have more than we ever had in our wildest dreams.  All the hype about asteroids, terrorists, refinery capacity, drilling capacity, piping, shipping, banditos, etc. ad infinitum is just that...........HYPE.......to keep prices up............

 

If Mexico becomes "desperate"..........it's of their own doing.  Mexico isn't a poor country.  Mexico has oil, fishing, tourism, mining, wood products, a perfect climate for agriculture, etc.etc.etc.  Makes one wonder why they're all running over here???  Mexico's resources aren't dwindling but government interference or mismanagement could be increasing?