Hi folks,
I just read this in the LA Times.
http://www.latimes.com/...
Will Mexico Soon Be Tapped Out?
A rapid demise of Cantarell, the country's chief oil field, could pose a serious economic threat.
By Marla Dickerson, Times Staff Writer
July 24, 2006
MEXICO CITY -- Output at Mexico's most important oil field has fallen steeply this year, raising fears that wells there that generate 60% of the country's petroleum are in the throes of a major decline.
Production at Cantarell, the world's second-largest oil complex, in the shallow gulf waters off the shore of Mexico's southern Campeche state, averaged just over 1.8 million barrels a day in May, according to the most recent government figures. That's a 7% drop from the first of the year and the lowest monthly output since July 2005, when Hurricane Emily forced the evacuation of thousands of oil workers from the region.
So, the number 5 oil Producer in the world is Mexico and it is also the number 2 oil exporter to the US behind Canada. The second biggest field in the World is Cantarell. The question is, how much oil is Cantarell producing in relation to the total Mexican production?
According to the authors, Mexico produces 3.3 million bpd a day and Cantarell produces 1.8 million bpd a day (down from a peak of 2.1 million bpd in 2004). Therefore, Cantarell is producing about 57% of Mexico's output. So the point is that if Cantarell goes into decline, this will have a noticeable affect on oil production in Mexico.
Now, the next question is, how much oil is Mexico exporting and importing. According to the US government, the US imports about 54% of Mexico's oil exports...
http://countrystudies.us/...
And since the US imported in May of 2006 1.5 million barrels a day from Mexico...
http://www.eia.doe.gov/...
that means is that Mexico is producing about 3.4 million and exporting about 3 million leaving about .4 million bpd for it's domestic use. Interestingly, Mexico has to import about 25% of it's gasoline or about 0.1 million barrels.
Next, how much is the USA importing from other countries? According to the EIA, we imported 9.8 million barrels from 15 countries.
So what does all this mean? Pemex has two predictions about Cantarell(1) a public prediction of a decline to 1.4 million bpd by 2008 and (2) an internal worst case prediction of a decline to 0.5 million bpd. Interestingly, the low number of 1.4 million equals a decline of .4 million barrels. This is equivalent to 75% of Mexico's Gasoline usage. The worst case scenario of 1 million barrels decline would mean that Mexico would sell only 2 million a day instead of 3. Now, if the pain was spread equally, (That's a big IF) it would mean that the USA would be getting 1 million a day from Mexico instead of 1.5 million a day. Either way the USA will begin getting less oil from Mexico in the neighborhood of .1 million a day to 1 million a day depending on how quickly Cantarell is depleted.
Now mind you, this shortfall will be filled by other suppliers IF there is spare capacity. But as we know from Econ 101, when supplies are low and demand is high, the price goes up. Furthermore, Mexico is much much closer than say Iraq so the cost of transport is less.
So the overall message is, one of the big oil fields that we as American importers of oil depend on is in decline and it is declining quickly. This will probably effect your price at the pump. The effect may be small or large depending on the scenarios.
Charles