Mexico's Declining Oil Production: Clarion Call for Cantarell

The eighth largest oil field in the world will be dead by the end of next year. Shall I repeat that, or did you get it the first time? Like the Time to Die Speech of Rutger Hauer at the end of Blade Runner, the Cantarell complex has surely seen its share of ocean storms, human hopes, and stars since its discovery by a humble fisherman in 1976. If you’re wondering whether that fisherman has a name, the man who saw oil floating on the surface of the ocean as he gathered his nets, the answer is yes: Rudesindo Cantarell.

The days when you could find a supergiant oil field while fishing are over. Cantarell came late, in the oil age. That meant this global giant would receive all the best doctoring modern technology could provide. The result is that Cantarell was pumped out effectively and hard, especially after the technique to re-pressurize the field was adopted. This allowed for a spike high of daily production to be captured for several years, late in its life when a field would otherwise go into gentle decline. The result? Quicker monetization of the oil for the benefit of the Mexican state. But then the price: a catastrophic, fast crash. (click on chart to enlarge)

Chris Nelder, energy analyst and author of Profit from the Peak, also watches Mexico quite keenly and we both had an enormously long telephone call about Cantarell back in early January, of this year 2009. While we both have been tracking the decline of Mexico’s oil production for years, and knew that Cantarell was crashing, I was shocked when Chris said, “Oh yeah. That field could head below 500 thousand barrels a day (kb/day) by the end of this year.”

Now, one has to realize that this conversation was occurring just after New Year’s, and the most recently available data was for November, which had closed out just 5 weeks earlier. In that month, Cantarell produced 862 kb/day. In addition, Cantarell had started 2008 with January production of 1243 kb/day. Now let’s look at Cantarell’s production numbers for the most recent month of 2009, in July: 588 kb/day. As someone remarked on The Oil Drum, this looks to be a linear, rather than an exponential decline. Interesting observation. If Cantarell is indeed losing a steady 35 kb/day a month in production, then by Christmas of next year we’ll be close to zero. (click to enlarge)

I covered the implications of this supply crash in the March issue of my Gregor.us Monthly newsletter, Saga North America: How The North American Oil Crisis Will Force Ottawa, Washington, and Mexico City to Confront One Another As Never Before. In that report, I forecast the next oil crisis will unfold as Mexico loses the ability to export oil, starting sometime in late 2011. However, as so often is the case in this era of peak oil, that forecast now looks optimistic. Mexico will need all the oil they produce for their own economy. But to have an economy, Mexico will also need to solve the problem of another decline: the crash in oil revenues, upon which Mexico has depended for so many decades.

Graphics:

Rutger Hauer, Blade Runner.

Kjell Aleklett, Uppsala University, Sweden: Top 18 Giant Oil Fields.

Reuters: Daily Production from Cantarell through June 2009.

Comments

[jakelake]

What are the ramifications for the United States? The next article could bring some light to the more obvious short term implications.

2009 Aug 23 11:04 PM

[PVizzle]

holy crap!!!!!

2009 Aug 23 11:55 PM

[rbblum]

Losing the ability to export oil, Mexico will be another defining moment in modern history . . . presenting the American environmentalist movement in a position to further define who they are and what they truly represent . . . all the while America transitions into the next chapter redefining itself with the use of more expensive oil reserves and determining which alternative energy sources will likely be the most efficient and economical for the long term.

Unfortunately, there are very few, readily available, acceptable options that the American environmentalist movement will accept in addition to US politicians having no experience nor track record in planning and implementing a reasonable and reliable energy business plan that would pass economic muster on the open global market . . . thus, guaranteeing a bumpy ride for all.

2009 Aug 24 01:52 AM

[nelsone]

Here and I thought that no one ever read my comments on The Oil Drum. Sometimes the most pithy and obvious statements get the most attention. But the linearity of C's decline is so glaringly obvious, somebody just had to speak the Unspeakable out loud.

Now, about that border fence....
- nelsone

2009 Aug 24 05:14 AM

[perceptions_now]

I suggest that the US government has been aware of these scenario's for some time and has already taken some short term remedial action!

However, Long Term, is a whole other ball game!


On Aug 23 11:04 PM jakelake wrote:

> What are the ramifications for the United States? The next article
> could bring some light to the more obvious short term implications.

2009 Aug 24 05:27 AM

[Tony Petroski]

The Author:

"...the Cantarell complex has surely seen its share of ocean storms, human hopes, and stars since its discovery by a humble fisherman in 1976."

This is wonderful writing.

As to the question of fishermen, are there any other other than "humble?"

"The days when you could find a supergiant oil field while fishing are over."

Darn. I was going to take up fishing just to see if I could get lucky, not by catching a fish but by discovering an oilfield.

Jed Clampit? Can we still discover oilfields by hunting?

2009 Aug 24 08:26 AM

[The Greatest Rip Off of our...]

Time to go solar.

2009 Aug 24 08:28 AM

[Davmors]

FYI...the Mexican Government derives about 40% of its operating income from Pemex. The government can't support its people now. Consider Mexico without oil.

2009 Aug 24 08:47 AM

[john s. gordon]

will north dakota replace cantarell?
energy & capital seems to think so.
> jack

2009 Aug 24 09:16 AM

[ffkling]

Yea, Drill Baby Drill will solve all of our problems. After all the US has a staggering 3% of the world's proven reserves.


On Aug 24 01:52 AM rbblum wrote:

> Losing the ability to export oil, Mexico will be another defining
> moment in modern history . . . presenting the American environmentalist
> movement in a position to further define who they are and what they
> truly represent . . . all the while America transitions into the
> next chapter redefining itself with the use of more expensive oil
> reserves and determining which alternative energy sources will likely
> be the most efficient and economical for the long term.
>
> Unfortunately, there are very few, readily available, acceptable
> options that the American environmentalist movement will accept in
> addition to US politicians having no experience nor track record
> in planning and implementing a reasonable and reliable energy business
> plan that would pass economic muster on the open global market .
> . . thus, guaranteeing a bumpy ride for all.

2009 Aug 24 09:35 AM

[Fred Magyar]

<blockquote> But to have an economy, Mexico will also need to solve the problem of another decline: the crash in oil revenues, upon which Mexico has depended for so many decades.</blockquot...

Umm, how about cellulosic ethanol from cannabis?! ;-)

2009 Aug 24 09:53 AM

[Trane250]

Speaking of Cantarell, we must thank the cosmic gods who sent a giant asteroid crashing into Chicxulub on the Yucatan 65 million years ago. The impact crater is what caused Cantarell to fill up with petroleum, dinasaur extinction notwithstanding.

2009 Aug 24 10:22 AM

[erniem]

Mexico without Cantarell's income is pretty much a projection of today. Only far worse. The funding for clinics, food handouts, dental work, housing and education will go from very little to even less. The pressure on the poor to go SOMEWHERE will increase accordingly. Only the bad economy in the US has kept this flight from sorrow as low as it is currently. What the impact of even further depredation will be is not clear, but I hope there is a good fence in place.

2009 Aug 24 11:39 AM

[Advill]

Defending Mexico at its 70 years governments is not easy, problems will come for 3 to 8 years but everybody has to have something in Mind.

"Mexico, because of the politics in the 40´s has no exploration for most of 70 years, the proportion of drilling activity comparing to USA is 2000 to 1", Cantarell was an accidental finding.

Since new government arrived in Mexico in 2000 drilling contracts has been in the market and new findings are comming in a regular pace, there are not super giants but for first time in many years probable reserves are up, proven reserves will be up.

Problems is that some new findings are away of lines and ports but oil is there and coordination between phasing out Cantarell and adding new volumes is 5 years behind.

AN interesting business right now is the "rediscovery" of oil in old fields, new drilling techniques helps in increasing production of "dry deposits".

Real problem of Mexico are politicians and the equation Oil = National Independence ..... ( something similar to fireamrs and NRA in America), what ever that means....but there is oil....a lot of oil.

2009 Aug 24 12:37 PM

[jerrydd]

I've been telling other about this for yrs but no one listened. We hit peak oil in early 08 and next yr oil will be back to $140bbl and heading higher until is causes another world, US recession, then again, then again until we get off imported oil in about 10 yrs.

Facts are most fields are now declining as we are only finding 1bbl for every 4 we use. Purdue Bay was 2,000,000 bbl's/day to now under 800k/day. OPEC has no where near as much as they say. Only Iraq does and it has sweet crude, the kind our refineries need. Hence the Iraq war. The problem would solve itself if the military costs, welfare to big oil was in oil instead of in our income taxes.

Yet Repubs have fought every attempt do switch our economy from this disaster, instead making us more susceptible to it. Way to be patriots guys!!

Myself I build custom EV's so I'll make out well. My 2 seat EV sportswagon gets 250mpg equivalent and my Harley size trike gets 600mpge. These get 100 and 40 mile range on lead batteries and 40-100 yr old tech. So it's not like it can't be done. Hell Baker Electric had 110 mile range in 1911 and Jay Leno's still uses some of the original Edison NiFe batteries!!

PHEV's, EV's, NG semi's are the way to fixing this but will take 5+ yrs to be enough of them to matter.

For the rest of you, buckle your seat belts as it's going to be a very rough ride.

2009 Aug 24 12:55 PM

[User 422955]

It would have been interesting to read about Mexico's other oil fields.

2009 Aug 24 08:07 PM

[lookingsouth]

Erniem makes a very good point. We focus a great deal of attention on the impact of higher oil prices for the economy of the United States, but falling crude production will kick the foundation out from under Mexico's goverment and social programs. You can already make a good case, based on the levels of poverty, corruption, and violence, that Mexico is a failed state. It's very uncomfortable to imagine the potential consequences for the U.S. of Mexico's coming economic crisis.

2009 Aug 24 09:31 PM

[realold]

I would say "watch out Costa Rica"


On Aug 24 11:39 AM erniem wrote:

> Mexico without Cantarell's income is pretty much a projection of
> today. Only far worse. The funding for clinics, food handouts, dental
> work, housing and education will go from very little to even less.
> The pressure on the poor to go SOMEWHERE will increase accordingly.
> Only the bad economy in the US has kept this flight from sorrow as
> low as it is currently. What the impact of even further depredation
> will be is not clear, but I hope there is a good fence in place.

2009 Aug 24 11:56 PM

[realold]

And where do you get your electricity?


On Aug 24 12:55 PM jerrydd wrote:

>
> I've been telling other about this for yrs but no one listened. We
> hit peak oil in early 08 and next yr oil will be back to $140bbl
> and heading higher until is causes another world, US recession, then
> again, then again until we get off imported oil in about 10 yrs.
>
>
> Facts are most fields are now declining as we are only finding 1bbl
> for every 4 we use. Purdue Bay was 2,000,000 bbl's/day to now under
> 800k/day. OPEC has no where near as much as they say. Only Iraq does
> and it has sweet crude, the kind our refineries need. Hence the Iraq
> war. The problem would solve itself if the military costs, welfare
> to big oil was in oil instead of in our income taxes.
>
> Yet Repubs have fought every attempt do switch our economy from this
> disaster, instead making us more susceptible to it. Way to be patriots
> guys!!
>
> Myself I build custom EV's so I'll make out well. My 2 seat EV sportswagon
> gets 250mpg equivalent and my Harley size trike gets 600mpge. These
> get 100 and 40 mile range on lead batteries and 40-100 yr old tech.
> So it's not like it can't be done. Hell Baker Electric had 110 mile
> range in 1911 and Jay Leno's still uses some of the original Edison
> NiFe batteries!!
>
> PHEV's, EV's, NG semi's are the way to fixing this but will take
> 5+ yrs to be enough of them to matter.
>
> For the rest of you, buckle your seat belts as it's going to be a
> very rough ride.

2009 Aug 24 11:58 PM

[Mark Divy]

I love how someone always comments against Electric cars with the question of "where do you get your electricity". There is always a down side to everything, but would the fanatics in the room please quit trying to battle everything? We need to start somewhere, and cutting gas usage & petroleum imports looks like a really good place to start. I would say that replacing electric generation with greener alternatives is easier than replacing gas with "greener" gas.

Think Wind, think solar, better batteries, ultra capicators form Maxwell Technologies, recycle for energy by Global Resources Corp, wave and tide generators, etc.

If you have some better suggestions - please provide them.

2009 Aug 25 11:31 AM