Mexico's Important Cantarell Oil Field In Decline

I have written previously about Mexico's Cantarell oil field. In Thursday's Wall Street Journal, David Luhnow wrote an excellent article DYING GIANT: Mexico Tries to Save A Big, Fading Oil Field (subscription required) about the decline of the Cantarell oil field and its importance to the Mexican economy.

Moreover, Luhnow indicated that Cantarell might be typical of many of the elephant fields.

It's widely believed that the world's biggest oil fields have already been found. In the decades leading up to the 1970s, the world discovered eight big fields that produced between 500,000 to one million barrels a day, according to Matthew Simmons, a veteran oil industry banker. During the 1970s and 1980s, only two were found. Since then, only one - the Kashagan field in Kazakhstan - has the potential to easily top the 500,000 barrel-a-day mark.

Two decades ago, about a dozen fields produced more than a million barrels a day. Now there are only four, one of which is Cantarell. The future of two others, discovered more than 50 years ago, remains in question. Some analysts speculate Saudi Arabia's Ghawar, the biggest field by far, could begin a gradual decline within a decade or so. Another, Kuwait's Burgan, is showing signs of maturity. In November of 2005, Kuwait Oil Co. lowered its estimate of the field's sustainable production level to 1.7 million barrels a day from 1.9 million a day.

Replacing big gushers is difficult. Industrialized countries, which tapped out their big fields years earlier, haven't been able to maintain output despite finding large numbers of smaller fields and investing heavily in technology. Alaska production, hurt by declines at the giant Prudhoe Bay field, dropped from 2 million barrels a day in 1988 to a current rate of about 900,000 a day.

As those who read my blog, you know that I am bullish on commodities in general and in particular on gold and silver as well as oil and gas. If the bulls on energy are correct, then this article serves an excellent warning of higher prices to come.

Furthermore, I am curious as to how Mexico grapples with the decline of Cantarell. Will it open its oil industry to foreigners? Or will it make cutbacks in other areas of its economy to compensate for decline in production? Mexico faces some difficult decisions.

I highly recommend reading and keeping the WSJ article. It provides an excellent snapshot of the difficulties facing the oil companies as they search for new reserves. And it highlights the political challenges of those countries with large fields in decline.

Comments

[UncleFred:]

I wondered what Kevin thinks of the growing theory of continuous, deep-in-the-earths-man... generation of oil and gas, as opposed to the theory of oil and gas as fossil fuels. The argument is made (rather long windedly, unfortunately) in the following:

educate-yourself.org/c...

Since I own many shares of various CANROYS, I would appreciate his comments.

Thank you!!

Fred Mitchel
Fort Lauderdale

2007 Apr 09 01:03 PM

[Quaker:]

What possible difference would it make. It would be obvious to a donkey that if the abiotic "theory" had any application it would have applied to New Yorks wellsville field, drilled in 1900 and depleted by 1940, all of east texas, which has been 75% depleted since 1975 and Midland Odessa, depleted since that same time.

Also, what would seem obvious to a cigar store indian, if Saudi Arabias South Ghawar field was "fed from below", why doesn't any of this streaming oil from GOD show up on a well log run below the water zone.

Let me let you in on a little secret of mine. I've run probably 3,000 well logs on wells in texas, Louisiana, Mississippi, Saudi Arabia, inland and offshore and much of the UAE and have never one found as much as a thimble full of oil below a water zone. Not a thimble!

Maybe you can subscribe to Paul Davis's blog. I think it's called expert oil advice from a guy that can't e\ven change his own.

2007 Apr 09 02:04 PM

[Kevin Stecyk:]

Hi Fred,

Thank you for your comment. I am not a geologist. My background is mechanical engineering and finance. I tend to look at the oil situation rather simply. If you study the larger fields/areas in Canada (Western Canadian Sedimentary Basin), U.S. (Alaska North Slope, Gulf Of Mexico), Mexico itself, British North Sea and other areas, you find that the oil production is falling and the reserves are depleting. Oil companies are having to go further afield and into more dangerous locations to maintain their production. Regardless of how oil was formed, it is becoming much more expensive and challenging to find. If one believes that oil is a natural occurring substance generated deep down in the earth, then the earth is not being given sufficient time to regenerate the oil we need. So how the oil is formed is largely irrelevant.

Not only that, we are increasing our use of it. The world consumes about 88 million barrels per day. Oil and gas field deplete each and every year. So if a field produced 1000 "units" of oil this year, it might only produce 95 "units" next year. And so on. As our base demand level goes up, we need to find more oil each year just to remain at a constant production level.

Hope this helps.

Regards,
Kevin

p.s.: I was just about to hit the "Add Comment" button when I read Paul's comment above. It appears that he and I share the same approach in that <i>it doesn't matter</i> how the oil was originally formed. The old fields are drying up.

2007 Apr 09 06:20 PM

[cynic69:]

In the middle of the 19th century the population of the earth was about 1 billion. After the discovery of fossil fuels the rate of growth sky rocketed. Think of the billions of folks that live in areas that are so cold that they could not survive without fossil fuels. As fossil fuels get scarcer and more expensive people will begin to kill one another. Historically war has been the most often used solution to the problem of over population. I suspect that we can expect a four billion man die off in the future. That is unless Mr. Bush can grow enough corn to solve the problem using ethanol. What a joke.

2007 Apr 10 05:13 PM

[whidbey:]

Interesting and true I am sure. We are living on borrowed time, god knows what comes after the peak oil fact is accepted widely. We seem to be uncomfortable with any discussion of conservation. Why? Just changing from incandescent bulbs to florescent would provide a demonstration of how much can be done for not very much out-of-pocket expenditure. More to the point, conservation is something we each can do and one would think that would appeal to we ants. The ethanol is such a sad fraud: it costs more energy to make a gallon than can be gained from its use: Negative energy conservation! Our politicians are more corrupt that I had first imagined, if that is possible. Islander

2007 Apr 10 06:40 PM