PEMEX Expects Oil Depletion in Seven Years

Recently PEMEX, Mexico's largest integrated oil producer informed the United States that "Supplies of its economically exploitable resource are running out."

The company estimated proven reserves near 9 billion barrels in December of 2005. With current production near 1.3 billion and demand stable, simple division extrapolates seven years as the target depletion date.

PEMEX has long suffered from the stagnation of decreasing exploration investments as the company has been an exhausted cash cow of the Mexican government. According to the article, experts from the PFC Energy Advisory company in Washington estimated that in the event of heavy investment, new fields could take nearly eight years for full maturation. Even with this optimistic view, "Mexico may have to import oil to satisfy its internal market." Jesus Reyes, director of PEMEX, attributed the current state of affairs to declining capacity in Cantarell, Mexico's largest oil field.

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Given that Cantarell is one of the world's largest oil fields, with its discovery in 1976, exploitation in 1981 and peaking in 2004, this development could mark a startling corollary when compared to other elephant fields, notably the Ghawar field in Saudi Arabia.

For the energy intensive United States, this marks a chief concern as Mexico is our third largest importer at an estimated 1,469,000 barrels of crude daily. If and when Mexico does become a net importer of crude, the United States would require this differential to be recouped either internally or through the aid of existing importers. The question is, where will this excess capacity come from?

Comments

[huangjin]

A bigger question is how will the Mexican government fund their spending? Are we headed for another peso crisis?