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Cantarell Decline Perspective
Cantarell’s declining production trend continued in May as was first reported on June 26th. But the press seems to have done a double-take on the seriousness of the problem more recently noting that May production was down by more than one third compared with year ago levels. The following piece from the Financial Times is representative:
Output plummets at huge Mexican oilfield
By Adam Thomson in Mexico City
Published: July 8 2008 00:35 | Last updated: July 8 2008 00:35
Production at Mexico’s Cantarell oil complex, one of the world’s largest, has plummeted by a third in the past year, an indication the country could lose self-sufficiency in oil in the medium term.
Average daily production dropped to slightly more than 1m barrels a day in May compared with more than 1.6m b/d in the same month last year, according to the energy ministry.
Mexico’s total oil production fell about 10 per cent in the past 12 months to 2.79m b/d in May. That was only marginally above April’s output, which was the lowest in a decade.
“This is not a good sign,” said George Baker, head of energia.com, a Houston-based consultancy. “But it does at least strengthen the government’s position that there is an approaching crisis in oil production.”
The centre-right administration of President Felipe Calderón has for months been trying to use the deteriorating oil production figures to persuade Congress that something must be done quickly.
In April it presented legislators with a proposal for more flexibility in the service contracts that Pemex, the state oil company, signs with third parties. Currently, the contracts are narrow in scope and inflexible because Mexico’s constitution prohibits private investment in oil.
There is little optimism that the proposal will survive a slow-moving, entangled legislative debate amid strong resistance from both the main opposition parties.
Many opposition leaders argue the problems stem mainly from the government’s rising dependence on oil income, which has starved Pemex of cash it could use for exploration.
But the government maintains the vast bulk of the country’s reserves lie in deep waters and require technology and knowhow to develop that Pemex does not possess.
Copyright The Financial Times Limited 2008
Tags: peak oil energy investments
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4 responses so far ↓
1 rbblum // Jul 8, 2008 at 7:25 pm
Good, solid update regarding Mexico’s oil position that warrants continual, critical observation.
Thanks Jim
2 paultaut // Jul 9, 2008 at 2:22 am
Now we know the Aprox. amount of War risk currently embeded in the Oil complex.
$10-12.
The Russian Oil decline coupled with the news out of Mexico should lend support to Oil in the $130+ area.
Todays’ Iranian Missile “tests” could see oil revert to the mid to upper 140’s. especially if oil inventories continue their decline.
According to T. Boone, current US oil inventories are at a 25 year low.
Meanwhile Hurricane Bertha looks like it will miss everything but still has the potential to hit the east coast. Hello New York?
3 Robert Essian // Jul 9, 2008 at 3:41 am
Jim, this has nothing to do with this article but I have a question. At what price are oil stocks factored for. There has been a disconnect since July 2007 and the stocks are not responding as you might expect with the price of crude oil from a historical perspective. Any insight would be appreciated…Thank you
4 paultaut // Jul 13, 2008 at 9:28 pm
The oil stocks that have production and proven reserves started factoring in a recession last year. An interesting chart is that of XOM for the past 12 months. It does not reflect the price of oil. To me, it reflects economic expectations, which have fluctuated from mild and short recession to longer and deeper recession.
Oil stocks are just stocks in bear markets. Their earnings may even accelerate, but their PE’s will come down based on expectation.
The only oil plays I would consider are some of the CanRoys and those like QBIK who have the potential for large expansion of production.
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