Production dropped 9.2% but since domestic demand grew, exports dropped much more.  The cause of reduced production was an astounding 31% decline in the giant Cantarell field that is now producing at only half the rate of a few years ago.   Increased production at the KMZ field mitigated the total decline, but KMZ production is expected to peak in 2010.  While the Mexican government continues to claim they will develop “new fields” that will bring production back up by 2015, there is no assurance of that nor much hard evidence to date that it can be accomplished. 

Meanwhile it seems clear that the Mexican government’s cash flow from oil exports, which finances about 40% of its budget, will be vastly reduced by late 2009 when their oil price hedges expire and that 2010 and especially 2011 will be disastrous for Mexico’s cash flow unless the price of oil rises dramatically from the present $40+ area.  That may not happen if the global economic slowdown continues.

Here is the A.P. report:    

Jan 21, 1:14 PM EST

Mexican crude production down 9.2 percent in 2008

By E. EDUARDO CASTILLO
Associated Press Writer

MEXICO CITY (AP) — Mexico’s state-run oil monopoly said Wednesday its 2008 crude production was down 9.2 percent from 2007.

Petroleos Mexicanos, or Pemex, blamed bad weather and declining reserves at its biggest oil field, Cantarell.

Pemex produced 2.79 million barrels of crude a day in 2008, down from 3.08 million barrels daily in 2007. Exports dropped 16.8 percent to 1.4 million barrels a day.

Pemex said production at Cantarell fell 461,000 barrels a day in 2008, to close out the year at 1.01 million barrels daily. But production rose to 702,000 barrels a day, from 513,000 daily in 2007, at the second-largest field, Ku-Maloob-Zaap.

Mexico is the third-largest oil supplier to the U.S., and oil is Mexico’s biggest source of foreign income, financing about 40 percent of its annual budget.

But sagging investment by cash-strapped Pemex has led to a steady decline in output since 2004, when it peaked at about 3.4 million barrels per day.

Energy Secretary Georgina Kessel said this month that Mexico will develop new oil fields to boost output to 3 million barrels a day by 2015.

It is also seeking cooperation with U.S. oil companies now believed to be tapping much of the deep water crude that lies in shared deposits along the U.S.-Mexico border.

Pemex has so far drilled just six deep-water wells in the Gulf of Mexico, while hundreds of such platforms have sprung up in nearby U.S. territory. The discrepancy has sparked concerns of a “straw effect” that could ostensibly drain oil from Mexican reserves that straddle the border under the sea floor.

© 2009 The Associated Press

Tags: peak oil investments

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