Mexican oil production takes a cliff dive

J · Post by J » 2008-05-26 10:46pm

Pemex Says April Oil Output Drop Biggest in 12 Years (Update2)

By Andres R. Martinez

May 23 (Bloomberg) -- Petroleos Mexicanos, the state-owned oil company, said April crude production fell the most in more than 12 years as output at its largest field declined faster than the company forecast.

Crude oil production fell 13 percent to 2.767 million barrels a day in April, Mexico City-based Pemex, as the company is known, said today on its Web site. Output a year earlier was 3.182 million barrels a day. The decline was the largest since October 1995, when output fell 29 percent.

Pemex Chief Executive Officer Jesus Reyes Heroles set a goal of producing 3.1 million barrels of crude a day in July of last year. The company has only met that goal once since it was set. Output has been on a decline since reaching a peak in December 2003. Since 1999, proved reserves have been more than halved to 14.7 billion barrels of crude oil equivalent.

``There is no clear sign that this decline is going to slow down,'' said David Shields, an independent energy analyst in Mexico City. `` I don't think there is any point in trying to forecast an annual average.''

Mexico's Congress must pass a bill that would give Pemex more freedom to hire foreign and private companies to explore, produce, refine and transport oil, President Felipe Calderon said this week. The changes would give Pemex more cash to explore and produce oil to staunch the decline.

Congress ``seems to be oblivious from pressure from the market,'' Shields said. ``They don't care about Pemex problems, they only care about being nationalistic.''

The Senate Energy Committee has set aside 71 days to debate Calderon's bill. The debate ends on July 22.

Cantarell

Output at Cantarell, Pemex's biggest field, fell 33 percent to 1.07 million barrels a day, according to the Energy Ministry. That was the lowest output since March 1996 at the field, which peaked at 2.192 million barrels a day in December 2003 and once accounted for about 60 percent of the company's output.

The company forecast output at Cantarell would fall 15 percent annually until 2012.

Exports fell 14 percent to 1.439 million barrels a day. Pemex, the third-largest supplier of crude to the U.S., has said it will cut exports as output falls so that it can refine more of its own oil.

Gasoline imports fell 25 percent to 245,900 barrels a day in April to meet domestic demand. It was the first time since February of last year the company imported fewer barrels of gasoline compared with a year earlier.

To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net
Last Updated: May 23, 2008 14:56 EDT

So let's see, the largest oil field in Mexico is crashing hard. The forecast called for 15% annual declines, in real life it came out to a staggering 33% drop in a single year. Production is down 13%, exports down 14%, and there's no telling how fast nor how far it's going to drop.

Mexico is currently the 3rd largest supplier of oil to the US, or sometimes the 4th if Nigeria's having a particularly good week. Given the rate of current declines, both the US and Mexico will be in for a world of hurt.

Post by **K. A. Pital** » 2008-05-26 11:41pm

Ouch

I hope Russia doesn't suffer such a catastrophic extraction decline, or at least soften it by gas.

MKSheppard · Post by **MKSheppard** » 2008-05-26 11:47pm

Uhm, this is not news J; didn't I predict that Mexican Oil production would crash a long time ago?

Singular Intellect · Post by **Singular Intellect** » 2008-05-27 12:03am

MKSheppard wrote:Uhm, this is not news J; didn't I predict that Mexican Oil production would crash a long time ago?

I think the more important issue is whether the concerned governments bothered predicting this or have even the slightest plan to do anything about it.

I'm guessing a solid "No" on both accounts.

J · Post by J » 2008-05-27 09:26am

MKSheppard wrote:Uhm, this is not news J; didn't I predict that Mexican Oil production would crash a long time ago?

Not really, you posted a rambling barely coherent article filled with lies and half-truths. The one which says it's all PEMEX's fault, and implies that if only ExxonMobil & friends were allowed to go drilling then everything would be good again.

Big Phil · Post by **Big Phil** » 2008-05-27 10:41am

At least you and Aerius have that stash of money in your mattress, so even if the rest of the world gets fucked, you'll be okay...

Guardsman Bass · Post by **Guardsman Bass** » 2008-05-27 01:51pm

I blame at least part of this on the PRD (the more leftist party in Mexico's politics, along with the centrist PRI and pro-market PAN). They've done basically everything and anything in their power to prevent any type of private investment in Pemex that might allow Pemex to look for new, deeper Gulf oil to slow their decline (in the long term). Witness how they physically closed the Mexican Congress to prevent any legislation on the matter.

Patrick Degan · Post by **Patrick Degan** » 2008-05-27 01:56pm

So, basically, Mexico is out of the oil business.

Admiral Valdemar · Post by **Admiral Valdemar** » 2008-05-27 03:25pm

Patrick Degan wrote:So, basically, Mexico is out business.

Edited to make more accurate. Forty percent of the government's income is oil based.

By the way, the EIA (and IEA, but that I'm not so sure of) predicted an increase in their output over the short to medium term. This is only news to those who are meant to have their finger on the pulse, not those "peak oil theorists".

ANGELUS · Post by **ANGELUS** » 2008-05-27 03:48pm

Guardsman Bass wrote:I blame at least part of this on the PRD (the more leftist party in Mexico's politics, along with the centrist PRI and pro-market PAN). They've done basically everything and anything in their power to prevent any type of private investment in Pemex that might allow Pemex to look for new, deeper Gulf oil to slow their decline (in the long term). Witness how they physically closed the Mexican Congress to prevent any legislation on the matter.

Actually, PRI and PAN are in favour of private investment for Pemex. It is only PRD wich oposes. They are not leftists, they're just a bunch of assholes with no clear political tendency and that will say "No" to absolutely anything that both of the other parties or the president propose just to not let them do anything and make them look bad (it was just PRD that closed the congress, and they did it to stop any kind of dialog on the Pemex private investment topic [they wouldn't even allow for it to be discussed, they just wanted to stop anything the others propossed]). PRI and PAN had to go to an alternate location to session. PRD is right now falling appart as we speak, thorn into pieces by the conservative and extremist factions struggling for control.

I'm not a fan of PRI or PAN neither, but PRD is just much worst than them.

Ariphaos · Post by **Ariphaos** » 2008-05-27 04:58pm

Patrick Degan wrote:So, basically, Mexico is out of the oil business.

It should be noted that Mexico has some fairly sizable fields that PEMEX simply can't afford to develop or accept foreign investment for.

Eventually the Mexican government is going to have to wisen up.

Or split apart. One of the two.

Kanastrous · Post by **Kanastrous** » 2008-05-27 05:03pm

So oil revenues will drop precipitously, and - what with all that's going on in the US - remittances will probably dry up quite a bit, too.

Leaving the Mexican economy supported by...

...what?

Post by **K. A. Pital** » 2008-05-27 09:33pm

Your suggestion to the Mexican oil production decline is "drill more oil with Western help, so it ends faster"? Did I hear that tripe again?

God.

High time that Latin American states started thinking about what happens after their precious oil production falls. No need to delay a junkie's agony.

Guardsman Bass · Post by **Guardsman Bass** » 2008-05-27 10:05pm

ANGELUS wrote:
Guardsman Bass wrote:I blame at least part of this on the PRD (the more leftist party in Mexico's politics, along with the centrist PRI and pro-market PAN). They've done basically everything and anything in their power to prevent any type of private investment in Pemex that might allow Pemex to look for new, deeper Gulf oil to slow their decline (in the long term). Witness how they physically closed the Mexican Congress to prevent any legislation on the matter.
Actually, PRI and PAN are in favour of private investment for Pemex. It is only PRD wich oposes. They are not leftists, they're just a bunch of assholes with no clear political tendency and that will say "No" to absolutely anything that both of the other parties or the president propose just to not let them do anything and make them look bad (it was just PRD that closed the congress, and they did it to stop any kind of dialog on the Pemex private investment topic [they wouldn't even allow for it to be discussed, they just wanted to stop anything the others propossed]).

I know - I didn't say the PRI or PAN were involved in the PRD-style stunt.

I called them the more "leftist" party because they are basically a whole hodgepodge of groups including much of the previously fragmented Mexican Left under Lopez Obrador (that seems to be the thing with the PRD; first they were under Cuauhtemoc Cardenas, now Lopez Obrador). They are more "left", so to speak, than the PAN, and possibly the PRI.

I agree that they are falling apart. Not that I necessarily consider that a good thing; the PRI will probably do well because of it in the 2009 Congressional Elections, and possibly in the 2012 Presidential Election if Calderon can't get enough done and the PRD collapses.

PRI and PAN had to go to an alternate location to session. PRD is right now falling appart as we speak, thorn into pieces by the conservative and extremist factions struggling for control.

Depending on whether you support the PAN or the PRI, that's a good or bad thing. The PRI is probably dancing a happy (hidden) jig at both the chaos the PRD has caused for Calderon and the PAN, as well as the fact that the PRD is falling to pieces.

I'm not a fan of PRI or PAN neither, but PRD is just much worst than them.

You think so? I'll admit that I'm not particularly fond of the centrality around Lopez Obrador, but the PRI's leadership (Madrazo) is or was as corrupt as fuck, and the PAN - I think the PAN is okay, relatively speaking.

Galvatron · Post by **Galvatron** » 2008-05-27 10:15pm

Kanastrous wrote:So oil revenues will drop precipitously, and - what with all that's going on in the US - remittances will probably dry up quite a bit, too.

Leaving the Mexican economy supported by...

...what?

My gardener and all of his cousins working in the US?

ANGELUS · Post by **ANGELUS** » 2008-05-27 11:57pm

Guardsman Bass wrote:I know - I didn't say the PRI or PAN were involved in the PRD-style stunt.

Yeah I know, I misunderstood what you wrote when I first read it. I got it right when I re-read it but I had already posted.

I agree that they are falling apart. Not that I necessarily consider that a good thing; the PRI will probably do well because of it in the 2009 Congressional Elections, and possibly in the 2012 Presidential Election if Calderon can't get enough done and the PRD collapses.

Depending on whether you support the PAN or the PRI, that's a good or bad thing. The PRI is probably dancing a happy (hidden) jig at both the chaos the PRD has caused for Calderon and the PAN, as well as the fact that the PRD is falling to pieces.

I think PRI still has a long way to go before before they get back all of their previous power. Remember the presidential election on 2006? the country was divided in two: The south supported Lopez Obrador while the north supported Calderon. Madrazo wasn't even close to them and PRI didn't win not even a single state (something never seen before). Even if PRD falls appart and PRI gets back some of its power because of it I still doubt that they'll be able to challenge the PAN leadership for a long time.

You think so? I'll admit that I'm not particularly fond of the centrality around Lopez Obrador, but the PRI's leadership (Madrazo) is or was as corrupt as fuck, and the PAN - I think the PAN is okay, relatively speaking.

Yes, the lesser of three evils. At least they seem to be interested in getting things done instead of gaining power like the other two.

ANGELUS · Post by **ANGELUS** » 2008-05-28 12:07am

Stas Bush wrote:Your suggestion to the Mexican oil production decline is "drill more oil with Western help, so it ends faster"? Did I hear that tripe again? God.

High time that Latin American states started thinking about what happens after their precious oil production falls. No need to delay a junkie's agony.

Our economy is almost completely based on oil and I agree that in order to fix things we must find something else to base our economy on, and while we do that we still need oil. The problem is that we don't have the technology to get it from so deep under the ocean.

Private investment on Pemex will keep us alive while we (hopefuly) figure something out. Besides if we don't keep drilling oil it will not only kill us but it will have a serious impact on the US economy making gas and other oil based products become more expensive.

Post by **K. A. Pital** » 2008-05-28 12:40am

Private investment on Pemex will keep us alive while we (hopefuly) figure something out.

It will do only one thing: maintain the oil drug needle. Why care? Western oil companies, cornucopia. Until oil starts thinning out again.

Besides if we don't keep drilling oil it will not only kill us but it will have a serious impact on the US economy making gas and other oil based products become more expensive.

It better do. Reckless, arrogant fools will finally see what an energy crisis can bring and hopefully turn to the necessary energy kinds - nuclear, etc. before it's too late.

Guardsman Bass · Post by **Guardsman Bass** » 2008-05-28 01:54am

Stas Bush wrote:
Private investment on Pemex will keep us alive while we (hopefuly) figure something out.
It will do only one thing: maintain the oil drug needle. Why care? Western oil companies, cornucopia. Until oil starts thinning out again.

Taxes on Pemex account for something like 35-40% of the revenue of the Mexican federal government. A collapse in Pemex revenue means that Mexico suddenly finds itself short on funds and needing to either go into debt (of which lenders will be more reluctant than the last time Mexico went into huge debt, because of the lack of oil as collateral), or stimulate a lot of economic growth (which is the best long-term solution but doesn't really help solve the problem of collapsing government revenue.

I think PRI still has a long way to go before before they get back all of their previous power. Remember the presidential election on 2006? the country was divided in two: The south supported Lopez Obrador while the north supported Calderon. Madrazo wasn't even close to them and PRI didn't win not even a single state (something never seen before). Even if PRD falls appart and PRI gets back some of its power because of it I still doubt that they'll be able to challenge the PAN leadership for a long time.

They placed second in a lot of states, though, and had a national reach. I'll agree that it's unlikely that they'll get the Presidency in 2012 unless Calderon fucks up real bad, but there is always the chance that they'll get rid of Madrazo and pick somebody who is actually competitive. I still think that if the PRD continues to disintegrate, they'll do very well in the 2009 elections to the Chamber of Deputies (although maybe not enough to get a majority - even the PAN couldn't pull that off).