Mexico Facing Net Importer Status By 2018 As Cantarell Output Collapses - WP

[hatrack]

WASHINGTON -- Mexican Energy Secretary Georgina Kessel's warning to the Mexican Congress last week sounded ominous: If legislators did not approve reforms within the oil sector, the country would suffer a "severe energy crisis" within a decade. That's probably an understatement.

Mexico's oil production is rapidly declining. The Cantarell oil field, one of the world's largest, is responsible for almost two-thirds of Mexico's production. In 2004, it brought up 2.1 million barrels a day; today it produces only half that. Unless new sources are found, Mexico -- up until last year the second-largest supplier to the United States -- will become a net oil importer by the year 2018.

For some countries, being a net oil importer is no big deal. But for Mexico, oil represents the single largest amount of revenue for the federal government -- about 40 percent. This looming "energy crisis" would be felt more than just at the pump. It would be across the board, impacting financial, social and political sectors as well. Still, almost every expert on this issue I've interviewed or heard speak in recent months insists that it won't get that bad. They say Mexico will come to its senses and adopt the kind of overhaul that will give the country's state-run oil company, Petroleos Mexicanos -- Pemex -- enough flexibility to invest more of its profits in modernizing its operations. That way, the experts say, it could become more like Brazil's state-run Petrobras, regarded as one of Latin America's most well-run companies.

At the same time, Mexico's attitude about oil and Pemex's serious systemic flaws don't inspire much optimism. The energy proposals introduced last month by President Felipe Calderon offer some modest reforms, but probably not enough to stem the crisis. As Jeffrey Davidow, a former U.S. ambassador to Mexico, put it diplomatically, "the steps they are taking are not sufficient."

EDIT

http://www.washingtonpost.com/wp-dyn/content/article/2008/05/15/AR2008051502307.html

[Systematic Chaos]

1. But then they'll all drive their solar cars to the local solar Wal-Mart

and buy solar pool heaters! Then there'll be love, hugs and kisses for everyone!

Ole!

[phantom power]

2. I wonder...

where they could obtain equipment to extract new sources.

From Brazil?
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=115&topic_id=148454&mesg_id=148454
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=115&topic_id=148494&mesg_id=148494

[pscot]

3. I wonder

if these new sources have actually been found, or if they are "undiscovered" reserves.

[bhikkhu]

10. Good information on the new Brazilian oil discoveries:

http://www.theoildrum.com/node/3269

The find is probably as described, but on the very edge of what can be accomplished with technology. And probably some of the most expensive oil in the world if and when it is produced. Drilling through a mile of unstable salt at that depth and pressure, in particular, is something that has never been done.

I read somewhere that Chevron tried to do a test well in something similar, but easier, and gave up after destroying 12 $50,000 drilling heads.

[GliderGuider]

4. For those who haven't seen it

Here's my article about the consequences to Mexico of a crash in Cantarell's production. I wrote it about a year ago.

http://www.paulchefurka.ca/Mexico%20and%20the%20Problematique.html">Mexico: Peak Oil in Action

The Scenario

* Mexico's biggest oil field is Cantarell. Its 2 million barrel per day output was responsible for 60% of Mexico's production, and all its oil exports to the United States.
* Those oil exports account for 40% of Mexico's public funding.
* Cantarell's output is known to be crashing (see graphic above). Production has declined by 25% in the last year and is predicted to be down about 60% from its peak by the end of 2007. The field will probably lose over 75% of its production capacity by the end of 2008.
* When this happens Mexico's economy will probably implode.
* The United States currently exports about 20% of its corn crop.
* Next year, 20% of the United States' corn crop is going to be used for ethanol.
* Mexico imports a substantial amount of corn from the United States.
* As Cantarell's output declines, oil exports to the US will drop in lockstep.
* As oil imports drop in the US, the pressure will mount to produce more ethanol as a substitute.
* As more corn is bought by the American ethanol industry, US corn exports, especially to Mexico, will slide.
* At the same time the probability is high that Global Warming will result in higher temperatures in Mexico, a country already at temperature risk.
* Rising temperatures will bring more drought conditions and a drop in Mexico's own corn production.
* Now you have a country with a decimated economy and declining food. This is a recipe for massive migration.
* The migration moves North as it has in the past, but this time in enormous numbers.
* As the economic refugees cross the border what do they find?
* In January, 2006, KBR (a subsidiary of Halliburton) was given a $385M contract to build a string of very large detention camps in the United States...

The Spectre of Revolution

When contemplating Mexico's future you should always remember her past. Mexican history is full of revolutionary episodes: the War of Independence of 1810; the Mexican Civil War or War of Reform of 1857; the Mexican Revolution of 1910; the Zapatista actions in Chiapas in 1994; and the recent violent confrontations in Oaxaca.

The effect of NAFTA on the lives of the Mexican poor has been devastating. In an echo of the enclosure movement in Britain many have been forced off land they traditionally occupied, either by economic circumstances or legislation. A good overview of Mexican agrarian history, including the impact of NAFTA, is available in this FAO document.

The 100+ year-old push-pull effect of the US economy on Mexican migration is a very well documented historical phenomenon. This time, circumstances are somewhat different. Many Mexican campesinos — subsistence farmers that either owned their own land or held it jointly in a collective called an ejido — were forced off their land due to NAFTA rules that allowed the dumping of highly subsidized, below market-priced US corn on the Mexican market. The land is still there, but now sits idle. In the event of a severe economic downturn there would likely be a large movement to return to the land as well as increased northward migration.

Cantarell's crash and PEMEX's impending bankruptcy present a political crisis of the first magnitude for Mexico's elite and threaten the stability of the small middle class. This crisis presents a great opportunity for the long downtrodden majority to gain power as has happened in Bolivia, Ecuador and Venezuela. Conditions will be ripe for a resurgence of revolutionary sentiment in Mexico, which will probably take the form of an import of the Bolivarian Revolution championed by Hugo Chavez.

Of course, having such an incendiary political movement on their very doorstep will not sit well with the American industrial/political establishment. The probability of direct American political, economic and even military involvement in Mexican affairs as a result should not be lightly dismissed.

I take no pleasure in having such gloomy speculations confirmed.

[NickB79]

5. Got any predictions on lottery numbers?

You tell me the numbers, I'll buy the tickets, split the profits, and we can live like kings through this whole "peak oil" thing :-)

[GliderGuider]

6. Well, I do have this little bet with Nederland coming due in August...

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=266x1535

[tom_paine]

13. Like taking candy from a baby, eh, Paul?

These technologist-cornucopians just don't get it, do they?

Make sure the bastard pays up.

[GliderGuider]

15. He's already offered to make it a donation to DU

I heard the sound of assumptions being re-examined as he typed...

[tom_paine]

16. Nice. The Internets and human beings being what we are, though, I would discreetly

e-mail the admins at some point after he has said he made the donation to see if he actually made it.

Not that I would suggest making a public beef about it or anything (some things it's just better to let them slide) if it turns out he didn't pay. But just so you KNOW.

That way, you'll know if it is worthwhile to make another bet with him if the occasion should arise in the future and further, if you should happen to lose said bet, unlikely as it is when one of us who can see (the One-Eyed, as it were) bets with the Kingdom of the Blind, you will know that payment is "optional".

Sorry if that Kingdom of the Blind remark sounds elitist or contemptuous of others, but the reality is the reality, at least in this regard. It doesn't necessarily mean we are better than anyone lese, it means this is our strong field. I have no doubt, Paul, that each of us has areas where we are as ignorant, shortsighted, or misled, as anyone in my self-described Kingdom of the Blind. That, too, is what it is to be human.

But as is confirmed daily and "faster than expected", those mental weak points sure as hell don't seem to be in the area of integrating, analyzing and understanding long-term ecological and environmental trends based on current and recent data.

FULL DISCLOSURE: I don't know Nederland from Adam, so I certainly don't mean this to be a slander against him/her. I would suggest the same course of action when making any bet with someone you don't know who makes an offer to pay the bet off to a third party.

[Pooka Fey]

18. ROFL Oh, that made my day ! n/t

[depakid]

7. Add to that Mexico's population doubling time = 38 years.

due largely to Hispanic cultural aversions to birth control.

My prediction- within the next decade, America will become Canada's Mexico.

[Psephos]

17. With the birth rate at 1.5 children per woman, Canada's going to need its own Mexico

2.1 children is the breaking point for stable population. Canada's native population shrinkage is already assured. Within a generation or so it will be dominated by elderly people dependent upon immigrants to pay for their benefits.

A lot of other first-world countries are facing the same future, including almost all of Europe.

[bhikkhu]

8. Some more information on Cantarell

http://www.energybulletin.net/21299.html

The 2018 prediction seems to take into account only the production of oil, with the assumption that domestic use stays the same. A month ago I read (and will try to find the article) that if you combine Cantarell's rate of decline with Mexico's increase in domestic consumption, by 2012 they have no more oil left for export. At that point even new discoveries - assuming they began a big push now - would still be in development, and they might never catch up enough to rejoin the oil exporting nations. Not to be too pessimistic, but it is another example of why consumption will decrease, by geological determination. It is a big pill to swallow, and no time like the present to get ready for it.

We get 15% of our oil supply from Mexico.

[hatrack]

9. Canadian Imperial Bank of Commerce has already projected net import status by 2012

Don't have the link handy, but I imagine the Oil Drum has it.

[NickB79]

14. It is indeed a big pill

Too bad it's actually a suppository :o

[bhikkhu]

11. 2012 then.

Thats right around the corner....

And as 70% of Mexico's federal budget comes from oil revenues, it is something of a combined disaster. We lose enough oil to cause severe shortages and significant price increases (as if things aren't bad enough) and they lose most of the funding that keeps their government afloat and effective. I wonder if this doesn't have something to do with the West Bank style border fence under construction now.

[bhikkhu]

12. And some more info - no good discovery news yet

http://www.rigzone.com/news/article.asp?a_id=61624

$900 million spent in deepwater exploration, and only one promising possibility (Lakach). The clock is ticking on getting new oil to market before the Cantarell decline drains the bank.

[robertpaulsen]

19. Jeffrey Brown says 2014.

The #3 Source of Oil to the US Is About to Go Offline

Mexico provides about 14% of the oil the US imports. On any given day that makes it either the #2 or #3 leading source for US oil imports after Canada and Saudi Arabia. Given that the US currently imports close to 70% of its oil needs, the Mexican oil is critical.

But here's the thing. Using straightforward ELM calculations, Jeffrey Brown is confident that Mexico will ship its last barrel of oil to the United States -- or anywhere else, for that matter -- about 6 years from now, in 2014. In a recent interview with Brown, I asked about this forecast.

"Mexico was consuming half of their production at peak in 2004. And if you look at the '05, '06, '07 data, they're basically on track, on average, to approach zero net oil exports no later than 2014," he confirmed.

Of course, the US is completely unprepared to replace this source of oil, especially considering the growing stresses on global oil supplies causing by ballooning demand from emerging markets. That means the international competition for available supplies is only going to get more desperate in the months and years ahead.

http://www.fxstreet.com/futures/market-review/outside-the-box/2008-05-20.html