Let’s talk Mexico
I’m interested in people’s thoughts and analyses of Mexico’s oil situation. According to my own take on things, Mexico stands a pretty good chance of being one of the earliest of the many canary in the coal mines regarding oil production peaks and dwindling exports of major players.
In 2006 Mexico was second only to Canada in terms of US oil imports with Saudi Arabia a very close third , however, because of the massive drop-off in production from Mexico’s largest field, Cantarell, Saudi Arabia and Mexico have now flipped ranks.
If one looks at data provided by the United States Department of Energy’s Energy Information Administration (EIA), Mexico’s oil exports grow fairly steadily from as far back as ‘92 all the way up to 2006 where they begin a drop much steeper than the corresponding incline on the way up.
Though perhaps one of the most troubling statistics regarding Mexican oil production and exports is Pemex’s (Mexico’s sole and state-owned oil company) estimations concerning the reserves-to-production ratio. This ratio simply takes total proven reserves and divides them by that year’s current production levels to see how many years at current production levels are left.
As recently as 2002 Pemex estimated 20 years left at current production levels. But in 2006 the figure was revised dramatically downward to 10. So now (according to this model’s methodology obviously) instead of exhausting current proven reserves by 2022 the time frame would be by 2016 – only eight years from now. The newest data from 2007 and 2008 maintain this 2016 date for depletion of current proven reserves.
I just wanted to post this to get things going. Obviously, we need to include the Export Land Model to these numbers (which would pull the export depletion date closer) and increased production from existing fields still on the rise (which would push things out a bit).
There was a segment on 60 minutes last week about how Saudi Arabia is pouring 60 billion into developing 2 new fields in the country that are apparently out in the dunes where there is considerable difficulty drilling and maintaining. The projected output at peak production was expected to be 2 million barrels a day. What I found remarkable about this was the enthusiasm the interviewer had about this development and the impression given that this was an earth shattering deal solving all our problems.
The problem is that, even if we got all 2 million barrels, it would barely cover the losses from the Mexican oil fields. It isn’t that there is so much concern over Mexico’s oil production decline as it is about all the hoop-a-la over small finds here and there that are being touted as the solution to all our problems.
Here in Albuquerque I live under some of the major U.S. airways, and with gas at $4.00 plus I noticed a decline in the number of aircraft I would see going past and the number of trucks on the freeway. This morning I was able to see 8 aircraft contrails at once just in my little piece of sky. I know that’s not definitive, but it sure seems like the airlines are flying high again. I have also noticed that the 18 wheelers are screaming down I-40 again as if there had been no fuel price problem. I think oil consumption is creeping back up again and if so, fuel prices are sure to follow. I will have put about 14k miles on my car this year, 3 years ago it was almost 22k. Next year I anticipate 8-10k with prices under 4 bucks, even less if over. I was going to buy a new (low mileage used) car since the one I have has 125k on it, but I have decided to get some maintenance done and run it at least 2 more years, maybe more. It’s a 2002 Impala, and it has consistently made 30+ mpg on the road and 23 in town (I have a record of every gallon purchased for the car since 2002).