Cantarell Finally Slips Below 500 kbpd

It’s odd that people believe something truly new is possible in the world of global oil discovery. Oil deposits on earth follow a fairly well defined pattern: a handful of giant fields, and a great number of smaller fields. Unsurprisingly, 150 years of oil exploration and discovery has done nothing to upend this distribution. The giant fields were all found earlier in the oil age. Now we are into the latter part of the oil age, when the large fields have peaked and gone into decline, and we spend more capital, more labor, and more energy to extract oil from the smaller fields.

A nice example of the pattern is Mexico. They inherited a giant, Cantarell. But now that Cantarell has been in fast decline since its peak in 2004, Mexico is left with a complex of smaller fields called Ku-Maloob-Zaap, and also the very low quality Chicontepec. It’s kind of sad that Mexico’s Energy Ministry has been touting for years the promise of Chicontepec. It’s a dog’s breakfast of an oil field, with its deposits widely dispersed and hard to extract. After all this time, it produces a feeble 40 thousand barrels a day.

As you can see from the chart, Cantarell Crude Oil Production 2008 – 2010, Mexico’s single giant finally slipped below 500 thousand barrels per day of production in May, to 499,286 kbpd. It’s still pretty astonishing to reflect that just two years ago, Cantarell was still producing a million barrels per day. The Mexican government, like the average layperson, continues to trade publicly in the idea that some new discovery could occur in Mexico that would alter the country’s production decline. But unlike the layperson, PEMEX knows better. (Indeed, insider reports on PEMEX indicate they’ve known for years).

-Gregor

  • Infidelsarecool

    The GOM, especially the Cantarell fields are far from a declining, peaking field.

    The decline in production merely shows Mexico's incompetence. It's the perfect example that if a national run energy company fails to reinvest it's income into their energy business, production will surely fall off.

    PEMEX should know better than to fail to reinvest in their business.

  • gregor.us

    The GOM, especially the Cantarell fields are far from a declining, peaking field.

    You should contact the Energy Secretary of Mexico with your findings. They will definitely want to talk to you.

    The decline in production merely shows Mexico's incompetence. It's the perfect example that if a national run energy company fails to reinvest it's income into their energy business, production will surely fall off.

    Got it. Mexico's production decline is not due to geology. Again, you should contact el gobierno.

  • mikestiller

    What is Mexico's annual domestic oil consumption? When will they turn net importer, if they haven't already, and what effect does this have on the local population? Good stuff as always.

    -Mike

  • Bob Dobb

    Si, amigo. It works the same for government as it does for free trading oil diggers. Choose to divert your income into all sorts of social programs, fail to reinvest your cash flow into new digs, and watch your production decline.

    Buenos noches.

  • Evan

    If you figure $75 oil prices at 75% contribution margin, this 750k/day loss of oil comes out to 1.4% of GDP ($15.4b lost on a $1.09T GDP). Quite remarkable that a single oilfield's 60% loss of production can contribute such a deletrious amount to GDP.

  • Mikeb

    Did you sing the same tune 10 years ago, when PEMEX was still king and oil production at Cantarell was rising?

    Do you say the same thing about other national oil companies whose fields have risen in production?

    Actually, you probably weren't even paying attention until now.

  • Bob Dobb

    Mikeb, if you are referring to my comments, yes, I have been “paying attention” to world oil production since 1979. And unlike you, I make comparisons of differing national oil companies on a case by case basis.

    And in doing so, it is not prudent to think that they are all operated the same.

    Take Saudi for instance. That company not only reinvests heaps of their oil income back into the business, but they contract with outside companies to help do it right.

    Mexico? Mexico’s government controlled oil company treats Pemex as a major source of revenue. As a result, Pemex has insufficient capital to develop new and more expensive resources on its own, and cannot take on foreign partners to supply money and technology it lacks.

    But, Mexico has waken up to reality. Since 2007, Mexico’s slow moving political process has begin to address some of these problems.

    Mexico’s Congress not only approved reforms including a reduction in the taxes levied on Pemex, but Mex is in the process of taking on outside partners.

    So, yes, the product is there. The discovery and production of fields such as Cantarell prove this.

    E&P will increase from here. Bank on it.

  • Bob Dobb

    Mikeb, if you are referring to my comments, yes, I have been “paying attention” to individual world oil production since 1979. And unlike you, I make comparisons of differing national oil companies on a case by case basis.

    And in doing so, it is not prudent to think that they are all operated the same.

    Take Saudi for instance. That company not only reinvests the major heap of their oil income back into the business, but they contract with outside companies to help do it right.

    Mexico? Mexico’s government controlled oil company treats Pemex as a major source of revenue. As a result, Pemex has insufficient capital to develop new and more expensive resources on its own, and cannot take on foreign partners to supply money and technology it lacks.

    But, Mexico has waken up to reality. Since 2007, Mexico’s slow moving political process has begin to address some of these problems.

    Mexico’s Congress not only approved reforms including a reduction in the taxes levied on Pemex, but Mex is in the process of taking on outside partners.

    So, yes, the product is there. The discovery and production of fields such as Cantarell prove this.

    E&P will increase from here. Bank on it.

  • Zoltan

    Mr. infidel, I don't know if you noticed, but the British north sea production levels have been dropping just as fast. Britain has 100% private enterprise in the oilbusiness. I heard this story about the ineficient govt run companies way to often as an excuse. It is two-fold propaganda. One is to try to convince them to sell to the private interests, who will leave far less money in the country where the petroleum originates from. And the second of course is to justify our recent problems with suplying enough petrol to the market.

  • Googler

    I'm surprised at these types of opinion here. I would expect you to post on the
    peak oil debunked blog instead. Are you an economics or business major by any chance? You seem to be under the impression that with enough money invested we
    can get more oil out of any hole in the ground. Especially the ones like Cantarell that
    has been pumped for almost 40 years.

    Or with enough money invested we can discover fields that are BIGGER than
    Cantarell. Right? *chuckle*

  • Gregor, between facts like this, and the unprecedented disaster in the Gulf of Mexico, how can oil prices be so cheap and stable? You would think that analysts everywhere would be discussing these new realities and preparing divergent theories for what might be around the corner. Instead, it's happy motoring.

    Where are the analysts?

  • 1Eco_Indigo_1

    I agree that investment in production has probably been neglected, but that avoids the issue that if the physical quantity of oil is declining, spending more money to get the remainder out will just accelerate the decline.

    I think you can see how much this is hurting mexico, which appears to be tearing itself apart through gang warfare. Some of the reports i read are truly horrific. Its a real warning of how quickly production can fall off a cliff. We are talking 75% decline in a few years!!!

    Across the world, i think iraq is helping soften the blow, but i think there is massive market manipulation going on to keep the oil price down, its the only way to bridge the gap between mainstream media information and online boutique information.

  • Madero1910

    ” It’s kind of sad that Mexico’s Energy Ministry has been touting for years the promise of Chicontepec. It’s a dog’s breakfast of an oil field, with its deposits widely dispersed and hard to extract. After all this time, it produces a feeble 40 thousand barrels a day.”

    Just who do you thing did the exploration work at Chicontepec that was so dissapointing? I will give you a hint, it was not PEMEX. Since the PAN party came to power, Haliburton has been doing more work in Mexico than PEMEX.