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PEMEX Mexican Oil Thread

General discussions of the systemic, societal and civilisational effects of depletion.

Re: Analysis of Pemex/world oil theft trends

Unread postby Tanada » Tue 11 Jun 2013, 12:58:06

C8 wrote:Mods- how is it possible that I started this thread, wrote the title and wrote the lead article but now it is attributed to someone else and the lead article (with my analysis- which was the main point anyway) is bumped down?


I came across the 2011 thread on the same topic and merged them together because the older thread had material I thought was relevant to the new thread. If it really bugs you to be associated with it I can split the threads apart and just quote the news article at the start of the old thread. As the OP you can make that call as far as I am concerned.
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Re: Analysis of Pemex/world oil theft trends

Unread postby C8 » Tue 11 Jun 2013, 18:41:41

No big deal- just kinda weird to see my title with someone else as the author, maybe a little mod note at the beginning would clear things up if this kind of thing happens in the future, don't bother on this thread though
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An Update On Mexico’s Net Oil Exports

Unread postby westexas » Fri 12 Jul 2013, 22:07:41

In a February, 2013 article, titled “The Export Capacity Index (ECI):A New Metric For Predicting Future Supplies of Global Net Oil Exports,” I summarized recent global production and net export data, and I introduced what I call the Export Capacity Index (ECI), which is the sum of total petroleum liquids + other liquids production (per EIA definition) divided by liquids consumption for an oil exporting country. Net Oil Exports are defined as Total petroleum liquids + other liquids production less liquids consumption (EIA).

In the ECI article, I also reviewed what I called the Export Land Model (ELM), which is a simple mathematical model which examines what happens to net oil exports, given increasing internal consumption versus an ongoing decline in production in a net oil exporting country.

Based on the ELM, we can conclude that given an ongoing production decline in a net oil exporting country, unless they cut their internal consumption at the same rate as the rate of decline in production, or at a faster rate, the resulting net export decline rate will exceed the production decline rate, and the net export decline rate will accelerate with time.

Mexico’s production peaked in 2004 at 3.83 mbpd (million barrels per day, as defined above). Their 2004 liquids consumption was 2.07 mbpd, resulting in 2004 net exports of 1.76 mbpd.

Their initial 2004 to 2005 rate of change in production was -1.7%, and their initial rate of change in consumption was +2.2%/year, resulting in a 2004 to 2005 net export rate of change of -6.7%/year. In simple percentage terms, a 1.7% decline in production, plus rising consumption, resulted in a 6.4% decline in net oil exports, from 2004 to 2005.

Their 2004 to 2012 rate of change in production was -3.4%/year, and their rate of change in consumption was +0.7%/year, resulting in a 2004 to 2012 rate of change in net oil exports of -11.1%/year. In simple percentage terms, a 24% decline in production, plus rising consumption, resulted in a 59% decline in net oil exports, from 2004 to 2012, with net oil exports falling from 1.76 mbpd in 2004 to 0.72 mbpd in 2012.

The rate of change in their ECI ratio, the ratio of liquids production to liquids consumption, fell from 1.8 in 2004 to 1.3 in 2012 (at an ECI ratio of 1.0, net oil exports would be zero). At the 2004 to 2012 rate of decline in Mexico’s ECI ratio, they would approach zero net oil exports in about six years, around the year 2019.

Based on the 2004 to 2012 rate of decline in Mexico’s ECI ratio, their estimated post-2004 Cumulative Net Exports of oil (CNE) are about 4.2 Gb (billion barrels). They shipped a total of 3.2 Gb in net exports from 2005 to 2012 inclusive, which suggests that Mexico’s post-2004 CNE are already about three-fourths depleted, which would be a post-2004 CNE depletion rate of about 18%/year through 2012, i.e., the rate at which Mexico is depleting their post-2004 cumulative supply of net oil exports. This is completely consistent with what we have seen in other regions, e.g., Indonesia, as they approached zero net oil exports. Note that Mexico was the third largest supplier of net crude oil imports into the US in 2012 (EIA).

Mexico’s net export decline was a contributor to the regional post-2004 decline we have seen in net oil exports. The seven major Western Hemisphere net oil exporters in 2004 were Canada, Mexico, Venezuela, Trinidad & Tobago, Colombia, Argentina and Ecuador, i.e., countries with in the Western Hemisphere with net oil exports of 100,000 bpd or more in 2004. Their combined net oil exports fell from 5.9 mbpd in 2004 to 5.0 mbpd in 2012 (EIA). In other words, rising net oil exports from Canada have only served to slow the overall post-2004 regional decline in net oil exports.

Link to ECI article (Using BP + EIA data):
http://peak-oil.org/2013/02/commentary-the-export-capacity-index/

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Re: An Update On Mexico’s Net Oil Exports

Unread postby rockdoc123 » Fri 12 Jul 2013, 22:35:04

And it is pretty apparent that Mexico has realized their problem for some time. They have tried to change the constitution which does not allow for foreign participation in the oil and gas industry other than in service contracts but failed. The new president is going to congress in the fall to once again attempt to change the rules.
Of course their reserves have a limit but what is clear is that once they kicked out everyone but Pemex they lost connection with technology. They attempted to fix this recently by bringing in Schlumberger and Halliburton on contract but because neither company had any incentive other than to do jobs they were told to do the results were poor at best. There are many fields in Mexico that have not had the advantage of newer technology for the past 50 years, virtually no workovers in some of the older producing fields, no understanding of artificial lift nor pressure maintanence. Pemex was an exploration company and they did that but those fields discovered, after they kicked everyone out, without proper reservoir maintenance were doomed for failure. Chicontepec is a very good example, very complex but likely solveable if they had the right people in there...the right people are not Sclumberger or Halliburton but rather intermediate oil and gas companies with expertise in solving complex reservoir issues (they have been doing it for decades in North America).
A couple of years ago I posted production from the Mexican fields and what was clear is it was driven by discovery rather than field maintenance. It will be interesting to see what happens after the fall Mexican parliament discussions
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Re: An Update On Mexico’s Net Oil Exports

Unread postby TheDude » Sat 13 Jul 2013, 01:18:30

Have always wondered how steep a cliff KMZ will fall off. Terminal velocity, bumby ride, little of each? Found this handy summary from Feb: Insight: Clouds gather over Mexico's proclamation of new oil dawn - Yahoo! News

In February, Pemex said it expected Ku Maloob Zaap's output to hold steady at 850,000 barrels per day (bpd) through 2017. Since then, Pemex CEO Emilio Lozoya has repeatedly declared that Mexico, the world's seventh-largest oil producer, is making a comeback.
"Production is not declining. It is actually beginning to rally," he said recently, referring to total national output. "This is big news for our country, and something that is not necessarily known to the public."
But many analysts question that scenario. A closer look at Ku Maloob Zaap helps explain why.
In a presentation at Rice University in Houston, Texas, early last year, Lozoya's predecessor, Juan Jose Suarez Coppel, estimated production at the giant offshore oilfield, whose Maya name means "good nest of coals," will fall 60 percent by 2023.
Pemex officials initially declined to comment on the estimate until Reuters showed them the Rice presentation. At that point they confirmed that the forecast still stands.


Here's Rice Uni's page on Mexican energy. Coppel characterizes Pemex's management as "horrible" in this piece from May: Fossil fuel production could be much higher. Wonder if they still have 12k employees who are paid to sit around and twiddle their thumbs until they pick up their next check, which Dave Shields wrote about years ago.

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Re: An Update On Mexico’s Net Oil Exports

Unread postby westexas » Sat 13 Jul 2013, 08:24:58

Dude,

Circa 2008 or so, I had guessed that Mexico might be approaching zero net oil exports by the end of 2012. Of course, this turned out to be too pessimistic, but on the other hand, based on the 2004 to 2012 decline in their ECI ratio, they have depleted about 75% of post-2004 CNE (Cumulative Net Exports).

What I found interesting though is that the ECI method, using the 2004 to 2008 decline in the ECI ratio (which basically corresponded to most of the steep decline in Cantarell's production), indicated that Mexico would approach zero net oil exports around 2015, versus the 2004 to 2012 estimate, which is 2019.

Also, Mexico is a prime example of what is probably the most overlooked aspect of "Net Export Math," the CNE depletion rate. The observed 2004 to 2012 rate of decline in net oil exports was 11.1%/year, but I estimate that their post-2004 CNE depletion rate was about 18%/year. So, a (2004 to 2012) 24% decline in production corresponded to a 59% decline in net exports and to an estimated 75% decline in remaining post-2004 CNE.

Here is a graph from my ECI paper, showing estimated remaining post-Index Year CNE by year for the Six Country Case History, for Saudi Arabia, for GNE and for ANE (as defined on the graph). The Six Country CNE depletion rate turned out to be too optimistic. The Index year for the Six Country Case History was 1995, and it was 2005 for the other data sets. Note that by definition, the direction of the slope of the lines is not in question, it's just a question of the what the actual depletion rate is.

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Re: An Update On Mexico’s Net Oil Exports

Unread postby ROCKMAN » Sat 13 Jul 2013, 09:19:28

There’s actually another factor that exacerbates Mexico’s ELM situation. In 2012 Mexico exported $48 billion in crude oil…the great majority to Gulf Coast refineries. But that wasn’t a gain of $48 million of crude available to American consumers. Mexico has insufficient refining capacity and must import a lot of petroleum products…in fact $27 billion in 2012.

Can’t evaluate on a volume basis: a bbl of crude is not equal a bbl of products. Nor is there a straight forward $ to $ comparison. We can’t access the contracts Mexico has with US refiners but I would be very surprised if the deals didn’t require a fixed amount of product returned to Mexico. Thus even though Mexico is a major source of oil for the US it is not as large a net source of refined products.

But, like the KSA, Mexico has to sell oil to fund the govt. Last number I saw PEMEX supplied as much as 40% of the govt’s budget. But they also have to keep supplying the country with energy to prevent a total collapse. To help matters Mexico has been increasing it import of NG from the US to fuel its power plants. But that requires an increasing amount of capital. And potentially much more if US NG prices rebound significantly in 5+ years.

We chat about the collapse of oil importing economies but in the case of oil exporting Mexico they may be facing such pressure very soon. And this leads to a possible aid to their situation: export their oil to China. It might surprise some folks but Mexico has a huge trade imbalance with China. Which would be a huge cash drain that oil revenue from exports to the US supplements. But sell the oil to China and suddenly that trade imbalance begins to disappear yet Mexico still has the same revenue from their oil exports. A win-win for Mexico and China. Not so much for the US.

Remember the Chinese president spent more time visiting the Mexican president than the POTUS. Also remember that odd little deal with Costa Rica: China will spend $1 billion bringing a CR refinery on their Caribbean coast back into service. A refinery in a country with virtually no oil production. A refinery just down the coast from Mexico’s big offshore oil fields.

More dots to connect, eh?
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Re: An Update On Mexico’s Net Oil Exports

Unread postby westexas » Sat 13 Jul 2013, 09:52:38

Rock,

Note that the Production less Consumption metric addresses the topic of product imports. I've used the following example:

Production Land (P) has 2 mbpd of production, but no refining capacity.

Refinery Land (R) has 2 mbpd of refining capacity, but no production.

Ignoring refinery gains and other minor issues, P has consumption of one mbpd, and R has consumption of one mbpd.

P's gross exports to R are two mbpd. R's gross imports from P are two mbpd. R refines two mbpd, consumes one mbpd, and exports one mbpd of refined product to P.

P's net exports are production (two) less consumption (one) = +one mbpd.

R's net exports (actually net imports) are production (zero) less consumption (one) = -one mbpd.

As noted above, given a production decline in a net oil exporting country, with no offsetting decline in consumption, we see the "ELM" effects. So, if P's production dropped 25%, and consumption stayed flat at one mbpd, then their net exports drop by 50%, to 0.5 mbpd (1.5 - 1.0 = 0.5), and the net exports available to R drop by 50%. Of course, this assumes that R is willing to play along, but this is a mathematical example.

However, in essence this is an example of what is happening in the US, although the increase in our production has helped, we have been forced, via price rationing, to reduce our consumption as the supply of GNE available to importers other than China & India dropped from 41 mbpd in 2005 to 35 mbpd in 2012.
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Re: An Update On Mexico’s Net Oil Exports

Unread postby ROCKMAN » Sat 13 Jul 2013, 11:11:31

wt - Great analysis as always. The point I was making is that if Mexico were to begin selling all its oil exports to China it wouldn’t change their ELM trajectory. But Mexico's ELM export projector to the US would fall to zero. IOW Mexico ELM would be pertinent to China but have no bearing on Mexico oil exports to the US because there would be none. Given how quickly this could happen (in theory just months) the import decline would negatively affect the US much faster than ELM ever could. The additional upside for Mexico would be Chinese aid to develop their reserves. The Mexican constitution doesn't prevent foreign companies from doing so. What inhibits a US corporation is that it cannot claim reserves in the ground as being owned by the company...they remain the property of Mexico. Thus they can't be used as booked assets by that corporations according to SEC regs. US public companies would have a big problem spending $billions in Mexico without immediately adding assets to their books. The only value would be ultimate cash flow. Given how heavily Wall Street values book value over cash flow this would be a significant disincentive.

That would not be much of a restriction to China. Our SEC regs don't apply to their companies...the Chinese govt regs do. The Chinese could easily invest on some production sharing level as well as a right of first refusal. Politically that wouldn’t be any more unacceptable to the Mexican people IMHO. US corporations may not be operating in Mexico but Mexicans know US consumers are receiving about 25% of their oil production. The Chinese can offer another benny: unlike a US refinery a Chinese refinery isn’t necessarily required to sell a portion of their products back to Mexico at a profit. Just getting access to all of Mexico's oil exports would be reward enough. The primary goal will always be fueling their growing economy and not just letting their national companies post a profit.

Mexican ELM would be of no importance to the US if we’re no longer importing their oil.
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Re: An Update On Mexico’s Net Oil Exports

Unread postby Oily Stuff » Sat 13 Jul 2013, 11:15:36

Very interesting, gentlemen, thank you. The people of Mexico rely heavily on Pemex and much of the countries oil export income is directed back toward basic infrastructure and service needs of Mexico's people. Declining oil production does not bode well for Mexico, to say the least. For the moment the US might be able to dismiss the potential loss of Mexican oil imports, the problem as I see it is more socially entrenched. As the standard of living in Mexico continues to slip, and it is very much continuing to slip, the road to survival leads north. Americans will need not look very far to see, and feel, its first dose of post peak oil reality.
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Re: An Update On Mexico’s Net Oil Exports

Unread postby TheDude » Sat 13 Jul 2013, 12:56:43

Indeed there is only one cross-border pipeline between the US and Mexico, and that is for gas. Compare that with the multitude of lines connecting the US and Canada. This is another instance of Pemex failing to invest.

US refineries are specially tailored to handle Maya crudes - I'd think that would be yet another factor making Mexican imports to China problematic, not to mention the additional transportation costs - and are Mexican tankers even that seaworthy? Are they Panamax? That right there would put the kibosh on such a plan. BP data might show where else Mexican crude goes; EIA says 85% of it heads to the US. They also mention estimates of ca. 20 kb/d lost due to theft!

Crude oil, tourism, and remittances from emigres are 3 very large sources of revenue for Mexico, none of which do so hot in a peak oil era for a declining producer.
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Re: An Update On Mexico’s Net Oil Exports

Unread postby ROCKMAN » Sat 13 Jul 2013, 14:27:11

Dude – A few other factors. Right now under long term supply contracts China is shipping 350k+ bbls/day of Venezuelan heavy back home in THEIR tankers especially built to haul to THEIR two refineries especially built to crack it. If they find the economics acceptable doing that with a lower quality oil I suspect shipping Mayan would be doable. And when they get that Costa Rican refinery up and going they can ship Cantarell production that short distance to it. And then easily ship the products to Mexico to satisfy such as aspect of an oil trade agreement. Remember Mexico has to use about half its oil export revenue to import fuel. China can ship Costa Rican cracked product back to Mexico at cost if that sweetens the deal enough for Mexico. No US refiner could make that trade.

And the Chinese could still ship the oil to Gulf Coast refineries and see every bbl show up in China. What? Called a paper swap and is done all the time. Since China would have the rights to the Mexican oil they could do what they like with it. Like swap it with US refiners in exchange for North Slope crude. Saves shipping costs for both sides of the trade. The NS oil can’t be sold overseas but it can be swapped. We were doing that sort of deal with Japan over two decades ago. The Golden Rule applies as well to oil as it does gold. LOL.

And it doesn’t require N Slope oil. US refiners are importing almost 500k bopd from Russia. Simple paper work for a US refiner to swap the contracts for the Russian oil for Mexican oil contracts. Think how much savings in transport costs that would allow. The Chinese send THEIR Mexican oil to a Texas refinery and the Russians ship the equivalent amount oil from Sakhalin Island on the Siberian coast just a short sail to the new refinery being built by China right at it border with Russia. And don’t miss the subtle fact: the US might still be receiving the same amount of oil doing such swaps but it also means that equivalent amount of oil has been remove from the market place: China has it locked up as long as the swap deals are in place.

Lots and lots of freaking dots to connect out there you’ll never hear about from the US MSM.
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Re: An Update On Mexico’s Net Oil Exports

Unread postby TheDude » Sat 13 Jul 2013, 21:11:40

Geez ROCK, you've got me on the verge of demanding that we build new US refineries. :roll: Maybe they're rallying around that flag on talk radio these days again, wouldn't surprise me.

From what I'm seeing in the news though about all that's going on between Mexico and China is Sinopec bidding on poking holes in Chicontepec. I remember that bit of business with Venezuela being inked though, maybe Hugo liked the idea of pissing off Bush Cheney with such a deal, hmmm? Anyway you cut it, makes sense to deal with your neighbors and their captive market. And Mexico only has a few more years to live as an exporter anyway, unless they get their shit together in a big way.
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Re: An Update On Mexico’s Net Oil Exports

Unread postby pasttense » Sat 13 Jul 2013, 22:55:43

Doesn't Mexico subsidize domestic consumers (lower gas prices...) leading to higher domestic consumption?
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Re: An Update On Mexico’s Net Oil Exports

Unread postby westexas » Sat 13 Jul 2013, 23:31:34

Re: Mexico's petroleum subsidies

I believe that there are some subsidies but their rate of increase in consumption from 2004 to 2012, 0.7%/year, was well below the overall rate of increase in consumption for the (2005) Top 33 net oil exporters from 2004 to 2012, 2.4%/year.

Interestingly enough, Norway's 2004 to 2012 rate of increase in consumption was 2.1%/year, three times what Mexico showed, and of course Norway heavily taxes petroleum consumption.

In any case, the only way to avoid "ELM" effects is to cut consumption at the same rate as the rate of decline in production, or at a faster rate.

Denmark is a case history of a net oil exporter, showing a production decline, that taxes fuel consumption and that has successfully cut their consumption. Denmark’s 2004 to 2012 rate of change numbers (EIA):
(P = Production, C = Consumption, NE = Net Exports.)

P: -8.0%/year

C: -1.9%/year

NE: -18.7%/year

ECI Ratio (P/C): -6.0%/year

Given an ongoing production decline in an oil exporting country, unless they cut their consumption at the same rate as the rate of decline in production, or at a faster rate, the net export decline will exceed the production decline rate, and the net export decline rate will accelerate with time.

In Denmark’s case, their 2004 to 2005 net export decline rate was 4.5%/year, while their 2004 to 2012 net export decline rate accelerated to 18.7%/year.

In simple percentage terms, a 47% decline in production from 2004 to 2012 resulted in a 78% decline in net exports, even as consumption fell by 14%.
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Re: An Update On Mexico’s Net Oil Exports

Unread postby ROCKMAN » Sun 14 Jul 2013, 09:21:00

Dude – Just building new US refineries won’t help us much. The real genius to China’s approach is either doing a JV with an oil exporter and/or building the refineries in other countries like Egypt and Nigeria. Not only do exporters, like the KSA, increase the value of their oil production but they get locally created product instead of importing as they have been doing for decades. A refinery without a GUARENTEED long term oil supply is just a pile of very expensive metal rusting away.

And the Chinese companies, with the support of their govt, can cut such deals which are nearly impossible for US corporations. And China is also pretty good at local PR. It doesn’t get reported much but China does a lot of local infrastructure improvements for the “common man”. Really chump change for China but if it makes the locals happy and thus the politicians are happy. That and few $million in bribes gives China a huge advantage. LOL
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Re: An Update On Mexico’s Net Oil Exports

Unread postby TheDude » Sun 14 Jul 2013, 11:47:44

Yeah, I was being farcical. New US refineries seemed to be the universal panacea 10 years ago. Either that, or hydrogen.
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Re: An Update On Mexico’s Net Oil Exports

Unread postby Subjectivist » Sun 14 Jul 2013, 12:56:09

I seem to recall many of the members here were certain that Mexico would be done as an oil exporter by 2012, but so far they seem to be holding on.

The thing is I am persueded that Mexico is in serious decline so I am not sure why China wants to get tied into deals with them. Is there some prospect for vast reserves of tar sands or tight shale oil in Mexico that I am unaware of?
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Re: An Update On Mexico’s Net Oil Exports

Unread postby ROCKMAN » Sun 14 Jul 2013, 13:21:32

sub - It's still a bit iffy but Mexico has finally started to evaluate their portion of the Deep Water GOM. There are significant fields just across the international line with the US. Mexico may have nothing out there or 10+ billion bbls of oil...who knows? China has the expertise to help. Likewise for many years PEMEX has complained about the govt not leaving enough oil income with them to do a variety of projects to increase production. With their huge cash reserve this is another area where China might be able to help.

And let's not forget that although Mexico's oil production is in decline they still produce about 3.5% (10th largest) of the oil on the planet. Which is about 1/3 as much as the US produces. Not huge but not insignificant either.
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