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Page added on April 4, 2017

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Peak Oil? For Mexico, Yes — April 3, 3017

Production

Three comments regarding the linked article sent to me by a reader (thank you, very much):

  • my understanding is that reserves are related to the price of oil; one wonders whether that is true with regard to this article;
  • this is not a new story; a quick google search reveals that this has been an under-reported story for quite some time
  • the “9 years” is an interesting time frame; “9 years” is also the time frame in which Saudi’s cash reserves could be depleted if the price of oil doesn’t trend significantly higher, significantly sooner than later

So, here are the data points from SRSroccoReport:

  • Mexico’s existing oil reserves are dwindling so quickly that the country could “go dry” within nine years without new discoveries
  • Mexico’s reserves fell almost 11% in 2016
  • once the world’s largest crude oil producer, Mexico’s proven reserves have declined every year since 2013
  • the cause: record-low drilling activity for the past 3 years
  • crude production has declined every year since 2004
  • production will fall below 2 million bopd this year, the lowest levels since 1980

Two immediate problems for Mexico (similar to Saudi Arabia but for different reasons): a) less oil being produced on a daily basis; b) price of oil is low, could go lower.

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Deep Water to Challenge Shale

Link here at Oilprice.com.

Shell is boasting future profitability at $15 a barrel from its Mars platform in the Gulf of Mexico. The company is adopting drilling techniques from smaller, independent energy firms, which have left the Gulf after finding themselves unable to withstand the investment pressure, and is also transforming its corporate structure, which has already borne fruit.

The Million Dollar Way (The Bakken Oil Blog)



12 Comments on "Peak Oil? For Mexico, Yes — April 3, 3017"

  1. Midnight Oil on Tue, 4th Apr 2017 8:12 am 

    Oh Boy, Time to reannex TEXAS, right Rockman.
    Maybe add in southern California and a bit of Arizona to boot….the Rio Grande …well you get the picture.
    Viva a LA Mexico!

  2. rockman on Tue, 4th Apr 2017 8:58 am 

    Article bounces around a bit. First, “my understanding is that reserves are related to the price of oil”. Not in the case of Mexico and most other countries. Since they are not governed by rules of the SEC as US pubcos are they aren’t required to adjust their reserve numbers as oil prices vary. In fact, most of those stats don’t require an independent third party audit to confirm those reserve estimates.

    Second, they completely miss THE most important stat about Mexican production: last year Mexico became a net IMPORTER of fossil fuels. In fact Mexico has been a significant importer of refinery products: for many years much of the oil shipped to Texas was cracked and returned to Mexico.

    As far as “Shell is boasting future profitability at $15 a barrel from its Mars platform in the Gulf of Mexico.” – as typical in this case they aren’t clear if they are referring to the cost to produce existing wells or the price needed to justify drilling new wells. But it’s probably not the cost of production operations: the field has been producing 60k bopd. A $15/bbl lease operating expense would result in a monthly LOE of $27 MILLION PER MONTH. Trust me: Shell is not spending even 10% of that amount to operate the field. There were plans to increase production to 100k bopd in the near future. Assuming that would be done solely by drilling: at $15/bbl and an extra 40k bopd -that would add a gross revenue of about $170 million per year. Have to make some assumptions: drilling investments that recover 100% in 2 years generate a very acceptable ROR. So new drilling paying out in 2 years years would represent about $350 million in income at $15/bbl. Given the production infrastructure is already in place $350 million would allow a fair number of new wells.

    Folks grossly underestimate the profitability of Deep Water development because they are overly impressed by those big development costs into the $billions. But the estimate of NET URR is 800+ million bbls of oil equivalent. So if that $15/bbl represents the development cost: $12+ BILLION. Not likely Shell spent anything close to that to develop the field. But the way the oil patch time discounts the profitability of production the Net Present Value is less the $12 billion.

    But bottom line: Deep Water oil production is much more profitable then most of the public understands. Which explains why companies are willing to risk $200 million drilling just one exploration well. Like the last DW Brazil well the Rockman worked on for Devon: the company paid $50 MILLION to just move the drill rig from Africa to S America: that much spent even before the began drilling…plus what it cost to lease the block and pay for the seismic and overhead. And yes: it was a dry hole.

  3. rockman on Tue, 4th Apr 2017 9:06 am 

    “Time to reannex TEXAS, right Rockman.” Actually before that would happen Texas and northern Mexico would succeed and form a new country. Between our energy and their cheap labor we could grind US industry to dust. Would be easy: we already speak the same language. LOL.

  4. AFDF on Tue, 4th Apr 2017 9:07 am 

    @davy I don’t like making you uncomfortable thinking I’m stalking you or anything. I also like only a couple of your comments. I’m not interested in the rest or just don’t have particular interest in the sub-subject relating to PO.

    @Michael Lynch I understand the concept of never ending argument and there’re tangible benefits to having opposing opinions. I want to be fair and so I no longer label you as a troll. It’s harder to argue from your point of view so I apologize for piling on the following: I notice that fresh surface and ground water is under a lot of pressure from over use. This is something easily seen and it’s abundant but still get depleted. I don’t have all the numbers to put this into perspective. I just want to provide a parallel scenario to depletion of oil. I think your arguments can go on for a while longer since oil is something mostly hidden from sight.

  5. Davy on Tue, 4th Apr 2017 9:32 am 

    AFDF, I appreciate you honesty. Did you post this comment to the wrong feed or are you just being expansive? I made no comment here. I might add who are you so I can determine if you matter to me.

  6. AFDF on Tue, 4th Apr 2017 10:13 am 

    @davy A-F-D-F is artist yo.

  7. Midnight Oil on Tue, 4th Apr 2017 10:18 am 

    Sure it is Rockman…BP Deepwater Horizon proved it! Very profitable… The only aspect that the Rock can see.

  8. Davy on Tue, 4th Apr 2017 10:19 am 

    Cool, I am a fan of you bro

  9. rockman on Tue, 4th Apr 2017 10:55 am 

    MO – “Sure it is Rockman…BP Deepwater Horizon proved it! Very profitable…”. You should look at maps more closely: the Macondo discovery (you do realize the oil reservoir that blew out is being developed, right?) is beneficial for the federal govt and the American consumers. At the same time it will put more oil into the market place which only hurts the Texas oil patch.

    Nothing wrong with snide comments…the Rockman actually enjoys them. But not understanding the details of the dynamic hurts one’s credibility.

  10. rockman on Tue, 4th Apr 2017 11:15 am 

    Back to the subject matter. Now that the laws have changed there might be some good news over the horizon for Mexico. For decades PEMEX has planned the govt for taking too much of its revenue and not leaving enough to finance adequate exploration drilling and refinery expansion. There could be significant and relative economic oil reserves even at current prices to develop with the new expat monies coming into play.

  11. a on Tue, 4th Apr 2017 11:19 am 

    If they have until 3017 then who cares? 😛

  12. Midnight Oil on Tue, 4th Apr 2017 2:50 pm 

    Rockman, claims “It’s all Good!” is “beneficial” to the Feds and “consumers”!!!!
    Rockman, do you know the meaning of ” consume”?
    Look it up, nah, let me tell you in a snide manner, “to destroy”
    Maybe, you can Google the TRUE Cost of the Deepwater Horizon yourself, that may provide an awakening in a direct manner.

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