[joewp]

MEXICO CITY, Feb 20 (Reuters) - Mexican oil production fell 9.2 percent in January to its lowest level since November 1995 as output from the aging Cantarell oil field continued to dwindle, state oil company Pemex said on Friday.

Mexico pumped 2.685 million bpd in January, down from 2.957 million bpd in the same month a year ago, according to government data.

The giant Cantarell oil field lost its position as Mexico's largest single oil producer in January to the nearby Ku Maloob Zaap heavy oil complex, Pemex said.

Cantarell pumped 772,000 bpd in January, down from 811,000 bpd in December and down about 38 percent from a year ago.

Ku Maloob Zaap produced 787,000 bpd in January.

Reuters

[newman1979]

Cantarell production of crude has fallen from a peak of 905 million barrels in 2004 to 430 million barrels in 2008. In January 09, 772,000 barrels a day was produced. If production continues at that rate 280 million barrel will be produced in 2009. However the decline will probably result in fewer barrels as the history of monthly production demonstrates. At 2,670 million barrels a day in January, it is doubtful that Pemex can average 2.7 million a day in 09 and 10. As the domestic demand is around 2 million a day, exports to the US can be expected to decline also. The peak of imports from Mexico was around 1.85 million a day and in 2008, imports were under 1.2 million a day. There are also possibilities that would make imports from Mexico much less in 09 and 10, such as hurricanes and effects of nitrogen injection. The fall in Cantarell production is usually under reported as is the decline in GOM production in general.

[ROCKMAN]

It's really impossible to predict the future decline rate at Cantarell. The nitrogene being injected expands its gas cap and pushes the oil downwards towards the producing wells. But as the base of the N2 cap reaches perforations in a producing well it has to be shutin less you depelete the effort to maintain reservoir pressure. The decline rate will be a function of the structural position of the remaining wells. If most of the remaining perforation are close to the existing N2/oil level the field will decline much faster then the most pessimistic projections. OTOH, if most of these wells are much lower then the N2/oil level the decline rate could drop to a low level for years.

But PEMEX has a very good idea of the future. The reservoir management is rather straight forward. IMO the best hint we can get is watching Mexico's actions and ignore their words.

[cualcrees]

It's really impossible to predict the future decline rate at Cantarell. The nitrogene being injected expands its gas cap and pushes the oil downwards towards the producing wells. But as the base of the N2 cap reaches perforations in a producing well it has to be shutin less you depelete the effort to maintain reservoir pressure. The decline rate will be a function of the structural position of the remaining wells. If most of the remaining perforation are close to the existing N2/oil level the field will decline much faster then the most pessimistic projections. OTOH, if most of these wells are much lower then the N2/oil level the decline rate could drop to a low level for years.

But PEMEX has a very good idea of the future. The reservoir management is rather straight forward. IMO the best hint we can get is watching Mexico's actions and ignore their words.

Hello Rockman!
What would you say are the best and worst case scenarios? I've read somewhere that Mexico will become a net importer before 2012, how does the situation in Cantarell play in to this?

[mos6507]

I don't see how anyone can realistically claim production will bounce back. It's all downhill from here. The regional peak oil story has been a pretty predictable one from looking at the charts. Few oil producers have ever seen a 2nd wind. Russia being the only exception I can think of, due to the fall of the soviet union and the introduction of western oil expertise.

[newman1979]

Rockman[/quote]But PEMEX has a very good idea of the future. The reservoir management is rather straight forward. IMO the best hint we can get is watching Mexico's actions and ignore their words.

[i]

.
If Pemex has a good idea of the future, then why are the projections of the past four years are off by a factor of 2 every year? Why did Pemex let everybody believe 3 yeas ago that production would be 4 million barrels a day by now?
Mexico is said to be freezing gasoline prices going forward. I guess that action is suggesting demand will increase domestically even though production has fallen for four straight years. What then is the prospect for exports based on the facts? If lower prices stimulate demand, exports will fall. If domestic demand does not increase, exports will fall at a smaller rate. If domestic demand falls even with subsidized prices, exports may not fall at all. While not claiming to be a able to see the future, I don't think that predicting the future of Mexican crude oil production and exports is difficult at this time based on the past four year track record.and Mexico's decision to stimulate gasoline demand. Of course i could end up wrong, but the prediction could still be correct at the time it was made.and it is certainly better than Pemex's predictions of the last four years.

[ROCKMAN]

Newman/cualcrees -- As far as what PEMEX claims this will sound a tad nasty but there’s a big difference between knowing the truth and telling the truth. If one had access to the field maps and the detailed production history of the wells it would take one reservoir engineer 2 weeks to come up with a pretty accurate future decline rate. As I’ve mentioned elsewhere predicting future declines and ultimate recoveries can be very difficult depending on the reservoir drive mechanism and limited production histories. But Cantarell sits at the other end of the spectrum. This is a simplification but it’s valid: stick you hand in a swimming pool and guess how much water you get out of it vs. put a pressure gauge on a cylinder of known volume and guess how much air you can get out of it. One is pretty easy and the other not so much.

Net exporter? In addition to field depletion it depends on how badly their economy goes down and internal consumption decreases IMO. Just a WAG but it’s hard too imagine them exporting much more then 5 years down the road. They may eventually develop Deep Water oil fields but that’s decades and 10’s of billions of $’s away. They may just be the worst case scenario some describe: resources available but no capital to develop them and a population heavily dependent upon gov’t support just o feed themselves let alone expand business. We don’t see much press about it but industries are shutting down very quickly in Mexico. Now you can add the loss of that revenue to the loss of oil revenue to a society which cannot sustain itself without both and I’m afraid it could really turn into that Mad Max world some describe.

[newman1979]

Mexico's Oil Challenge Rises with New Output Drop
by Robert Campbell (Reuters) AFX News Limited Friday, February 27, 2009

Doubts are growing that Mexico can halt a four-year decline in crude oil production after its January oil output slumped to a more than 13-year low, due to bureaucratic delays and technical challenges.

Crude output in Mexico, a top U.S. supplier, dropped 9.2 percent year-on-year in January to 2.685 million barrels per day, its lowest level since November 1995 and just below state oil company Pemex's 2009 target of 2.7 to 2.8 million bpd.


Related Pictures

Chicontepec and Cantarell
(Click to Enlarge)


Pemex's assurances it can halt the slide -- the result of a failure to prepare for the decline of the huge Cantarell oil field -- and waning volumes risk hurting government coffers just as the economic downturn bites.

Crude oil revenues, which fund a third of the federal budget, have been shielded by hedges from plunging global oil prices this year and further helped by the slide in the peso against the dollar. But the hedge expires at the end of the year and analysts see production volumes slipping lower.

Cantarell was Mexico's crown jewel for years, pumping more than 60 percent of the country's oil, but output has slumped by nearly two thirds since a 2004 peak of just over 2 million bpd. New projects aimed at making up the gap are moving slowly.

"It's unrealistic to think they can somehow ramp up production enough to cover losses at Cantarell this year. There's not enough coming on line," said Eurasia Group analyst Allyson Benton.

Pemex executives estimate Cantarell will end 2009 producing 700,000 bpd, implying yields will fall 14 percent from 2008.

However Cantarell's decline has accelerated steadily in the past few years and exceeded 36 percent in 2008.

This trend appeared intact in January as output from the the Cantarell complex, encompassing the main offshore field and several smaller ones nearby, fell by 34 percent year-on-year, knocking the field off its pedestal as Mexico's top producer.

Pemex's inability to slow Cantarell's remorseless decline has led many analysts, including the International Energy Agency, to forecast that Mexico's total oil output could drop to 2.5 million bpd by the end of 2009.

Mexican officials downplay the January data and say Pemex's big capital spending plans will turn things around.

"Production will begin relatively lower but will improve towards the second half of the year," Pemex Chief Executive Jesus Reyes Heroles told Reuters this week.

Pemex expects output gains in the second half of the year from major projects like its onshore Chicontepec development to offset the fall in production anticipated for the first part of the year, Reyes Heroles explained.

[copious.abundance]

At least they're discovering something there.

>>> Oil & Gas Journal <<<

Pemex makes oil, gas finds in Gulf of Mexico
Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Mar. 3 -- Mexico's state-owned Petroleos Mexicanos, which has budgeted more than $12.2 billion for oil and gas exploration in 2009-12, has discovered "significant" amounts of natural gas and condensate with its Tsimin-1 wildcat well drilled in the Gulf of Mexico.

The Tsimin-1 well had initial production of 4,400 boe/d, Pemex said.

Meanwhile, the state firm also announced the onset of gas production of the Cali-1 well in its Burgos project, with production starting at 9.1 MMcfd of gas.

Pemex, which drilled the discovery well in August 2008 on Mision block in Burgos, said the development of the field will provide an additional 90-110 MMcfd of gas.

Pemex also listed four light oil discoveries in its fourth-quarter 2008 financial results, with the Xanab-DL1 offshore well being the most productive at 9,200 b/d of oil.

The discoveries coincide with a statement by Pemex Chief Executive Officer Jesus Reyes Heroles stating that the firm likely discovered 30-35% more oil and gas in 2008 than in 2007.

[...]

[TheDude]

RIGZONE - Pemex Trims Estimate for Cantarell's 2009 Oil Output

by Nancy Agin Rigzone Tuesday, March 03, 2009


According to a report by Reuters, Pemex has lowered its production estimate for its aging Cantarell oil field, which is set to produce an average of 700,000 barrels per day (bpd) of crude in 2009. The average output rate is down from the previously announced estimate of 756,000 bpd presented by Pemex to Mexico's Congress in January.

Additionally, Reuters noted that Pemex has also trimmed its forecast for Cantarell's long-term output, which the company sees averaging 400,000 bpd between 2009 and 2017. Pemex originally estimated in its January presentation that output at Cantarell would reach 423,000 bpd.

[copious.abundance]

According to this, this is a 4.9 billion barrel field in shallow water, and according to this it was discovered in 2002. Too bad I wasn't doing a Catalog of Oil Discoveries then.

>>> Bloomberg <<<

Pemex Pumped 18% More Oil From Ku-Maloob-Zaap Field
By Andres R. Martinez

March 19 (Bloomberg) -- Petroleos Mexicanos, the state- owned oil company, said production at its offshore Ku-Maloob- Zaap field rose 18 percent in February, as the field surpassed Cantarell for the second time as Mexico’s most productive deposit.

February output was 801,600 barrels a day, up from 677,100 barrels a year earlier, Pemex, as the Mexico City-based company is known, said today in a statement on its Web site. Full production figures for February will be released tomorrow.

Pemex said last month it may invest $8.3 billion through 2012 at Ku-Maloob-Zaap to offset a faster-than-expected decline in output at Cantarell, which was the world’s third-largest field upon its discovery in the 1970s.

[...]

I admit I am somewhat impressed if they're cranking out 800K bpd from a heavy oil field.

[copious.abundance]

According to this, this is a 4.9 billion barrel field in shallow water, [...]

A bit more info - now that I've read this part I think I *have* heard of this one before. It's actually 3 fields (or maybe 3 different vertical zones?) which are close-together and are being developed as a single project.

A feature of the KMZ fields is that the oils have different viscosities. Ku has an API of 22°, while the Maloob and Zaap fields have an API of 12°. The Yuum K'ak' Naab therefore has a segregated storage facilities with one tank able to store one million barrels of blended crude similar in chemistry to Cantarell's 21°API, known as Maya blend.

Also, Cantarell is just medium-grade oil. Didn't know that.

[SteinarN]

New monthly report for February is out.

Total production was 3.027 mmdpd, down 0.023 mmbpd from January.

[Maddog78]

Pemex is spending that money and they are going to halt the declining output.
Good to see somebody spending money on E&P in this downturn.

http://www.rigzone.com/news/article.asp?a_id=74717

State-owned Petroleos Mexicanos has awarded bids totaling some $5.39 billion thus far in 2009, the company said in a statement.

The most recent contract, worth close to $687 million, is for drilling and completing 500 oil wells in the complex, onshore Chicontepec Field, which covers a 3,800-square-kilometer (1,470-square-mile) area in the east-central Mexican states of Puebla, Veracruz and Hidalgo.

Pemex is hopeful that output at Chicontepec can eventually total between 600,000 and 700,000 barrels per day by 2017, but technically challenging horizontal drilling techniques must be employed at thousands of wells to get at the oil, which is found in small pockets in densely populated rural areas.

Chicontepec is believed to hold roughly 17.7 billion barrels of crude, or 39 percent of the country's total petroleum reserves.

[newman1979]

newman1979 on April 5, 2009 - 3:03pm
Chicontepec a(CB) and Ku-Maloob-Zaap (KMZ) are Mexico's great hope to replace Cantarell as its main oil producing fields now and in the future. Let's take a look at the facts. Cantarell peaked in 2005 at 2.1m/b/d. It is declining at an alarming rate of 38% (Feb 08 to Feb 09). Cantarell production was 772,000 b/d in Feb 09. KMZ is an adjacent area in the Gulf of Campeche. It has increased production 138,000 b/d to near 800,000 b/d in Feb. 09. Both fields are nitrogen injected. In Cantarell this injection has led to the dramatic decline we are now witnessing. As the KMZ field is much smaller, it is expected to peak soon and I will speculate that, based on the results in Cantarell, it too will fall precipitously after its peak of around 800,000 b/d. Pemex spends additional billions to get oil from these fields every year.
Unfortunately,KMZ's oil is not able to replace the quality of Cantarell's lost oil production. Most of KMZ's production is heavier than Cantarell's already heavy oil. Jude Clemente in Pipeline and Gas Journal Aug 08 states "Pemex documents have shown that oil quality... at KMZ is falling, as water and salt seep into the reservoirs. These quality issues make optimistic projections of future oil production at KMZ highly questionable."
CB has never produced much oil to date, but Pemex has announced a plan to invest $37 billion to develop the 20,000 wells over 20 years to reach 1m/b/d production. But the region's geology has led George Baker publisher of Mexico Energy Intelligence to conclude the prospects for the area is suspect. Baker argues the potential of the CB is " a highly speculative investment given the adverse geological parameters of the field, the rapid annual decline rate of 50% and the low rate of initial production, typically below 150 b/d". Also the area covers 2400 square miles, heavy infrastructure expense, low recovery rates of 10%, a lot of heavy oil, and expense in general, has lead Colin Campbell in his 2005 book "The Coming Oil Crisis" to claim that Mexico systematically exaggerates the recoverable oil in CB.
A cynic might conclude that the CB story is a kin of "gold salting" to support the myth of future oil production in Mexico, Pemex's bonds, Mexico's future or some combination of all three, but who is a cynic?

[copious.abundance]

>>> Reuters <<<

Mexico finding, expanding deep Gulf oil, gas -exec
Wed May 6, 2009 10:36am EDT

HOUSTON, May 6 (Reuters) - Mexico is having success finding oil and gas in the deep Gulf of Mexico and is ramping up rapidly to expand production, a Pemex executive said Wednesday.

Drilling activity will increase from two wells currently to as many as 10 wells in 2011, and five rigs will be working in deep Mexican waters of the Gulf by 2012, Pemex PEMX.UL exploration and production director Carlos Morales Gil told an Offshore Technology Conference breakfast meeting.

The Tamil-1 heavy oil and Lakach natural gas discoveries can be commercially developed, although Tamha-1 was not successful, and Pemex is optimistic about exploring the Mexican side of the U.S. Perdido prospect, Morales said.

[Niagara]

However Cantarell's decline has accelerated steadily in the past few years and exceeded 36 percent in 2008.

Holy crap. Applying the rule of 72, that means production is dropping in half every 2 years.

At that rate, in 8 years it will yield 1/16th of 2008 production.

But you won't hear this mentioned on CNBC. All you'll hear is cheering and talk of "green shoots".

[AirlinePilot]

The key issue with Cantarell is when it ceases to be a contributor to Mexico's oil exports. That time may be coming sooner than many folks like to think. I also believe tht this is ne of the contributors to the crude price climb recently.

[Armageddon]

The key issue with Cantarell is when it ceases to be a contributor to Mexico's oil exports. That time may be coming sooner than many folks like to think. I also believe tht this is ne of the contributors to the crude price climb recently.

I am like the doomer side of you AP. Too bad you are so blinded by the 911 official story bs.