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Page added on March 30, 2019

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NEXT OIL DOMINO TO FALL? Mexico Becomes A Net Oil Importer

Production

While Mexico suffered the bloodiest year of violent deaths in 2018, even bigger trouble may be ahead for the embattled country.  For the first time in more than 50 years, Mexico has become a net importer of oil.  This is undoubtedly bad news for the Mexican Government as it has relied upon its oil revenues to fund a large percentage of its public spending.

And, the majority of these revenues came from just one prolific oil field.  After the discovery of the huge Cantarell Oil Field in the Gulf of Mexico in 1976, Mexico’s oil production surged from 894,000 barrels per day to a peak of 3.8 million barrels per day (mbd) in 2004.  That year, Mexico’s net oil exports exceeded 1.8 mbd.

Unfortunately, the downturn of Mexico’s oil production was also due to the peak and decline of the Cantarell Oil Field, which topped out at 2.1 mbd in 2004 and is now below 135,000 barrels per day:

With the rapid decline in Cantarell’s oil production, Mexico’s net oil exports also plummeted from 1.8 mbd in 2004 to only 314,000 barrels per day in 2017.  However, the situation for Mexico’s net oil exports continued to deteriorate in 2018 as its domestic oil supply fell to a new low at the end of the year.

According to several sources, the BP 2018 Statistical Review, IEA’s OMR Reports, and the EIA’s data on World Oil Production, Mexico became a net oil importer in November 2018:

I find it strange that this has not yet been mentioned in the news as it is a very critical factor for the future of Mexico.  Now, I would like to qualify that the data I am using is accurate.  I found Mexico’s total petroleum production and consumption data from the EIA, the U.S. Energy Information Agency’s World Oil Production Browser, the IEA’s, the International Energy Agency OMR Reports, and BP’s 2018  Statistical Review.

In just a little more than a year, Mexico’s net oil exports fell from 314,000 barrels per day to net imports of 90,000 barrels per day in December 2018.  This next chart shows Mexico’s total oil supply versus consumption for each month in 2018:

Of course, we don’t know if Mexico will be able to increase production, but if we consider the disaster that is taking place at PEMEX, the country’s national oil company, I highly doubt domestic oil production will recover.  Why?  Well, let’s just say, PEMEX is on the verge of bankruptcy as the company published two troubling signs in its Q4 2018 Financial Report:

  1. Falling Oil Production
  2. Rising Long-Term Debt

According to PEMEX’s Q4 2018  Report, oil production fell from 1.90 mbd Q4 2017 to 1.76 mbd in Q4 2018. These figures are for oil production only and do not include NGPL (natural gas plant liquids) and refining gains.  Which is why it doesn’t add up to the 1.94 mbd for December 2018 shown in the chart above.

Regardless, oil production continues to decline at PEMEX while it’s long-term debt reached a new record high of $96 billion last year:

So, even with all the additional capital expenditures, (shown by the massive increase in long-term debt), PEMEX was not able to prevent the inevitable decline of its domestic oil production.  What happens to PEMEX when oil production really starts to decline?

Sadly, as domestic oil supply continues to decline, the Mexican Government will have lower oil revenues to support its public spending.  I believe Mexico is likely one of the next OIL DOMINOS to fall… and it won’t be pretty.

I will be doing a more detailed update on PEMEX’s financial information when they release their next quarterly report.

SRSrocco Report



24 Comments on "NEXT OIL DOMINO TO FALL? Mexico Becomes A Net Oil Importer"

  1. Robert Inget on Sat, 30th Mar 2019 3:48 pm 

    This fact has escaped notice since most of Mexico’s exported crude is returned as gasoline and diesel.
    There’s an excellent chance one more GOM elephant field will rear it’s ugly head putting Mexico back in business, for a few years. So far,
    like the entire world, replacement crude ain’t
    making up for depletion, or course, demand.

    If Trump closes the border in some peak of madness, Mexico may cut crude shipments.
    As it stands the US has more to lose than Mexico
    in trade.

    Exxon is making huge discoveries in Pakistan and
    Guyana. Besides not becoming available to market for years it’ll NEVER making up for missing Venezuelan, Iranian, Mexican oil, ALREADY effecting deliveries.

    Next step, drain the SPR. Then what?

  2. shortonoil on Sat, 30th Mar 2019 4:50 pm 

    Trump said that the wall was a national emergency. He wasn’t kidding!

  3. Roger on Sat, 30th Mar 2019 6:41 pm 

    Mexico has a lot of potential to increase production…unfortunately it won’t be realized anytime soon.

    https://www.reuters.com/article/us-mexico-oil-election/mexico-leftist-says-he-would-try-to-halt-energy-auctions-if-president-elect-idUSKBN1GU0W5

  4. Ken Martin on Sat, 30th Mar 2019 7:06 pm 

    Ku-Maloob-Zapp is a play similar to Cantarell. It will probably go down in the same spectacular fashion as Cantarell. And I could happen anytime. I think KMZ currently make about half of Mexicos oil production. There is a lot more downside to world oil production than people realize. And the world has not been re-investing for badly needed new supplies for 4 or 5 years.

  5. Duncan Idaho on Sat, 30th Mar 2019 7:17 pm 

    As a recent resident of Mexico, things are a bit more complicated—–

  6. Pete Bauer on Sat, 30th Mar 2019 10:26 pm 

    Surprising that the fall will be this fast. So an oil exporter turns importer.

    The other major oilfield KMZ produces heavy oil which needs to be blended with NGL to produce motor fuels. Its time Mexico replaces all oil fired power plants with Natgas.

    Also time to increase the price of gasoline/diesel and get into electric vehicles.

    Wake up Mexico.
    Many countries oil production is declining, but the daily news is about the increase in shale production.

  7. Davy on Sun, 31st Mar 2019 3:14 am 

    It is not like Mexico is completely without oil. There is still a lot of production and potential for more. The economy has industrialized with NAFTA and there is a strong agricultural sector. Mexico is maturing and being a petro state is a thing of the past. Mexico has huge solar potential and should move in that direction along with reducing fossil fuel subsidies. What Mexico needs to get a handle on is its organized crime. This is the real danger for Mexico.

  8. Theedrich on Sun, 31st Mar 2019 4:18 am 

    The Mexican oil crisis is due in part to crime.  The culture of lawlessness in the country has always been an integral part of its society.  The cartels suck off enormous amounts of petroleum in various ways, not least by bribing business and government officials.  Many of the criminals are ex-military, so they know how to use guns — “plomo o plata” (lead or silver), as they say, i.e., death or acceptance of bribes.

    The Mexican masses are even more stupid than Americans.  They are convinced by their Leftist politicians that all of their problems are due to the Gringo to the north.  Nineteenth-century Mexican dictator-president Porfirio Díaz put it succinctly:  “Poor Mexico, so far from God, so close to the United States.”  It’s the perfect excuse for the incipient disaster now playing itself out in Mexico, and one of the reasons for the failure to stop the “caravans” from Central America.  We are seeing only the beginning of the collapse of the Mexican state.  The Democrats will love it, with so many new Spic-speaking voters they can count on.

  9. Sissyfuss on Sun, 31st Mar 2019 8:33 am 

    Mexico will be facing a Venezuelan future if they can’t ramp up production and soon. Peak oil and overshoot are a lethal combination that can’t be avoided except within the corporate media. We will need more than a wall to keep out the starving millions that will be headed our way.

  10. Robert Inget on Sun, 31st Mar 2019 11:40 am 

    Mr Trump ordered the suspension of aid payments to El Salvador, Guatemala and Honduras to push their governments to stop migration into the US.

    Critics say the decision will hurt programmes that already aim to persuade people to stay at home.

    Congress may seek to stop the aid being redirected elsewhere.

    ‘Sometimes I pray to my dead daughter’
    ‘I left without telling my mum’
    How Hispanics are affected by wall debate
    US officials say the immigration system at the border with Mexico is already at breaking point yet the administration wants to increase the number of asylum seekers sent back over the border fivefold – from 60 a day to 300.

    There has been a huge increase in asylum seekers fleeing violence in El Salvador, Honduras and Guatemala. The three nations are where most of the migrants on the US southern border come from.

    President Trump has also said he is likely to close the border if Mexico does not do more to stop migrants crossing.

    BBC

  11. Robert Inget on Sun, 31st Mar 2019 11:46 am 

    Mexico doubles Natural Gas imports.

    https://oilprice.com/Latest-Energy-News/World-News/US-Gas-Pipeline-Export-Capacity-To-Mexico-To-Nearly-Double-By-2018.html

  12. Robert Inget on Sun, 31st Mar 2019 12:16 pm 

    Donald Trump’s reversal of an Obama-era environmental protection was “unlawful”, a judge has ruled.

    During his presidency, Barack Obama brought in a ban on offshore drilling in parts of the Arctic and Atlantic.

    Mr Trump attempted to overturn this with an executive order in 2017, promising to allow oil and gas companies back into protected regions.

    District Court Judge Sharon Gleason has now ruled that the president violated a federal environmental law.

    https://www.bbc.com/news/world-us-canada-47762089

  13. Outcast_Searcher on Sun, 31st Mar 2019 12:18 pm 

    Meanwhile, globally, more tight oil can be recovered due to improving technology and efficiency re oil shale extraction. The IEA predicts growing global oil production through 2040 or 2050. And meanwhile, in coming decades transport will shift strongly toward being electric. Meaning FAR less need to burn oil, at least for transport.

    Let’s not pretend this “next domino” is a global problem, despite the clear insinuation by the title.

  14. Robert Inget on Sun, 31st Mar 2019 1:53 pm 

    THE OIL INDUSTRY PRODUCES MORE GAS THAN IT CAN HANDLE

    Natural gas prices in North America have tanked. As an unavoidable by-product of the oil drilling industry, producers have more than they know what to do with.

    CONVERTING GAS TO ELECTRICITY FOR POWERING MINING RIGS
    A better solution would be to find a productive way to use natural gas at the source. Which is why a shipping container full of mining rigs is sitting in a remote Canadian oil field. The project is the brainchild of oilman and bitcoin entrepreneur, Stephen Barbour.

    The container has a generator attached to convert natural gas into electricity to power the rigs. The unit uses about 400 cubic meters per day, which allows the wells to operate 24/7. A production foreman for the oil company, Black Pearl Resources, explains:

    It was the best option for us. We’re using it to bring ourselves below the government-regulated amount that we can vent on location and keep producing oil.

    And Mr. Barbour is more than happy to be building himself a healthy stash of bitcoin. Moreover, he explains that Bitcoin is a liberating technology for humanity. It transforms energy that would otherwise be wasted “runs computers” to calculate small numbers providing “financial freedom for people all over the world.”

    Whilst solutions of this kind are spreading, they are not suitable for all situations.

    Locally, pretty much nobody knows what bitcoin is.

    Earlier this month, Bitcoinist reported that, in fact, alternative sources of energy such as solar can even provide even more competitive advantage for miners depending on their location, cutting operating costs by as much as 75 percent.

    Meanwhile, a November 2018 report found that bitcoin miners often prefer cheaper alternatives to oil and gas, with as much as 80 percent running on renewables.

    Is Bitcoin a useful technology for utilizing energy that would otherwise go to waste?

  15. Robert Inget on Sun, 31st Mar 2019 2:33 pm 

    I posted the short article above out of personal motive.

    I want to build five acre PV farm that would generate on a good day at least one MEG, (maybe two) if I buy the latest stuff.

    So far, my utility shows zero interest in buying that power. In fact, they don’t return calls.
    This outfit (Pacific Power) is constantly covering itself with green paint. Typical.

    My acres located on a state highway seven miles from a bedroom community of 20,000.
    The nearest interstate (I/5) exit is fewer than
    five miles distant. Three fiber optic cables forming the internet backbone for the American West Coast are buried next to my property. Alas I would need to pay $600 a month to access one of those networks.

    Here’s my request:

    I need a customer for a MEG (or two) of surplus power. Any ideas?

    (My plan is to have sheep or goats graze under around solar structures)

    The only inconspicuous plan I’ve come up with would be Bitcoin mining, which requires cheap power, a fiber connect, to make a profit.

    EV power:

    I believe EV batteries will soon permit 400 to 500 mile ranges. Besides, zoning won’t permit a refueling outlet. Only (local) residents use the state highway in any case, I/5 replaced ‘my’ road
    to/from California in the 1950’s.

    I would welcome conversation on the subject.

  16. Davy on Sun, 31st Mar 2019 3:19 pm 

    Bob, build a few ecco off grid homes with insulated barns and allow these people to farm and do artisan crafts. They would buy power off you and you would have a captive customer. You could also invest in EV’s cars and tractors for them to use again they would be captive consumer. The other option would be to put that power into a greenhouse operation. I would figure out what you want to do then install the panels to fit that need. Have a vertical business model building on a green idea powered by renewables.

  17. Robert Inget on Sun, 31st Mar 2019 4:07 pm 

    Good ideas Davy.
    While ‘tiny’ houses are being promoted in the nearby town, I’m ‘zoned’ single family out-of-town.

    As for the greenhouses, the only ‘crop’ worth growing here is weed. Everyone, I mean everyone
    in this neighborhood got the ‘gardening’ bug in 2017 when our state went legal. Now the market is
    flooded, prices lower etc.

    In the old days INDOOR weed growers all put up solar so as not to draw attention to use spikes
    around all those ‘grow-lights’. They could afford the high electric bill but not the lawyers.

    I’m too old (84) to do much AG labor any longer.
    I’ll bet you understand.

    One offshoot would be to house animals UNDER
    the solar structures. Sheep and (meat) goats would seek warmth and shade in any case.

    Thanks, Bob

  18. Robert Inget on Mon, 1st Apr 2019 8:12 am 

    Whipple’s Quote Of The Week…
    “Quote of the Week

    “In just a little more than a year, Mexico’s net oil exports fell from 314,000 barrels per day to net imports of 90,000 barrels per day in December 2018…I find it strange that this has not yet been mentioned in the news as it is a very critical factor for the future of Mexico.”

    Steve St. Angelo, oil industry commentator”

  19. Davy on Mon, 1st Apr 2019 8:45 am 

    Bob, Nafta saved Mexico. They will do well enough. It is likely good they are no longer a petro state. If they could be less of a Mafia state is the question not oil.

  20. Robert Inget on Mon, 1st Apr 2019 9:16 am 

    Still Davy, down 6% is serious.

    Mexico exports

    Mexico Exports. Mexico has an export oriented economy. Mexico’s main exports are manufactured products (89 percent of total shipments) and oil and oil products (6 percent). Among manufactured products, metallic, machinery and equipment is the major category (69 percent) and automobiles account for around 31 percent of total sales.

    Mexico Exports | 2019 | Data | Chart | Calendar | Forecast …
    tradingeconomics.com/mexico/exports

    Closing this border will cause economic chaos.

    Since Trump doesn’t know how to use a computer
    someone should turn him on to ‘asking Seri’
    (about Mexico/US trade)

    My seven year old GS never bothers with Google or Bing, he simply voices his questions.
    I’ll bet Trump could manage that.

  21. Duncan Idaho on Mon, 1st Apr 2019 9:22 am 

    I’ll bet Trump could manage that.
    I wouldn’t put that much trust in the Fat Boy.
    He has lied 9000+ times, and a computer has so far been very confusing for him.
    Better at a hustle in Yonkers.

  22. Duncan Idaho on Mon, 1st Apr 2019 9:55 am 

    Well, 9451 as of yesterday:

    https://www.sfgate.com/news/article/President-Trump-has-made-9-451-false-or-13731417.php

    Might be a positive among our conservative friends– reality is a liberal plot.

  23. Chrome Mags on Mon, 1st Apr 2019 11:25 am 

    An elephant bites the dust.

  24. Mark Ziegler on Mon, 1st Apr 2019 1:48 pm 

    The idea is to help their economy not to inflict damage upon it.
    https://www.youtube.com/watch?v=4w5tQY5yN70&fbclid=IwAR2RfKbemnOijPRbILFbd1vvULORoO2m-QUzhHMq6A-RF0ZoFxOwLuh5j9k

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