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Oil declines hurting Mexico

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Mexico’s fiscal health is in jeopardy because of a declining rate of oil production, an analysis from the U.S. Energy Information Administration said.

EIA updated its country profile for Mexico, noting the oil sector accounted for 13 percent of the country’s export earnings last year.

Mexico is one of the top 10 oil-producing countries in the world, with an estimated 10 billion barrels of proven reserves as of 2013.

EIA said Mexico produced an average 2.5 million barrels of crude oil per day, a level that’s more than 20 percent less than its peak from 2004-09.

“Notably, crude oil production in 2013 was at its lowest since 1995 and continues to decline thus far in 2014,” it said in its Thursday report.

EIA said the decline in oil production was having a direct impact on the health of Mexico’s economy, a situation exacerbated by a declining export market.

EIA said that, despite Mexico’s status as a crude oil exporter, its economy is still heavily dependent on imported petroleum products. Last year, the country was a net importer of petroleum products and relied on the United States for 44 percent of its motor gasoline.


8 Comments on "Oil declines hurting Mexico"

  1. rockman on Fri, 25th Apr 2014 2:53 pm 

    Worse then the oil export numbers would indicate: México spends about 25% of it’s oil export revenue buying back refined products from US refineries. In effect it’s a hidden ELM volume that doesn’t show up in the export bbl Talley.

  2. Kenz300 on Fri, 25th Apr 2014 6:22 pm 

    The easy to get oil is going fast…….

    The rest is harder to get and more expensive.

    It is time to transform Mexico’s oil industry into a diversified “energy” industry. Wind and solar do not have high depletion rates.

  3. westexas on Fri, 25th Apr 2014 10:17 pm 

    Of course the net export numbers look a lot worse than the gross export numbers

    (Production = total petroleum liquids + other liquids, and consumption = total liquids, EIA).
    ECI Ratio = Ratio of production to consumption.

    Key metrics for Mexico, 2004 & 2012:


    Production: 3.83 mbpd
    Consumption: 2.07 mbpd
    Net Exports: 1.76 mbpd
    ECI Ratio: 1.85


    Production: 2.91 mbpd
    Consumption: 2.19 mbpd
    Net Exports: 0.72 mbpd
    ECI Ratio: 1.33

    At the 2004 to 2012 rate of decline in their ECI Ratio, I estimate that Mexico will approach zero net exports around the year 2019. Based on the 2004 to 2012 rate of decline in their ECI ratio, I estimate that post-2004 Cumulative Net Exports (CNE) are about 4.8 Gb, with 3.2 Gb already having been shipped, suggesting that they have already shipped about two-thirds of their post-2004 CNE.

    Globally, I estimate that we have already consumed, through the end of 2012, about one-fifth of post-2005 Global CNE*.

    *Combined net exports from top 33 net oil exporters in 2005, total petroleum liquids + other liquids, EIA

  4. Boat on Sat, 26th Apr 2014 9:21 am 

    We will see within 10 years whether fracking takes off in Mexico like it has in the US. I tend to think an explosion of growth is going to happen for oil and Nat Gas.

  5. Davy, Hermann, MO on Sat, 26th Apr 2014 9:28 am 

    Boat, I don’t think we have 10 years and even if we do the economics of shale are already a camouflaged negative through central bank financial repression.

  6. westexas on Sat, 26th Apr 2014 11:24 am 

    Re: 10 years . . .

    It’s interesting to look at some regional declines in US oil and gas production, e.g., marketed Louisiana natural gas production (the EIA doesn’t have dry processed data by state).
    According to the EIA, the observed simple percentage decline in Louisiana’s annual natural gas production from 2012 to 2013 was 20%. This would be the net change in production, after new wells were added. The gross decline rate (from existing wells in 2012) would be even higher. This puts a recent Citi Research estimate in perspective.
    Citi estimates that the gross underlying decline rate for overall US natural gas production is about 24%/year. This would be the simple percentage change in annual production if no new sources of gas were put on line in the US. In round numbers, this requires the US to add about 16 BCF/day of new gas production every year, just to maintain about 66 BCF/day of dry processed natural gas production.
    Based on the Citi report, the US would have to replace 100% of current natural gas production in about four years, just to maintain a dry processed gas production rate of 66 BCF/day (24 TCF/year) for four years.

    Or, based on the Citi report, the US has to replace the productive equivalent of all of the 2012 dry natural gas production from the Middle East, in a little over three years (3.3 years), in order to maintain a dry production rate of 24 TCF/year. Over a 10 year period, we would need to put on line three times the 2012 production rate from the Middle East, in order to maintain current US gas production for 10 years.

    On the oil side, according to the EIA, the observed 10 year exponential rate of decline in Alaska’s annual Crude + Condensate (C+C) production from 2003 to 2013 was 6.5%/year. This would be the net change in production per year, after new wells were added. The gross decline rate from existing wells would be even higher.

    If we assume a probably conservative decline rate of 10%/year from existing US C+C production, in order to just maintain current production for 10 years, we would have to replace the productive equivalent of every oil field in the US over the next 10 years–the productive equivalent of every oil well from the Gulf of Mexico to the Eagle Ford to the Permian Basin to the Bakken to Alaska. 

  7. Boat on Sat, 26th Apr 2014 12:29 pm 

    Just because it’s more fun I will choose nat gas. The the US flares off anywhere from 20-36% in our biggest oil fields definitely a sign of a source that is way ahead of it’s infrastructure. The only reason ng prices are so depressed in N America is because it is so hard to get ng to market and grow the market. If you could come up with 500,000 more welders overnight this would help alot.
    There are huge fields all over the world waiting for the advanced tech and advanced workers that can handle the tech for fracking, piping, drilling etc..
    Things like 64 horizontal pipes coming from a 3 acre pad are completely changing the dynamics of developing a field that even the US hasn’t done good at yet but will soon in my opinion. It’s just a logistical nightmare. When this becomes a turn key operation that includes all the training, the world of fracking will be turned on it’s head and I think we can hit those numbers you talk about and more. Much more.
    If the market for ng could grow fast and easy it would be a different story. But grow it will and exponentially so.
    If you believe all point 2. Refineries that don’t use ng for feedstock are at a tough disadvantage. It won’t be long before refineries that don’t have a competitive advantage of low priced for feedstock will be priced out. Thus more market for ng. The reason I picked a number like 10 years was just a wild number but mainly signifies the length of time it takes to grow this market because of all of the complexities of getting the ng to where it needs to be. It may take 20 years or more as companies become more efficient at the entire operation. The drilling and fracking for it is the easy part. But I yet have to see a shortage of ng in N America or anything like it, just the opposite.

  8. westexas on Sat, 26th Apr 2014 6:08 pm 

    The EIA estimated that less than 1% of gross US natural gas production was flared in 2012, but people will believe what they want to believe I suppose.

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