On Mexican oil

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Kevin (who, like me, says he hasn’t written anything on peak oil lately) links to this LA Times story:

Production at Mexico’s largest oil field is slipping faster than projected and officials see few options for quickly replacing the main source of the nation’s oil riches.

The struggles of the world’s No. 5 oil producer have implications for an already tight global petroleum market and for the United States, the chief buyer of Mexico’s heavy crude. It’s also a threat to Mexico’s social stability.

Production at Cantarell, the world’s second-largest oil complex, which provides about 60% of Mexico’s crude, averaged 1.78 million barrels a day in 2006. That’s a 13% drop from 2005, said Jesus Reyes Heroles, director of Petroleos Mexicanos, or Pemex, in a news conference Wednesday.

Drum tells it like it is:

The issue here isn’t that Cantarell is declining. That began a couple of years ago and had been widely anticipated. What’s news is that, just as many peak oil theorists have been warning, when big fields start to decline they decline faster than anyone expects. So far, Cantarell appears to be evidence that they’re right.

By itself, this is nothing to get alarmed about (unless you’re a Mexican politician or a Pemex executive). However, if it turns out that the peak oil guys are broadly correct, and declining fields start turning into collapsing fields across the world, that would be something to get alarmed about. We don’t know yet if that will turn out to be the case, but it’s very definitely worth keeping an eye on.

So, how big is the decline:

The decline was more than twice as great as the company’s published predictions, and the slide will almost surely continue in 2007. Reyes said he expected average daily production at Cantarell to fall to 1.5 million barrels a day this year, a 15% decline. He estimated that within five years the aging field would pump about 700,000 barrels daily, less than half of December’s production of 1.439 million barrels a day.

Experts have long forecast the exhaustion of the field, which was discovered in 1976. The question for Mexico, which depends on oil revenue to fund more than one-third of public spending, is just how fast Cantarell will lose its productive capacity, and whether the country can squeeze more oil out of smaller fields to compensate for the decline while it searches for a blockbuster new deposit.