Oil reserves in Mexico
Encyclopedia
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
was the sixth-largest oil producer in the world as of 2006, producing 3.71 Moilbbl/d of petroleum products, of which 3.25 Moilbbl/d was crude oil. Mexican oil production has started to decline rapidly. The U.S. Energy Information Administration
Energy Information Administration
The U.S. Energy Information Administration is the statistical and analytical agency within the U.S. Department of Energy. EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and...
had estimated that Mexican production of petroleum products would decline to 3.52 Moilbbl/d in 2007 and 3.32 Moilbbl/d in 2008. Mexican crude oil production fell in 2007, and was below 3 Moilbbl/d by the start of 2008. In mid-2008, Pemex said that it would try to keep crude oil production above 2.8 Moilbbl/d for the rest of the year. Mexican authorities expected the decline to continue in future, and were pessimistic that it could be raised back to previous levels even with foreign investment.
The constitution of Mexico
Constitution of Mexico
The Political Constitution of the United Mexican States is the current constitution of Mexico. It was drafted in Santiago de Querétaro, in the State of Querétaro, by a constitutional convention, during the Mexican Revolution. It was approved by the Constitutional Congress on February 5, 1917...
gives the state oil company, Pemex
Pemex
Petróleos Mexicanos or Pemex is a Mexican state-owned petroleum company. As of 2010, with a total asset worth of $415.75 billion, it is the second non-publicly listed largest company in the world by total market value, and Latin America's second largest enterprise by annual revenue as of 2009...
, exclusive rights over oil production, and the Mexican government treats Pemex as a major source of revenue. As a result, Pemex has insufficient capital to develop new and more expensive resources on its own, and cannot take on foreign partners to supply money and technology it lacks. To address some of these problems, in September 2007, Mexico’s Congress approved reforms including a reduction in the taxes levied on Pemex.
Most of Mexico's production decline involves one enormous oil field in the Gulf of Mexico
Gulf of Mexico
The Gulf of Mexico is a partially landlocked ocean basin largely surrounded by the North American continent and the island of Cuba. It is bounded on the northeast, north and northwest by the Gulf Coast of the United States, on the southwest and south by Mexico, and on the southeast by Cuba. In...
. From 1979 to 2007, Mexico produced most of its oil from the supergiant Cantarell Field
Cantarell Field
Cantarell Field or Cantarell Complex is an aging supergiant oil field in Mexico. It was discovered in 1976 by a fisherman, Rudesindo Cantarell. It was placed on nitrogen injection in 2000, and production peaked at in 2003. In terms of cumulative production to date, it is by far the largest oil...
, which used to be the second-biggest oil field in the world by production. Because of falling production, in 1997 Pemex started a massive nitrogen injection
Enhanced oil recovery
Enhanced Oil Recovery is a generic term for techniques for increasing the amount of crude oil that can be extracted from an oil field...
project to maintain oil flow, which now consumes half the nitrogen produced in the world. As a result of nitrogen injection, production at Cantarell rose from 1.1 Moilbbl/d in 1996 to a peak of 2.1 Moilbbl/d in 2004. However, during 2006 Cantarell's output fell 25% from 2 Moilbbl/d in January to 1.5 Moilbbl/d in December, with the decline continuing through 2007. In mid-2008, Pemex announced that it would try to end the year with Cantarell producing at least 1 Moilbbl/d. However, in January 2008, Pemex said that the oil production rate at Cantarell had fallen to 811000 oilbbl/d by December 2008, a decline of 36 percent from a year earlier. This resulted in a decline of total Mexican oil production declining by 9.2 percent from 3.1 Moilbbl/d in 2007 to 2.8 Moilbbl/d in 2008, the lowest rate of oil production since 1995.
As for its other fields, 40% of Mexico's remaining reserves are in the Chicontepec Field
Chicontepec Field
The Chicontepec Basin is a petroleum system in Mexico north-east of Mexico City, covering an area of around in the states of Veracruz, Puebla and Hidalgo. Several oil fields have been discovered in that area since 1926...
, which was found in 1926. The field has remained undeveloped because the oil is trapped in impermeable rock, requiring advanced technology and very large numbers of oil wells to extract it. The remainder of Mexico's fields are smaller, more expensive to develop, and contain heavy oil
Heavy crude oil
Heavy crude oil or extra heavy crude oil is any type of crude oil which does not flow easily. It is referred to as "heavy" because its density or specific gravity is higher than that of light crude oil. Heavy crude oil has been defined as any liquid petroleum with an API gravity less than 20°.Extra...
and trades at a significant discount to light and medium oil, which is easier to refine.
In 2002 Pemex began developing an oil field called "Proyecto Ku-Maloob-Zaap
Ku-Maloob-Zaap
Ku-Maloob-Zaap is the most productive oil field in Mexico. Ku-Maloob-Zaap is made up out of three relatively large fields Ku, Maloob and Zaap which are located to the immediate northwest of the Cantarell field....
", located 105 kilometers from Ciudad del Carmen
Ciudad del Carmen
Ciudad del Carmen is a city in the southwest of the Mexican state of Campeche. Ciudad del Carmen is located at on the southwest of Carmen Island, which stands in the Laguna de Términos on the coast of the Gulf of Mexico. The 2005 census population was 154,197 people...
. It is estimated that by 2011 the field will produce nearly 800 koilbbl/d. However, this level of production will be achieved by using a nitrogen injection scheme similar to that of Cantarell. That same year, Pemex decreased its reserve estimate by 53%, from 26.8 Goilbbl. Later the estimate was increased to 15.7 Goilbbl.
In June 2007, former U.S. Federal Reserve Chairman Alan Greenspan
Alan Greenspan
Alan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC...
warned that declining oil production in Mexico could cause a major fiscal crisis there, and that Mexico needed to increase investment in its energy sector to prevent it.
In February 2009, DeGolyer and MacNaughton
DeGolyer and MacNaughton
DeGolyer and MacNaughton is a petroleum consulting company based in Dallas, Texas, with offices in Houston, Moscow, and Calgary.DeGolyer and MacNaughton was founded in 1936 by Everette Lee DeGolyer and Lewis MacNaughton. In 2004, it acquired Calgary-based Outtrim Szabo Associates forming its...
certified that the Chicontepec Field had reserves comparable with half of those in Saudi Arabia, which puts Mexico at the third place of the countries with most oil reserves after Arabia and Canada, yet, it will take Mexico upwards of nine years to fully exploit these reserves at the current pace of the Mexican oil industry. Some government officials were unhappy with the results at Chicontepec, expressing concern that costs were higher and oil production lower than expected. Mexico had spent $3.4 billion dollars on the field, but it was producing only 30800 oilbbl/d by June, 2009 and increased only slightly to 46000 oilbbl/d in the 3rd quarter 2010, causing them to question whether more investment in the field was justified.