Are Mexico’s Oil Reserves Almost Depleted?

Tyler Durden's picture

Submitted by OilPrice

Mexico’s oil and gas regulator said last week that the country’s proved hydrocarbon reserves will drop by 10.6 percent in 2017. This forecast, coupled with the lower oil production that state company Petroleos Mexicanos (Pemex) reported for yet another year in 2016, is painting a rather bleak picture of Mexico’s reserves.

Without resumption in investments and more drilling, and if no significant finds occur, Mexico will be running out of reserves within 9 years, according to an official from the National Hydrocarbons Commission.

However, the energy reform that ended Pemex’s monopoly and allowed foreign companies to invest in Mexico’s oil exploration and production is expected to start yielding results by the end of this decade. The deepwater bidding round last December attracted major international oil companies, and Mexico awarded blocks to consortia including Chevron, Exxon, Statoil, BP, Total, and China Offshore Oil Corporation.

In addition, the analysts are now largely calling the end of the downturn and expect deepwater investment to pick up in coming years.

Mexico’s National Hydrocarbons Commission said last week that as of January 1, 2017, the country’s proved oil and gas reserves are estimated at 9.16 billion barrels of oil equivalent, down by 10.6 percent from the 10.243 billion boe as of the beginning of 2016. Proved oil reserves were down 7.9 percent to 7.037 billion barrels from 7.641 billion barrels estimated as of 2016.

In its 2016 results release, Pemex reported crude oil production of 2.154 million bpd last year, down by 5 percent over 2015, mostly due to natural declines of a number of producing fields.

According to the EIA, Mexico’s crude oil production has been steadily dropping since 2005 as a result of natural production declines from Cantarell and other large offshore fields.

Surely, the oil price slump has not helped Mexico’s output either, and has complicated the energy reform that the country started implementing in 2013.

But now, steadier prices and new projects involving international oil companies are expected to start offsetting declines after 2020, according to the International Energy Agency (IEA).

Projected crude oil production bottoms out at under 2 million bpd towards 2020 and then rises as the reform efforts bear fruit, new projects – notably deepwater developments – start operation and higher oil prices improve profitability, the IEA said in its Mexico Energy Outlook last year.

Mexico is already seeing its first international offshore drilling success, after Italy’s oil major Eni said last month that the first well drilled by an international oil major in Mexico since the 2013 reform “indicates a meaningful upside to the original estimates”.

A Rystad Energy analysis from last month compares the potential of the Brazilian and Mexican E&P markets to attract foreign investment. According to Kjetil Solbraekke, Head of Rio Office at Rystad Energy, currently planned exploration activity in Mexico and Brazil point to increased capex in both countries, and “numbers indicate that Mexico can reach the same level of investments as Brazil in 15 years.”

In addition, Rystad Energy says that “there are reasons to believe that the exploration play types are fairly similar in Mexico as they are in the U.S. There is also reason to believe that the discoveries might be in the same range as in the U.S. and more or less of similar productivity.”

Potential discoveries aside, the deepwater drilling industry is emerging leaner and more cost-competitive from the oil price slump, according to a Wood Mackenzie report from last week. Global deepwater project costs have dropped by 20 percent since 2014, WoodMac has estimated. The energy consultancy reckons that “the playing field between tight oil and deepwater is about to get a lot more level”, with deepwater breakevens pushed down, while cost inflation is “back with a vengeance” in tight oil projects.

According to the IEA’s Mexico outlook report, the main source of future growth in crude production is projected to come from deepwater fields.

So Mexico’s hopes for offsetting production and reserves decline are pinned on higher oil prices, the landmark energy reform, and the international oil majors resuming deepwater investment after the downturn.

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StackShinyStuff's picture

Yes.  Or else we would have invaded by now.

hedgeless_horseman's picture

 

As long as they keep trading their finite oil reserves for our infinite currency, exclusively, then they are safe.

Just ask Saddam Hussein, Muammar Ghadaffi, and Hugo Chavez.

The_Juggernaut's picture

Not depleted, just run by a state-owned company.

FrozenGoodz's picture

To hell with oil reserves ... build us a fence

ParkAveFlasher's picture

Wake me when they run out of burrito coverings.

JRobby's picture

Too many people driving in rom the US to "tank up" ???? Can't be.

space shitle's picture
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CrazyCooter's picture

Haven't read the article yet - but I have developed an uncanny ability to spot a Sovereign Man and OilPrice article on the main page, just by reading the headline and abstract ... nailed it!

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Cooter

Laowei Gweilo's picture

great news !

 

bullish Canadian oil sands !

El Vaquero's picture

It's worse than that.  9 billion barrels ain't shit.  2015 annual consumption was something like 34 billion barrels.  I haven't looked recently at Mexico's oil export situation, but if they have to stop exporting, it is going to cause currency "issues" for them.  Think they want to come up here now?  Ha!  

MalteseFalcon's picture

So as long as Mexico keeps drilling for oil, searching for oil, and invests in modern methods, Mexico will, in fact, still produce oil.

LOL.

There's a winning formula.

Who thinks that oil will pump itself?

Besides the Mexican government?

OK, besides Venezuela's government?

MAAAHM's picture

Just wait until our current POTUS builds the pipeline. The next Democrat POTUS will extend our oil to Mexico in reparations for deportationes. MARK MY WORDS

mkkby's picture

Soon all beaners will have is beans, and a very small hill of them.  Hurry up and build that wall, 'cause there's gonna be a flood of them heading our way.

Just look at the destruction going on in Europe.  A flood of water destroys you once.  A flood of niggs/spics/muzzies is like salting the soil every year forever.

newmacroman's picture

Legalize drugs and the Mexicants are doubly screwed.

rf80412's picture

Even better if the druggies kill themselves off within a month.

halcyon's picture

No. They will never be depleted.

At some point it is just too expensive to extract and the rest will be left in the ground.

Are they past their production peak? Hell yeah, ever since 2005.

 

Snout the First's picture

If we were going to invade, wouldn't the time to do that have been after the 1938 "expropriation"?

Iconoclast421's picture

Why dont you post a chart of mexico's oil production over time. It is going to be a bell curve. Should be pretty simple to extrapolate when 90% will be gone.

 

http://www.euanmearns.com/wp-content/uploads/2017/02/mexico_oil.png

Looks like Mexico is heading for trouble. They should be at 10% of their peak production rate by 2028. Fracking and other forms of enhanced recovery might push that to 20 or 30%, but that is still a predicament.

 

You think we have an immigrant problem now, just wait till mexico cannot even afford to control their southern border.

Atomizer's picture

http://www.tradingeconomics.com/mexico/crude-oil-production

It appears to be functional until 2050. Article is merely rounding up investment to build new rig. 

halcyon's picture

90% drop rate by 2028 is too long time in the future. Before that they will hit they export limits:

They will be at their exports crossing over their own production by 2022-2024.

http://mazamascience.com/OilExport/output_en/Exports_BP_2016_oil_bbl_MX_...

At that point, they can either stop exporting (disaster for balance of trade that is already a sliding towards it) or try to cut on subsidies and internal consumption.

Either way, they are fukked.

And other countries will follow in due time.

 

rf80412's picture

Mexico doesn't control their southern border anyway.  It's not widely known, but an awful lot of the "Mexicans" coming into the US illegally are actually not from Mexico.

SloMoe's picture

Better build a taller wall....

Stan Smith's picture

Or at least get it up quicker.

Atomizer's picture

As a short term fix, plant landmines across border. 1/3 miles deep. 

Schematic 

• • • • • • •

 • • • • • • 

• • • • • • •

 • • • • • • 

•••••••••••

Inverse, then repeat ^ 

They'll stop coming over. 

buttmint's picture

...Atomizer.....sounds iike you are itching to play with LANDMINES.

Get up to speed by heading to Cambodia. Buy a motorbike and/or bicycle and begin cruising about the countryside. There's 10+ million landmines, unexplored ordinance.

www.cambodia.uxo

Knock yourself out......

YouKnowMyName's picture

Hydrocarbon reserves are limitless. However, exploration capacity of bureaucrats are limited. 

adr's picture

They drilled deepwater wells when oil was selling for $12 a barrel. Somehow it seemed profitable then.

I think Oilprice.com exists only to spread short term stories in vain attempts to manipulate the futures market.

Pasadena Phil's picture

Keep in mind that most of the world's "proven oil reserves" are accepted at face value from secretive foreign governments (like Saudi Arabia). Those reserves are significantly impacted by oil prices since the reserves don't exist unless they can be produced profitably. Then add all the manipulation by OPEC and other secretive oil producers, what is the real number?

That is the very argument that peak oil is based on. This is also a very big reason why American energy independence will stabilize global prices and as a result, the global economy. We'll have better, more reliable numbers to commit CAPEX into a more realistic global infrastructure.

America! Fuck yeah!!!

 

MAAAHM's picture

If that doesn't work, we can always put a boot in their ass and take their oil.

Non-Corporate Entity's picture

Pulling out all the stops to get the price of crude up, aren't they?

CHX13's picture

The energy dilemma - current oil prices are too low for the producers to make a profit (and survive long-term) and too high for consumers of the real economy.

crossroaddemon's picture

And there you have it. One of the primary reasons if not THE primary reason there will be no eonomic recovery. Modern oil plays are too goddamn expensive for the real economy to continue to function long-term. Our entire infrastructure has been built on the theory that energy is going to remain dirt-cheap forever.

Money_for_Nothing's picture

So all the government reports that say all the storage is full should be discounted? At some time oil will fall to a market-clearing-level if storage is really full and all the producers are still pumping. Same way for houses and cars and so forth. Who thinks illegal aliens are going to save their economies? A lot of dumb-asses who where in charge when this situation was created ... that's who.

Things will change when the real situation can't be hidden anymore. The Fed raising rates implies that that may be happening. Remember all the posters here who said the Fed would never raise rates?

unsafe-space-time's picture

If storage if full why are you still importing oil? 

Doan Nonuffin's picture

Theirs is cheaper, use their reserves up first.  Sweet crude requires less refining.  Do I need to keep going?

 

MAAAHM's picture

That and the fact that everything that went up in the cost of goods based on oil cost did not go down when oil went down. If it does any, a tax will go up to replace it.

MURICA!

Money_for_Nothing's picture

Current oil prices are too low to keep up all the corrupt officials who are using their positions to fill their pockets with money. All the people the corrupt officials were extorting from prayed to God and God answered their prayers.

MAAAHM's picture

Then enters the hydrogen car, no wait, that person got off'd.

moonmac's picture

Who needs oil when everyone's driving around in Muskmobiles?

Silver Savior's picture

I can not drive a muskmobile because the back ends always look like a well used bar of soap. And at least one model lost nearly all it's trunk.

Soph's picture

The problem isn't that Mexico doesn't have recoverable oil...it most certainly does.

The problem is that they have had an inept state run organization managing their existing reserves, and seeking out (or not) new ones.

ipso_facto's picture

Once you get the Mexicans out of the way the oil will start flowing.

Dominus Ludificatio's picture

What a dumb country,selling all its oil output to the thirsty US neighbor and now with no money,is forced to look for expensive oil.

Money_for_Nothing's picture

The top dogs in Mexico are doing alright for themselves. Wonder how they made all that money since they are servants of the little people?

btn's picture

This is exactly the kind of "Energy Independence" that the "Drill, baby, drill" crowd is going to create for the US.

Conserving resources is the ONLY way to energy independence, not using them up faster.

Money_for_Nothing's picture

So are you going to hunt-and-gather tomorrow or subsistence farm? Corruption is what is destroying Pemex.

daveO's picture

Yea, the Mexicans never conserve corruption. It's obvious how this turns out. The oil companies go in, drill, discover and the the Mexican government will nationalize it all again. The oil companies can bet on it.