The Oil Drum

(Repromoted due to today's explosions in Pemex's pipelines and JHK's story and link to us today...originally posted 7/12/07)

In my annual new years predictions, I said that the most significant, and surprising, development of 2007 would be the collapse of both Mexico’s economy and its very existence as a viable Nation-State. While there hasn’t been a spectacular, single event confirming my prediction, there has been a steady erosion on all fronts—with five months left in the year, I’m not yet willing to push back my prediction of Mexico’s “collapse” to 2008. The decline of the Mexican Nation-State is a bellwether for the massively complex network of geopolitical influences sometimes termed above ground factors. It provides some insight into how symptoms of oil scarcity already being felt in poorer parts of the world will increasingly spill over into our own back yard…

UPDATE: After I wrote this story (July 7th), things took a serious turn for the worse with a series of rebel attacks on Mexican oil infrastructure: Bloomberg, Forbes (research credit: Dantes Peak).

In April of this year, Mexico's president Vincente Fox announced a major new discovery in the Gulf of Mexico by the state-owned oil company Petroleos Mexicanos (PEMEX). This new field, announced a scant few months before Mexico's national presidential elections, was said to contain a potential URR of 10 Gb (billion barrels) of oil.

I had wanted to do a story on PEMEX and Mexican oil production. What was the story? I knew from the discoveries trend that finding a field of this size is now rare, a statistical outlier. So, I waited.

On July 5th, I got my answer and my patience was rewarded. The Energy Bulletin, quoting from the Oil & Gas Journal (OGJ) announced Fox-hailed deepwater well a modest gas find

HOUSTON -- Noxal-1, a deepwater Gulf of Mexico well trumpeted in March by Mexican President Vicente Fox as being a major oil discovery, appears to be a modest gas find.

Speaking on Mar. 14 from the drilling rig in 935 m of water 63 miles off Coatzacoalcos, Fox said the then as-yet-untested well had the potential to produce 10 billion bbl of oil (OGJ, Apr. 17, 2006, p. 35).

However, after the well operated by state-owned Petroleos Mexicanos reached a total depth of 4,000 m, the fourth interval tested has flowed 9 MMcfd of gas from a reserve estimated at 245 bcf, said IHS Energy, Houston.

This story gives some detail about the current state of Mexican oil production and its possible effects both south of the Rio Grande and here in the United States.

One of our oil industry insiders has sent us some interesting data on rig rates, well type/depth changes, and more on the oil situation in the GOM, as well as how the industry in Texas and the GOM is staffing its rigs.  Lots of interesting stuff under the fold.

Oilcast.com today breaks an exclusive interview with a senior engineer from Mexican state oil company Pemex, who says "the days of the Mexican super giants are over." He claims Pemex is in the "doorway of depletion" and "in the middle of the Hubbert curve." (You can also just read the transcript in the right sidebar if you wish.) Link: http://oilcast.com.

Here are just a couple of bits of information that you may have missed since at least one of these was in the post on oil rigs.   One of the discussions we had on CERA and ODAC predictions of supply was based on the time that it took for a field to come on line.  Well just this weekend Sakhalin Island finally started to produce oil.

If you go back to Chris Skrebowski's initial listing of projects that would contribute to production by 2010, Sakhalin Island (which is just north of Japan) was scheduled to come on line in 3 steps - Phase 1 of which was supposed to happen in 2004.  

The other thing to note is that we are not the only ones to suffer from the Hurricane.  Consider that Mexico provided a lot of the oil that went to the refineries that are still closed.  As a result it's economy is now being hurt by the delays in getting them restarted.