Monday, July 30, 2007

PEMEX Numbers

This chart sums it all up:

Cantarell is one of the greatest oil fields ever exploited by the human race. Her day is done.

Let's drop all sarcasm and my normal, feeble, attempts at humor. PEMEX has a problem. And that means North America, specifically the United States, has a problem. The following charts use data taken from the 2006 PEMEX Statistical Yearbook:

Depression Through Inflation

Depression through inflation is a phrase my father often uses to describe an environment where bottomline costs are increasing, but profits are stagnant due to competition or lack of ability to grow market share. Costs eat you up and eventually destroys you. Anyone who remembers owning crop land during the 1980's is familiar with this phenomenon.

In a Peak Oil world, where you have to run harder and harder, just to stay at the same, or nearly the same, level of production, that concept applies. You have to drill more rigs, hire more people, buy expensive equipment - all just to keep production from declining too fast. Anyone who is familiar with the long slide from peak production in Texas knows this trend very, very well.

Death of the Cash Cow

As I've touched on in the past - PEMEX, is an enormous cash cow for the Mexican Federal Government.

And the figures in the chart above are just the direct duties paid to the government. What about the VAT associated with all the good purchased by PEMEX employees, the graft and contracts associated with providing work for PEMEX, etc. The tax collection trend is up, so all is well, right?

Well, take a look at the reserves trend:

NOTE: The projected reserves figures are simple polynomial extrapolations off the data. This is not a rigorous analysis of the raw data (which I don't have access to) but a best-guess based on current trends. From looking at the exploration data in the yearbook, PEMEX peaked out in their exploration efforts back in 2004. The number of fields they've been discovering peaked out in 2003 at 33 fields discovered (but none large enough to offset that collapsing reserves figure).

Proven reserves maybe have another decade left. Ten years. Ten years for Mexico to prepare for an enormous shock to their economy, as export income dries up. The U.S. could go out and strike a deal with Saudi Arabia back when we peaked out - we had the guns and money to do it. But Saudi is at or past peak production now as well. The great oil export game is coming to a close.

According to PEMEX, their exports (in terms of volume of oil shipped) topped out in 2003. Probable reserves give them some cushion as far as domestic needs are concerned - but for how long? And can they keep up their production numbers in the face of Nigerian-style disruption?

Mexico is the Number 2 source of oil for the United States (they passed Saudi Arabia in 2007). In a few years those billions of barrels will no longer be available for U.S. consumption. Period. End of story.

What else is there to say? If you have not already done so, begin preparing yourself for the post-fossil fuel world and an age of chaos.

1 comment:

Bob said...

When Mexican exports dry up the US will turn towards Alberta and the tremendous reserves in Saskatchewan.