Monday, June 29, 2009

Our Friends to the South

It has been awhile since we checked in on how PEMEX is doing. I've whipped up a few graphs illustrating their most recent production, use and export numbers. FYI, PEMEX does a very nice job of providing clean production data. The Saudis could sure take a page from these guys.

By the way, I suggest you take a deep breath before thinking too much about the implications of these three graphs. You might throw up all over Larry Kudlow's green shoots...

The above graph is just to put a "face" on how the implications of the Export Land Model might play out in Mexico. For those of us interested in keeping as much oil flowing to El Norte as possible, that flat domestic demand line is a comfort of sorts.

Above is the Export Volume from PEMEX broken out the Americas (the red dots) and by total exports. As you can see, the vast bulk of PEMEX production stays in the Western hemisphere, with the lion's share going to the United States.

Now let's project things out a bit, shall we? Below is a chart taking the historic average daily production numbers, plugging in a 7% yearly depletion rate and a 1% growth in domestic demand.

These not-unrelastic assumptions mean the death of Mexico as an exporter within 7 years. One might also assume that "above ground" factors could come into play as production plummets with the death of Cantarell to where, heaven forbid, the Mexican authorities might try and scale back exports to save a little juice for their own people down the road. Not likely, but just a crazy thought.

Action Items

Well, this is just another light from an oncoming train. Long before Mexico ceases to be physically able to export oil, my belief is that at the very least, exports will cease, probably within the next few years. It may be from a conscious decision to stop exporting or from 4GW attacks on infrastructure or from an inability to keep pumping at high rates due to a collapse in revenue due to worldwide Depression.

Who knows, but do realize that this directly impacts every gas tank north of the Rio Grande.

If you haven't already wrapped your head around the blowback from what that means, well, get busy thinking about it...

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