And away goes Cantarell

[GliderGuider]

Text from WSJ:

Daily output at Mexico's biggest oil field tumbled by half a million barrels last year, according to figures released Friday by the Mexican government. The ongoing decline at the Cantarell field could pressure prices on the global oil market, complicate U.S. efforts to diversify its oil imports away from the Middle East, and threaten Mexico's financial stability.

The virtual collapse at Cantarell -- the world's second-biggest oil field in terms of output at the start of last year -- is unfolding much faster than projections from Mexico's state-run oil giant Petroleos Mexicanos, or Pemex. Cantarell's daily output fell to 1.5 million barrels in December compared to 1.99 million barrels in January, according to figures from the Mexican Energy Ministry.

That's 25% in one year and from the look of the graph the decline is speeding up. It's like the glacier news we all know and love: "Scientists this week were shocked to discover that events are unfolding twice as fast as had been predicted..."

[hatrack]

1. Oops!

This should be interesting.

[Extend a Hand]

2. a slow decline

is looking less and less likely. This is very bad news indeed. I wonder how many people realize seriousness of the consequences of declining supplies?

[phantom power]

3. Are any of the big oil exporters independently audited?

I, for one, am not shocked to hear that projections published by Pemex about itself turned out to be optimistic. They simply aren't motivated to make public statements like "Hey, according to our figures, Cantarell is fixin' to collapse like a used condom."

[hatrack]

4. Maybe the should have consulted with Oman

Let me rephrase that:

"Maybe we should have consulted with . . Oh, MAN!!!!"

[GliderGuider]

5. Commentary from ASPO

From today's Peak Oil Review newsletter:

On Friday PEMEX made it official. Production from Mexico's largest oilfield, Cantarell, fell from 1.99 million b/d in January 2006 to 1.44 million b/d in December. The company's overall crude production in December was 2.98 million b/d, falling below 3 million barrels for the first time in six years. Nearly a year ago, a leaked internal PEMEX study forecast that under the best-case scenario Cantarell's production would fall to 1.54 million barrels a day by the end of 2006 -- almost exactly what happened.

Mexican oil analyst, David Shields, expects the field's output to drop another 600,000 barrels a day by the end of this year. He says that Pemex will likely increase output by 200,000 barrels a day at other fields -- leaving the country with a net decline of 400,000 barrels a day by year's end

The sudden crash of production from Cantarell has serious implications for the US and Mexican economies. Mexico derives 37 percent of its federal budget from PEMEX's profits. Last year, revenue from the nation's crude exports reached an all-time high of $34.7 billion. In 2005 Mexico exported 1.82 million b/d mostly to the US. By last month exports had fallen to 1.53 million b/d and will obviously continue to drop during 2007 and beyond as production drops and the growing Mexican economy continues to demand more fuel.

Here comes the scenario I've talked about before.

[phantom power]

6. Another part of this scenario...

is that America's economy is likely to collapse at around the same time. If Mexico's economy is driven by oil exports, ours is driven by oil imports. Cheap oil imports, to be precise. Our economy is riddled with large, systemic time-bombs, which could be finally triggered by a sustained oil shortage. The housing/lending bubble, our trade deficit, our federal debt load, etc.

Under circumstances like those, we are a candidate for revolution too, although our society is more preconditioned for fascist takeover a la 1930s Germany, not so much a populist or leftist revolution.

[GliderGuider]

7. I agree.

I don't see the conditions or appetite in the United States for a populist revolution. However, we've all seen just how eager Americans are to hand over the keys of the kingdom to the nearest Man With a Plan when a serious crisis occurs. The political/industrial axis will only be too happy to take the reins and show you the way to safety...

[hatrack]

8. K&R

Thanks, GG! Really important story.

[Maven]

9. 25 percent within the SAME YEAR?!

Holy....wow.

What was that about a "soft landing?"

K/R