Mexico’s oil, the US and peak oil imports

William Cummings of Exxon Mobil tells us, “All the easy oil and gas in the world has pretty much been found. Now comes the harder work in finding and producing oil from more challenging environments and work areas.” That’s about as cheerfully as the harsh reality can be put.

Mexico is a stark example of peak oil, virtually all Mexican output comes from Cantarell, in the shallow waters of the Gulf of Mexico. It’s the second largest oil field in the world and is run by the state owned Pemex.

When Cantarell was discovered in 1977, it held 17 billion barrels of oil. Since then, the Mexican government has been spending the oil revenues for the benefit of the “right” people and for the all important project of holding on to power. Pemex isn’t a sideline for the Mexican economy; it provides 40% of all revenue the government collects.

The state is so dependent on oil revenue that Pemex built a nitrogen injection project to push the oil out faster. It worked, but at a price. In 2004, production rose to 2.5 million barrels per day. But it’s now declining at a rate of 15% per year, and the decline is irreversible. Mexico won’t be an oil exporter for long.

Mexico, like most other oil exporters, is merely retracing the history of the US oil industry. Because it was the one place where easily exploitable petroleum resources, a ready market for petroleum, and respect for property coincided, the US was early in the oil business. Early to start, and early to peak. Its production history is a preview of how Peak Oil works.

In 1973, the United States imported 30% of the crude oil it used. By 1977, imports had risen to 44% of consumption. Then, following a mini-boom in the development of marginal fields that had been made practical by the high oil prices of the late 1970s, imports dropped off to just 25% in 1985.

Since then, imports as a percent of domestic use have been in an almost steady uptrend. They now account for 66% of total domestic crude oil consumed. If the trend were to continue at the rate of the last two decades, in 2028 the US would be totally dependent on imported oil.

Of course, the import trend won’t continue in a straight line to 2028, because production is now declining in the rest of the world. In 2004 the US imported 600 million barrels of oil per year from Mexico. By 2012, total Mexican production will have declined to only 180 million barrels per year, and none of it will be available for export to the US or anywhere else.

Tags:  Mexico, oil imports, peak oil, US