Breaking news: Mexico finds the next Cantarell?

BusinessWeek reports something of a shocker: Fox: Deep-water oil find may top Cantarell (Note that this was discussed in previous threads, but I guess the editors managed to miss it. I can only imagine that many of you did too, so here it is for everyone. Thanks, Leanan. But keep reading—I promise you new content under the fold.)

We've mentioned before that Cantarell is in decline, and this article reports that "Production at Cantarell is expected to decline 6 percent this year, to 1.9 million barrels a day, and decline even more sharply in subsequent years." Cantarell's original total reserves were 11.5 billion barrels. (Khebab's post at EnergyBulletin on the state of Mexican reserves also bears on this issue.)

The emailer who sent us this story noted that he believes that the field is in fact bigger than Cantarell, but also a heavier grade.

This new field is a deep-water find that is 950 meters (3,117 feet) underwater and a further 4,000 meters (13,120 feet) underground. Interestingly, though, the article goes on to say that it might take more time to get at the oil than might be expected:
Pemex sees deep-water crude as one of its best bets for replacing reserves and for increasing production as Cantarell declines.

The fastest way for Pemex to get the oil out would be by forming alliances with companies that have the deep-water technology. However, current laws forbid private companies from exploration and production activities in Mexico except when they are under contract to Pemex.

Energy Secretary Fernando Canales told Dow Jones Newswires the ban on Pemex forming alliances for deep-water drilling would slow down the process of developing the reserves, but won't keep Pemex from getting at the oil.

Vicente Fox was on "Rita Crosby: Live and Direct" on MSNBC yesterday to announce this find. Not surprisingly, the first question out of Crosby's mouth was "Do you think this new reserve that you are speaking of, would you make this new reserve available to the United States?" Since the part of the transcript concerning Fox is so short, I can reproduce it here:
PRESIDENT VICENTE FOX, MEXICO: And we will be announcing in a couple of weeks from now, a huge, new reserve of oil and natural gas.

COSBY: Do you think this new reserve that you are speaking of, would you make this new reserve available to the United States?

FOX: Of course, United States is our number one customer, oil wise.

COSBY: Do you think this will help us?

FOX: Well, we‘ll keep selling to the United States as well as we keep selling to different parts of the world. We don't think this is the most convenient for anybody to have such high prices of oil.

"Not convenient" to have high oil prices? Well, I guess that's one way of putting it.
If true, is this good or bad? Do we want more hydrocarbons, or less? How can we take advantage of this find without adding more co2? Might we be better off if oil goes to $200/b, with the resulting recession and reduction in use, plus the faster switch to wind, nukes, and hopefully someday solar?
There is little chance of new carbon taxes, either alone or as a substitute for other taxes, being passed in this era of relatively high prices anywhere on the planet - politicians are still subsidizing oil/ng throughout asia and elsewhere, here they talk of lowering the taxes. It seems the best hope is for very high prices in the near term, which will only come with a change in the current supply/demand balance.
TOD readers worry separately about the coming hydrocarbon shortage and global warming, kind of like a brain partition. One is a partial solution for the other, so the sooner we have the economic incentive to switch from hydrocarbons to other solutions, any and all other solutions, the better. Every increase in price should be celebrated.
I think our positions match on 100% here. From purely technical perspective PO is solvable - we have vast amounts of nuclear, wind, solar, hydro energy... But climate change is presenting unprecedented risks for the future, and we don't really have anything to tackle it with.
FWIW, we discussed this a bit previously, when the news first broke.
I had three points on the other thread:  (1)  it's going to take a long time to get the oil to markets; (2)  based on Khebab's work, Mexico is right at about the 50% mark of Qt (at least 50% of current reserves), so in all likelihood, Mexico will never equal its peak production (consumption is also growing fast) and (3)  the world uses--from nuclear + fossil fuel sources--the energy equivalent of one Gb of oil every five days.
This new find suggests to me that the discovery curve for Mexico is very immature. If they only just found the Queen or King, that suggests a lot more nobles are still out there. That raises the specter that the Hubbert linearization for Mexico will fail (for similar reasons to the early misleading linear region in the UK P/Q plot).

Our insider (who we trust) told us "According to my sources at Diamond, it is supposed to be nearly as big as Cantarell, but is a lot heavier".

Hmmm.... We'll see. And it's a lot deeper and harder to produce too, if all this is true. I wouldn't be jumping to any conclusions yet but I'd like more detail about what the trusted "insider" actually said.
The quote I gave you is about it. I agree that the omens point away from very near term production of this new find.
They can't form alliances to develop oil without changing their constitution, which won't happen. They can contract to drillers, but not many deep rigs available, and anyway pemex is starved of funds, both because the state takes it plus vast internal pemex corruption and/or overmanning. My guess is 2015-2020, if then, and assuming the find is real. Mexico output (and, more importantly, exports) will be down substantially by then - maybe if they become an importer they will have the impetus to change their constitution.
This new find suggests to me that the discovery curve for Mexico is very immature.

That was my thought, too.  Cornucopians often claim Mexico has barely begun to explore deepwater oil, because they don't have the expertise.  Maybe they're right.

OTOH, it seems like a lot of these (potentially) "huge discoveries" don't pan out.  And Mexico has a record of exaggerating their finds.  This may not be a king or queen at all.  Or even a noble.  

I had the same thoughts about using Simmons' classification.  However, why do we apply a political boundary to Mexico's discoveries and not a geological one?

While not a geologist, I'd guess that the arc of the Gulf of Mexico is the correct vision of a province so that Spindletop in coastal Texas is the King and Canteralle and this new ones are queens and nobles.  It doesn't matter whether they have to be accessed from sea or shore.

What are the biggest fields discovered in Louisiana, Alabama, and Florida?  

Spindletop in Texas was not a particularly big field. Those were East Texas and Hugoton. Cantarell was pretty big, too.
This report (based on one well?) may have a lot to do with the impending collapse in Cantarell Field production.  

The worst case scenario outlined in the recent WSJ article on the Cantarell Field suggests that the worst case annual decline rate could be as high as 45% per year.   I have forgotten the exact numbers, but I think that the remaining oil column at Cantarell is on the order of 800' and it is thinning at the rate of 250' or so per year.

Production at huge Mexican oil field could collapse

PARIS, Feb 9, 2006 (AFP) - Oil production at the world's second-biggest field, operated by Pemex at Canterell in Mexico, could fall sharply by 2008, the Wall Street Journal reported Thursday, citing an internal study by the Mexican group.

The consequences would be tighter global oil supply, making it harder for the United States to rely less on the Middle East as President George W. Bush has proposed.

Cantarell currently produces two million barrels of crude oil per day, or 60 percent of Mexico's total output.

Under a worst-case scenario sparked by rising water and gas levels in the field, oil production could plunge to 875,000 barrels per day next year or to 520,000 bpd by the end of 2008, according to a study that took place late last year.

I think the Mexicans should play it smart by developing the field slowly and methodically.
I think the Mexicans should play it smart by developing the field slowly and methodically.

I would not bet on this.  Mexico gets a lot of their national budget from Pemex.  Assuming Mexico's politicians are not any better than our own, they are going to panic when revenues start falling and demand Pemex get production up.

Yeah, I know - that's why I said "should" instead of "would". And you're right that we wouldn't be any better.

I like how they say "may be larger than Cantarell".  Just like those envelopes in the mail that say "You may already be a winner"...

Unfortunately we don't have any details on this new field yet.  For all we know, they might privately be able to say that with 95% certainty that this new field is smaller, but it would still be technically accurate to say "may be larger than Cantarell".

It must be very difficult to assess the size of a resource three miles below sea level with any kind of accuracy.  Given the games played I'd say you're right to be skeptical.
Haven't we heard all this before?

Mexico's Pemex in a corner after oil find boast, Sep 2004.

"Pemex has generated a great big scandal internationally with the news that there's a 'potential' of 54 billion barrels of oil in this area," wrote independent energy analyst David Shields in an editorial.

"They are totally hypothetical figures, there's an infinity of doubts about the size and certainty of reserves that could exist in the deep Gulf. What's more Pemex would need to totally reinvent itself to be able to develop this type of reserves."


Thanks, I remembered this and was going to find the link - you saved me the trouble. PEMEX recanted later and cut the number in half - all still just speculation. I have no faith in Fox's comment, there is too much political loading on any of these announcements. He may just be trying to pressure the Mexican legislature to relax their rules on foreign investment with this veiled threat/promise.
Here's is what I know.

Pemex has no capability to develop this kind of discovery on its own.  They are trying to learn by doing joint studies with some IOC's, but they are completely "over their head in deep water".

They likely do not have a very good idea of the size of the resource they have found based on one well.  They are probably quoting the size of how big it "could be" if oil completely filled the structure that their geologists mapped.  This is an unlikely situation.

A deep water oil discovery bigger than 1 billion barrels is huge.  There is only one of those in the GOM (Thunderhorse - and it may not be bigger than 1 bbo).  10 bbo is unheard of for a deepwater field.

Size is not all that matters for deep water discoveries.  The high cost of developing these demands that the wells flow at very high rates and have very high ultimate recoveries.  Rules of thumb are 10,000 BOPD per well or greater with UR's of 10,000,000 BO per well (or greater).  For that reason reservoir and fluid conditions are important.  The product of reservoir permeability times net feet of reservoir pay times the pressure differential divided by the viscosity of the fluid ultimately determines the flow rate.

If you want more detail about this discovery you might want to check out this article.

Right. Some quotes seem appropriate here.
... may lead to discovery of as much as 10 billion barrels of petroleum, Chief Executive Officer Luis Ramirez said.

Highly Speculative

"The 10 billion barrels would be a substantial amount if there were a basis for it and there's not at this point," Shields [an independent energy consultant in Mexico City] said. "All of it at this point is highly speculative".

Ramirez said Pemex had proven, probable and possible reserves of 46.42 billion of oil, gas and other fuels as of Jan. 1, 2006, a decline of about 500 million barrels from a year ago.

Pemex announced in 2004 it may have as much as 54 billion barrels of oil in Gulf of Mexico waters more than 500 meters deep.

So, what has Mexico got here? And how much can they produce and at what cost? Who knows? Again, I wish I had a nickel for every annoucement like this I've ever read. The only thing I know for sure is that Cantarell is in permanent rapid decline.
I too am skeptical. If the the decline of Cantarell is not matched IN PERCEPTION by a balancing increase elsewhere, where does this leave Fox? And when was this known -- before or after the announcement of Cantarell going into decline?

Anyway, we'll see. Since help will be needed developing these sites, we'll see who signs up. Maybe that'll be a clue.

A bit of information from

Heres the news release from IHS Energy this AM:

Further to DA 14 Mar 06: 3rd in 3-deepwater well campaign in Miocene Trend, approx. 100km NW off Coatzacoalcos in Sureste Basin, WD 936m, PTD 4,000m, last reported below 3,432m in mid Feb 06, reportedly the 'massive' oil find suggested yesterday, albeit testing still remains to be done. Ocean Worker SS.

Officials suggest the structure could hold up to 10 Bbbl, likely pretty optimistic until testing is completed. Deepwater Mexican wells have been US$25-30 MM operations; the 1st well Nab 1 was a heavy oil find, and Caxui 1 was dry.

Bottom line....1 well, untested.......likely wild speculation at this point as to actual size.

With regards speculation, there is a suggestion that the decline in Cantarell production may present Mexico with difficulties in servicing its existing national debt. The timely discovery of a notional major find may serve to allay any concerns on the part of creditors and avoid a sudden rise in interest rates prior to a national election.
Its not press diff squared?
Well, good...I'm glad that we can all go back to sleep now.  
Interesting to see which part of the article caught whose eye.  Mine was caught by:
Production from deep water will take as long as a decade if Pemex starts now, Ramirez said
Bearing in mind that more wells will be needed to better delineate the field, etc. I also suspect that Pemex won't be starting "right now" either.

They said the oil was a lot heavier than Cantarell - how much heavier?  If it is really thick, won't it be much harder to produce, and for that matter won't it cost more to refine?
Perhaps Bubba can answer, but my understanding is that heavier oil tends to result on a smaller percent recoverable also. When people tout number of barrels in this situation, it is usually for oil in place, not reserves. Some heavy oil fields only wind up with 25% recoverable, as I recall.
We don't know squat about the oil in that find (despite Stuart's insider's info).  I have my own insider info that would contradict Stuart's info.

On the other hand, if the crude was heavy (which can mean a hell of a large range of potential crudes) it would be bad news for trying to get high rates, high ultimates and high recovery efficiencies.

Afghanistan, too!


Two geological basins in northern Afghanistan hold 18 times the oil and triple the natural gas resources previously thought, scientists said Tuesday as part of a U.S. assessment aimed at enticing energy development in the war-torn country.

Nearly 1.6 billion barrels of oil, mostly in the Afghan-Tajik Basin, and about 15.7 trillion cubic feet of natural gas, mainly in the Amu Darya Basin, could be tapped, said the U.S. Geological Survey and Afghanistan's Ministry of Mines and Industry.


Quick!  Someone tell Bush to disrupt the local government, install one of "our guys", and get a bunch of military force on top of that oil and gas and...  Oh, never mind.

Pemex has a unsustainable debt burden if oil revenues fall. Mexico could not raise additional capital for deep drilling or keep existing creditors happy without prospects of additional oil, hence the claim of a large find.
This mirrors my own thoughts. Pemex cranked up the PR on this field to funding to develop it. I am sure that the field is much smaller than Pemex is touting.
This is slightly off-thread, but since there's no current open-thread, I'll post it here before it turns stale:

There was an article in FT 3/14 on Gazprom. Two points of interest: 1) its three major fields are in decline; 2) Gazprom has 16pct of the world's reserves and 20pct of its production. There's more, maybe someone can post a link.

The same issue has an idiotic attack on Europe's railway system -- defending cars and trucks.

WSJ 3/14 has an article on LNG imports. What I found interesting: "Plants to liquify natural gas in places like Trinidad, Russia or Qatar cost about three times as much as a regasification terminal, which converts LNG back into gas form, and even the fleet of tankers needed to ensure the steady supply costs two to three times as much."

Actually, just pretend that Gazprom is Mexican and the Putin is Fox, and this becomes on-thread.
As a benchmark for LNG capital investments, the National Petroleum Council claims that a 1 bcf/day LNG system requires $5 to $10 billion to develop.
11GB says Mr. Fox...I say so what?!  Let's say it IS bigger than Cantarell (which if you go back and research the claims that Mexico was making for IT in the late '70's, they were talking like they'd just replaced SA as the new world swing producer)..anyhow...

Let's say it's bigger...Cantarell was what? 11-12GB recoverable...  Let's say it's double the size of Prudhoe Bay, and comes in at about 30GB -apparently completely unheard of at that depth-  what does that do for planet Earth? Another 365 days of supply at 2005 consumption rates?? When will this baby be on line?  --I live in Mexico, and the wrangling that has been going on down here for the last 5 years over "privatizing" PEMEX or opening it up to the resourse sharing deals that will be necessary to put this find into production are a sight to behold.  It may be a long wait.  The timing of the announcement is a little suspect too, since the airwaves and newspapers have just spent the last couple of days talking openly about the imminent decline of Cantarell...


More oil to burn!!


Screw you earth, we don't need no stinking livable environment, we got oil!!

Looks like you're on track to a new hit song
To the tune of "Brick in the Wall" (Pink Floyd):

We don't need no livable situation,
We don't need no green gas control,
No dark sarcasm in the boardroom
Preachers leave them environmentals alone
Hey! Preachers leave them environmentals alone
All in all they're just another stick in the eye o' the world.
All in all we're just more extractors of oil.

Woo Hoo
Woo Hoo

How did Rita Cosby "get" the Pemex oil story from Presidente Fox????    Her whole show is usually murder stories.....just thought it a bit odd.....
I don't want to pour cold water on this news. A significant find gives us all a little bit more time to adjust to the coming transition. I'd like a new Saudi Arabia to come online every five years, now that China and India waking-up! However, isn't their a chance this positive story is connected to the coming presidential election in Mexico. We've all heard of the "feel-good factor" haven't we?
When it comes to elections, "Perception" is reality.

"False impressions" are the tools of the totalitary (-isms).

I would also throw in for discussion the fact that hurricane season is going to be coming back before we know it and if its anything like last year the Gulf of Mexico is in for another kick in the face.

If these storms get any worse we're going to keep seeing oil rigs getting tossed around like rag dolls and that production timeline will get thrown right out the window.

Good point Drezden,

Hurricane damage could drastically ratchet down the already low [deep-sea & deep drill] ERoEI efficiency ratio.  If the IOCs get involved in developing this new oilfield, they will use the pricing power to keep alternative energy development uncompetitive for an even longer period, so that the resulting collapse will be faster and harder when it finally does arrive.

Bob Shaw in Phx,AZ  Are Humans Smarter than Yeast?

One of the things that Mexico has to worry about is that the Mexican debt bondholders might start to worry about getting paid off now that Cantarell is in decline. So Mexico might not be able to roll over it's debt and have to default without another oil field like Cantarell.
Or they could raise taxes, allow the peso to fall, and put everyone back to work in the maquiladoras...
Or they could end their epidemic corruption and become a first world economy. But, they'd better hurry...
"I don't want to pour cold water on this news.
A significant find gives us all a little bit
more time to adjust to the coming transition."

Unfortunately that is not what happens in
the real world. In the real world, additional
finds of oil are seen as evidence that there is
no problem with oil supply and justification
for continuation of energy profligacy.

If this oil were to come on stream quickly, it
would simply encourage China and India to
produce more cars to burn it. The warning bells
for oil depletion and environmental collaspe
have been ringing for decades, but it will not
be until the system starts grinding to a halt
that appropriate action will be taken. And then
it will be too late of course.

As was said previously, our best outcome is
that the size of the field has been exaggerated
and the difficulty in extracting the oil
underestimated. Should this disvcovery
significantly delay the impact of the peak oil
crisis, it will simply make matters worse for
the entire planet.... more mouths to feed, more
cars to dispose of... more CO2 in the atmosphere..

I agree with you, mostly. I was only striving to put a slightly optimistic spin on the news. There is just so much doom and gloom around. I's still not sure that finding more oil now is really going to make things worse in the longer term. It just might make things better. Giving the growing awareness of PO more time to influence mainstream opinion. I'm not sure where to put this new find on the scale of Optimism/realism/pessimism. At least for me it's a difficult subject.