Trouble South of the Border -- Mexico's Oil Production

In April of this year, Mexico's president Vincente Fox announced a major new discovery in the Gulf of Mexico by the state-owned oil company Petroleos Mexicanos (PEMEX). This new field, announced a scant few months before Mexico's national presidential elections, was said to contain a potential URR of 10 Gb (billion barrels) of oil.

I had wanted to do a story on PEMEX and Mexican oil production. What was the story? I knew from the discoveries trend that finding a field of this size is now rare, a statistical outlier. So, I waited.

On July 5th, I got my answer and my patience was rewarded. The Energy Bulletin, quoting from the Oil & Gas Journal (OGJ) announced Fox-hailed deepwater well a modest gas find

HOUSTON -- Noxal-1, a deepwater Gulf of Mexico well trumpeted in March by Mexican President Vicente Fox as being a major oil discovery, appears to be a modest gas find.

Speaking on Mar. 14 from the drilling rig in 935 m of water 63 miles off Coatzacoalcos, Fox said the then as-yet-untested well had the potential to produce 10 billion bbl of oil (OGJ, Apr. 17, 2006, p. 35).

However, after the well operated by state-owned Petroleos Mexicanos reached a total depth of 4,000 m, the fourth interval tested has flowed 9 MMcfd of gas from a reserve estimated at 245 bcf, said IHS Energy, Houston.

This story gives some detail about the current state of Mexican oil production and its possible effects both south of the Rio Grande and here in the United States.
I had followed the story closely that the 2nd biggest oil field in the world and the biggest producer of heavy sour crude, Cantarell, is now in decline, perhaps radical decline. However, I am planning a follow-on story that will explore what is happening there and at Ghawar. Here, we'll concentrate on other aspects of the steadily deteriorating situation in Mexican oil production. As usual, let's get the big picture from the EIA country analysis brief.

Mexican Production & Exports -- Click to Enlarge

And from that EIA document

Mexico is the fifth-largest producer of oil in the world. The country produced an average of 3.78 million barrels per day (bbl/d) of oil during 2005, a 1.3 percent decline from 2004.

During the first nine months of 2005, Mexico exported 1.79 million bbl/d of crude oil. Of this amount, 88 percent went to the United States, followed by 11 percent to Europe. Mexico is consistently one of the top three exporters of crude oil to the United States, along with Canada and Saudi Arabia.

However, the situation may be going downhill fast. In this shocking statement reported by the Dallas Morning News issued prior to the recent presidential election, Mexico's oil model is under pressure, we learn that
The rust staining the storage tanks and distillation towers of the giant Miguel Hidalgo Refinery suggests what the balance sheets for PetrĂ³leos Mexicanos confirm: a company hemorrhaging money.

At a recent reunion of retired Pemex executives, former chief financial officer Ernesto Marcos recalled, a colleague urged that "the next president be told as soon as possible that we may soon not have enough oil for our own requirements and none for exports."

That's an ominous forecast for Mexico's economy and for the United States, which relies on Mexico for 8 percent of its oil.

Ominous indeed. In fact, downright scary.

PEMEX Background Information -- A Little History

If you are interested, this fascinating document, sourced from the US Library of Congress, details the history of Mexican oil production. For our purposes today, we note that the petroluem industry was nationalized in 1938 by President Lazaro Cardenas, who is now regarded as something of a national hero in Mexico. Since that time, foreign investment has been forbidden. To make a long story short, today PEMEX is actually losing money and heavily in debt despite oil prices hovering near $75/barrel. From the the Dallas Morning News again.
Yet the Mexican government has taken so much of Pemex's revenue (61 percent) and saddled it with so much debt (more than $75 billion, including pension obligations) that the company has had a negative net worth since 2002.

In May, the company reported net income of $700 million in the first quarter but a loss of $6.75 billion for 2005.

The reasons for this are straightforward. As the Dallas Morning News articles notes, the Mexican government siphons off PEMEX profits to pay for other services. In addition, PEMEX is itself a corrupt state institution. "In Pemex, there is no transparency, nobody watches over the contracts. For starters, they ask for a 10 percent (bribe) off the top of the price. When anyone complains, they are repressed. This is the way business is done here" from Mexico's oil bonanza starts to dry up.

As a result of these conditions, production infrastructure is deteriorating and subject to world supply shortages and competition. In addition, experienced oil field workers are in short supply. Back at the end of March of this year, TOD published From an Insider: Rig Prices, Rig Depth, and How to Get a Job from which I quote.

Someone who works for Pemex has said they have a large backlog of undrilled wells due to a manpower shortage at the rig sites, especially those near Reynosa and along their border with the US....

Pemex is also having trouble securing steel pipe (they used to get it from Korea) due to Chinese demand and their (Chinese) willingness to pay more than double what the Mexicans originally contracted for...

I thought it was important to relay what our open borders are doing to Texans and to the oil drilling business on BOTH sides of the border. Again, so many things are rearing their ugly heads around the country it's hard to keep track of them!!

Things are a mess. As if this weren't enough, there was recently an explosion last July in Benito Juarez II on antiquated pipelines.

The Recent Presidential Election

The recent election pitting the "conservative" candidate Felipe Calderon (35.88%) and the "leftist" candidate Andres Manuel Lopez Obrador (35.31%) was not primarily over oil but perhaps it should have been. The election is being contested by Obrador. Generally speaking, Calderon espoused the position that Mexican production should be increased through allowing foreign investment to support more E&P and increasing exports. Obrador wants to maintain the current PEMEX monopoly and "turn inward", using the oil to produce refined products for domestic consumption or export. However, throughout his entire tenure, current president Vincente Fox tried to reform the PEMEX state monopoly and allow foreign investment without success. And would it make any difference? I repeat the warning by our unnamed PEMEX executive at the top for emphasis: "the next president [should] be told as soon as possible that we may soon not have enough oil for our own requirements and none for exports".

The Consequences?

This story is not meant to be comprehensive. My goal here is to touch on the main issues. But here's my take on what's happening.

If the anticipated decline in Mexico's oil production should occur in the next few years, it appears that the consequences could be

  • A possible collapse of the Mexican economy, which is already shaky. If some of you think we have an illegal immigration problem now, think again. It's not hard to imagine many more refugees from Mexico attempting to enter the United States.
  • The problem in the US would be two-fold. The refugee problem just mentioned and the fact that we've lost a large percentage of our oil imports in a world where there is no spare capacity. This could precipitate a crisis which, as far as I know, no one has anticipated or is prepared to deal with.
I hope TOD has some Mexican friends and they will not be shy about speaking out regarding this story. As far as I can see, the situation is bad and could spin out of control very soon.
I wish I could say "it's hard to believe how vulnerable we are" but time and again we keep seeing the signs of how close to the edge we really are.  I, too waited, but also stated for those willing to listen that even if the find approached what was announced it still wouldn't change anything.  We were just as vulnerable if not moreso by counting on this find as a salvation to our predicament.

"I told you so" won't be a very comforting statement from those of us whom have warned of the coming peril.  For the most passionate of critics and nonbelievers I only say that they will be "surprised" in a way that I am not.  It won't make life any easier but I won't being dealing with my own state of "surprise" as they will.  And I will be in action in ways that they haven't begun to think of quite yet.  

Good article. I worked for a company that is a supplier to Pemex. In fact Pemex was our largest customer. I was a design engineer for aproximately a dozen large projects, mostly around the Villahermosa area, and mostly natural gas compression. Several of the projects were crude oil. A very large crude oil pipeline project was cancelled while I was working there. I always wondered if it was due to depletion. Considering how they operate, I'm amazed they have made it this far.
This possibitity may, at least in part, explain the call in Congress for a large fence with armed guards on the US-Mexico border. The interplay of this depletion along with the problems at Ghawar get mind boggling.  It's like watching a horror movie while it's actually happening in real time. Even if PEMEX is allowed to take on foreign investors to locate more oil, it will  be years before we see any appreciable production- all while the worldwide depletion bomb keeps ticking.
Well! I didn't think about that angle.
This possibitity may, at least in part, explain the call in Congress for a large fence with armed guards on the US-Mexico border.
Worth thinking about, depending on your level of paranoia and how much thinking ahead these politicians are capable of...
Actually this was my first association. And I don't think the idea is paranoic - I actually think that when the cheap labor lobbysts become outnumbered by those fearing immigration flood, this idea will actually be implemented.

FWIW EU is tightening its borders, USA following suit is just a matter of time.

Frankly I don't see the relationship between Mexican oil production and emmigraion.  If crude production drops, Mexico will cut back on exports way before touching domestic consumption (c.f. Indonesia).

In other words, U.S. economy will suffer before Mexico's.  And the jobs that are bringing Mexicans here (construction, food service, etc.) will be among the first to go.

The Mexican government collects roughly a third of its total annual revenue from PEMEX. Of that, approximately 60 percent comes from Cantarell alone. If the field's production declines   anywhere from 8 to 15 percent a year going forward, you can bet it's going to have an impact on the 40 percent of the Mexican population already living in poverty.

Even if there are fewer jobs available here, that won't prevent a mass exodus to this country by those desparate for work.  

I live on the Arizona/Sonora border. The border fence has increased in size dramatically in the past year or so. From urban centers outwards, troops weld up used military landing strip sections, of corregated, perforated steel approx. 12' tall and 6' wide. These peter out about a mile outside town (leftover landing pads are now used up?), and one sees a collage of ugly steel used parts welded together.

In the arroyos, they lay a thick pad of concrete, and sink 4" X 6" steel posts into it, in an offset pattern which allows runoff and small animals to pass, but which is too close together for humans. And on the wide plains, they augment the 8 strand barbed wire (what's left of it) with steel railroad rails, welded up to stand at sternum level to prevent drive throughs. There is a dirt road on this side, and one on that side, and the Border Patrol tries to shadow the coyotes driving vans packed with people on the other side. And the biggest "improvement" is stadium lighting for several miles (and growing by 1/2 mile at a clip), to light it up and allow agents to track and catch some portion of the immigrants.

I see no evidence of the "triple fence" Congress is talking about.

I figure people will continue to pour through until employment stops growing and this country starts deporting illegals. If there are no jobs, immigrants will stop coming.

However, that is not what the administration and other major forces in this country want. Indeed, they want an armed fence on the southern border of Mexico. I believe that George Ure coined the term "Mexusnada" to describe the ongoing efforts to broaden NAFTA and create a single unified North American free trade bloc as a precursor to a single unified North American political entity.
create a single unified North American free trade bloc as a precursor to a single unified North American political entity.

How about this take:
Such a union, by refusing to join NAFTA, would wreck Bilderberg's long-standing goal of expanding NAFTA throughout the Western Hemisphere and evolving it into an "American Union" patterned after the European Union. The dollar would become the common currency of the American Union.

And the key part:
The dollar would become the common currency of the American Union.

As taken from a Twighlight Zone episode, Rod Sterling stands up and says "picture this, if you will, The USA removes it's borders to Canada and Mexico, Canada secures the most nothern of borders and Mexico secures it's most southern borders. Where the 3 countries are intertwined and enter into a NAFTA PLUS agreement as we enter the Twighlight Zone"

Nafta Plus

scary stuff! and this all started last August in the Waco Summit, (and would have been the topic of MSM) just before hurricane Katrina hit. But Katrina stole the thunder, and it was all brushed under the carpet.
This is why (as I see it) the administration has done nothing to secure the borders. They already know how this is going to play out. Oh, we can moan and groan, put up a Minute Man Project, but in the end, the politicians have it all wrapped up. We have no say/control on how this can be stopped. As far as the politicians are concerned, this Nafta Plus WILL happen!

Geez, we live in interesting times!  

If we let Mexicans to freely come and work in the US with with what little legal protections American workers have; minimum wage, workers comp, unemployment insurance, employers requirement to pay their share to Social Security and Medicare the number of Mexicans working here would probably go down. Opening the border is the last thing the Chamber of Commerce and National Association of Manufacturers want.
Hello Dave,

Speaking of paranoia.....or is it fact?  Obrador just released videos that he claims prove vote tampering:

I hope Mexico can find a way to settle the rising conflict peacefully.

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

Hello TODers,

Here is the latest update from the Washington Post:

AMLO unveils his Ammo

Shortly before midnight Monday, lawyers for the left-leaning former mayor submitted a formal challenge of nearly 900 pages and called on Mexico's electoral tribunal (similar to the Supreme Court) to demand a recount of every single one of the 41 million votes cast July 2.

If that doesn't happen, Mexico could see an "insurrection," according to one of López Obrador's top aides.

"The warning by Gerardo Fernandez Noroña, the campaign's chief spokesman, was the most explicit high-level threat that the challenger's struggle to overturn his razor-thin defeat could erupt in civil disobedience and violence," reports the Los Angeles Times, which had the benefit of late deadlines. "Fernandez said that if the seven-judge Federal Electoral Tribunal upheld the result without a full recount and allowed Calderón to take office, "we are not going to let him govern."
Mexico has historically been prone to revolutions.

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

Hello TODers,

Latest update from CounterPunch:
History is What Comes Next
Mexico Splits in Half: the Election Hits the Streets

A full week after the most viciously contested presidential election in its modern history, a Florida-sized fraud looms over the Mexican landscape and the nation has been divided almost exactly in half along political, economic, geographical and racial lines.

Mexico has always been two lands ­ "Illusionary Mexico" and "Profound Mexico" is how sociologist Guillermo Bonfils described the great divide between rich and poor. But now, should it be allowed to stand, right-winger Felipe Calderon's severely questioned 243.000 vote victory over left-wing populist Andres Manuel Lopez Obrador (AMLO) will split the country exactly in half between the industrial north and the impoverished, highly indigenous south with each winning 16 states ­ although the southern states won by Lopez Obrador, who also won Mexico City by a million votes, constitute 54% of the population.

Moreover, the disputed election pits an indignant Indian and mestizo underclass that believes AMLO was swindled out of the presidency by electoral fraud against a wealthy white conservative minority that controls the nation's media, its banks, and apparently, the Federal Electoral Institute (IFE), Mexico's maximum electoral authorities. Lopez Obrador charges the IFE and its president Luis Carlos Ugalde with orchestrating Calderon's uncertain triumph.

In Mexico, the past has equal value with the present and the memory of what came before can sometimes be what comes next. These are history-making moments south of the Rio Bravo. North Americans need to pay attention.

AMLO is encouraging the largest protest march in Mexico's history this Sunday July 16, and is also threatening to have all PRD officials exit their govt. positions setting off a constitutional crisis.

Buckle-up folks--this could get ugly.

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

buzzinator -

Looks like those detention facilities (an undisclosed number at undisclosed locations) that the Bush regime is paying $385 million for Halliburton KBR to build are going to come in handy after all once Mexico collapses economically and the cross-border flood begins.

And if that doesn't come to pass, those detention facilities won't go to waste. They can always be used as a gulag of mini Guantánamos for dealing with native-born  political dissidents.

Hi Dave,

I will be eagerly anticipating your post of Ghawar and Cantarell.

Two questions.  An article in BW about a year ago claimed that Mexico's reserves were only ~16 billion barrels.  Is that right?  It strikes me as a very low number given their current level of production.

Secondly, any ideas as to why Fox announced a 10 GB oil find without any confirmation?  Was this some sort of Mexican "October surprise," or something else?

Re: "October Surprise"

Apparently so in order to support the candidacy of Calderon.

I am working with Jeffrey (Westexas) on the Cantarell/Ghawar post. We will be trying to put something comprehensive together. Perhaps it will be done in the next week or so. As to Mexico's recoverable reserves, I expect that to be addressed in that forthcoming post.

best, Dave

I was recently working in Midland, and, as I can't stand modern pop rock and pop country listening mostly to a spanish radio station out of Big Spring. There were numerous employment advertisemts in spanish for oil service companies. In the last oil boom there were very few non-white employees in the oil patch.
   In that part of West Texas most of the Latinos don't speak spanish. I speak more than 95% and my language skills will just about let me order a meal or ask for a restroom without snickering. My conclusion is that Haliburton and Big Dog drilling were seeking documentationaly challenged workers for land drilling in Tejas.
   Some of this is because most oil field folks see the handwriting on the wall and aren't encouraging their kids to become oil field trash, and some because of the rapid expansion of land drilling jobs. But isn't it strange?
Thanks Dave.

This thing is really scary. I am especially worring about the sorry state of the Mexican government + PEMEX cabal. A small persuation is that those 61% loyalties rule out the bancrupcy option in the medium term, because the govt will do anything to keep its cash cow alive. But the disastrous management of government owned and corrupted state companies is a thing I am very well aware of and I would rather see PEMEX bleeded to dead. If history is an example, once oil production starts to decline the PEMEX will collapse with it - leaving hordes of "privatisators" to finish off what is left.

The problem is in fact in the Mexican govt, not necessary in the form of property. See Venezuella and Russia for properly managed or/and controlled by the state oil companies.

"...really scary." I have seen comments about the potential scariness of things cropping up here recently and find most of them annoying. Sorry to pick on you, LevinK, you just happened to say something at a moment I could be bothered to make this comment, nothing personal.

The future is, of course, hazy and uncertain, not fixed, probably impossible to see. But maybe I, maybe you, maybe one or two others here can peer into it and occasionally glimpse where it might be in a few months or even a few years hence.

If a little decline in Cantarell etc really scares you then best get a good supply of disposable nappies (despite their eco-unfriendliness) because the scares of the next 2 or 3 years are way off your scale.

On a totally unrelated and trivial thing, I was researching motor neuron disease and somehow happened on this potential cause of death:

Curious about what might be called 'excessive masturbation' I visited this page:

Brief experimentation with the parameters (though I left the health condition at 'very healthy') resulted in the following conclusions:
If you are under 28, 100x per week (probably more) is healthy
At my age of 52 even 1x per week is 'Slightly Over Masturbated'
...and if I reach 13x per week it says 'Too much'

IMO the site, as well as being a blatant misinformation and selling site, is written by a load of tossers.

Looking below I note from memmel: "Cantrell should start collapse at some point in the next two years" - it is already in significant decline (plenty of news and discussion on this since november 2005), the only question is how steep. As is Burgan (Kuwait), Da Qing (China), and maybe Ghawar (SA). Those are the 4 largest oil fields so far and probably ever to be discovered on this planet. I do agree that the picture should be a lot clearer within 2 years, if it is significantly clearer much sooner than that the news will not be good.

Yes, Cherenkov, those camps, and some that were built earlier, may be called into use in a couple or 3 years. You are not scaremongering.

I don't know what made you pick on me since by the standards of this site I could pass as an optimist. Actually my only real fear is the reaction of the country I live in (US) to what is about to happen.

I think fear is the natural response for preparing for the future. Personally I expected or hoped that PO is several years away and the declines would be moderate. I find this Mexican situation particualarly alarming because of the following:

  1. It comes in a moment when some people are waking, few are preparing but nobody is truly prepared
  2. It comes in a moment when we have a strongly militarist cabal holding the power in Washington
  3. It happens in a neighbouring country which besides the potential for flooding US with immigrants is viewed by the hawks here as an almost US territory. BTW does Mexico develop WMD? Let them prove they don't.
  4. The critical resource we have differentiating the best with the worst scenarious is time, and it turns out we don't have that much.

In addition the sorry state of the Mexican oil industry convinces me that they are very likely to experience a total production collapse which inreases all these risks mentioned above. So, if you don't mind I do think there are reasons to be worried about.
It could have been anyone who said that they were scared by something relatively trivial. I see that the deeper implications were the things that worry you, though I would say that the relatively rapid decline of Cantarell is, of itself, not a particularly troublesome event.

Reading between the lines of your four reasons above it would seem that what you most fear is the current US government, that is probably very wise ;)

In my country we have the saying: "One evil never comes alone"
There is a lot of wisdom to it as many times bad things tend to happen at the same time due to some covert and nasty reason which has been hanging around for a long time without anybody taking it seriously.

Now in this case I see many things that seem doomed to happen simultanously or almost simultanously:

  1. North sea collapsing (already a fact)
  2. Cantarrel entering terminal decline
  3. Ghawar most certainly following in
  4. Tar sand, heavy oil projections proved unrealistic
  5. NG in North America on the brink of collapse
etc etc...

Well in another world one might say that this should be a pure bad luck we have those arriving almost at the same time, but I hardly believe coincidences - for me the underlying reason that has been hanging around is that simple human greed, causing us to overproduce and overexhaust our non-renewable resources. It is hardly a surprise it all comes down at the same time if everybody has been driven by that same motive.

Now consider what will happen if all those strings tear up in the next 2-3 or even 5 years. This is hardly a timeframe allowing anything rational as a mitigation response and I can see the superpowers drawing out their guns and the worst of all possible scenarios coming true.

Now in this case I see many things that seem doomed to happen simultanously or almost simultanously:

North sea collapsing (already a fact)

Cantarrel entering terminal decline

Ghawar most certainly following in

Tar sand, heavy oil projections proved unrealistic

NG in North America on the brink of collapse

etc etc...

Are these ingredients for a perfect storm?

NG in North America on the brink of collapse

I expect to see declines, but not a collapse in North American NG production. Many new wells are "long & slow" recovery,  Tight gas, coal bed methane, depleted wells that keep leaking a bit of NG.  Plus some new fields (Encana and Nova Scotia came to an agreement on a new offshore field recently).

So declines, yes.  Collapse, no.

A major program to install solar hot water heaters (in almost all new buildings and tax credits for existing) plus massive wind investments (reduce water heating & electric useage) would make a larger difference.  Add some supplimental solar space heating and no problem.

And LNG imports may not meet plans, but they will increase.

Well I see somebody fancies themselves quite the fearless badass.



And Agric says (in effect)

Mexico peaks and declines rapidly, no exports, where will the imports come from? Not to worry! The US loses about 8% of it's imports. No problem! The Mexican economy is propped up by siphoned off revenues from PEMEX. Those revenues are lost. Who cares? Some Mexicans suffer? Not my problem! Refugees in the US? They'll mow my lawn for peanuts!

What, me worry?

I think what Agric is trying to say is given all the other factors of overall decline in the picture, Cantarell is just one aspect, and even if that can be avoided there is still a lot of hurt coming in the next few years
If a little decline in Cantarell etc really scares you then best get a good supply of disposable nappies (despite their eco-unfriendliness) because the scares of the next 2 or 3 years are way off your scale.
Yes, I think I misinterpreted his remarks.

On the other hand, the decline of Mexican oil production to the point where they are a net importer, given that PEMEX revenues subsidize their government programs and economy, is one of the more realistic and scariest scenarios I can think of in the near term future, 2 to 3 years out. I agree that worse things could happen during this period but this crisis is just staring us in the face. And as an American, it hits rather close to home. The problem should not be minimized for any reason.

Apologies to Agric but he should not take an extreme position in order to downplay the magnitude of this problem.

If Mexican production doesn't meet domestic demand, they can switch to natural gas! Right near my home, a huge El Paso pipeline runs under the border and becomes Pemex. All they have to do is switch over to norteamericano gas, and they'll skate along just fine! ;)
Yes, Xironman and Dave (on reflection, no offence taken, your gracious apology accepted) are mostly right about what I meant. But I do also mean to belittle the real importance of the probable Cantarell decline. Even bad case Cantarell projections could be fully mitigated by US drivers correctly inflating their vehicles' tyres.

Even if the global peak was now and the decline rate in conventional and non-conventional oil was as high as 5% we humans could change our ways radically and things could turn out pretty OK.

Cantarell is just a relatively small glitch compared with others coming soon. Peak oil is a big problem, humanity on a global scale has never faced the problem of a reducing supply of energy. It will probably break present economic systems and more besides.

But peak oil is not the real problem, that's we humans: the way we think, act, feel. We will change or we will directly or indirectly kill one another until the supply of energy and resources is in balance with the survivors' perceived needs.

Hello TODers,

Just a quick warning again--have you bought a used scooter to protect yourself in case of a sudden oil shock?  Don't wait until a used scooter costs $6,000 or more, and a new one might set you back $10,000 until production ramps up.  Recall my post where the leading component of Zimbabwean inflation was bicycles.  As Jay Hanson warns:  Be a NOAH, build an ARK!

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

Howdy Bob,

What do you think:  I've been mulling over the idea of a business 'personal energy conservation'.  Part of it - alternatve transportation, mainly electric bicycles.  I think there is a limited market for these, but a market nonetheless.  I don't want to sell cars, I mainly want to educate people across a broad spectrum of possibilities, and facilitate Powerdown in our suburbia/SUV world.  Compact fluorescents ALONE could make a huge difference.  

I haven't even decided for-profit vs. non-profit.  Investors vs. grant money.  Both seem to have advantages.  Obviously, all of us here agree there is HUGE potential.  Buy a lot of stock/inventory ( electric bikes ) NOW?  Your post re. 'buy scooters now' made me think...  That's my feeling, too.  It seems like TS is really begining to HTF.  Kuwait, Mexico, Saudi Arabia...  I'm busy 'Working for the Man' thru August, and am feeling right now that that's almost too long to wait - Fall -to act on this...

I share these ideas with people and they look at me like I'm talking about aliens...  When it happens people are going to be SO UNPREPARED.  

I've been thinking about your idea of Pacific NW people 'sponsoring' desert SW people...  It doesn't have a lot of support up here...(I'm living in Portland, OR, home of the 'cheapest energy in the nation' according to recent reports about GIANT Google and Microsoft search engine 'farms' going in up here)

However, when times become desperate, desperate actions will ensue...

Surf now, think later...


Why not begin with what you most love and understand:
  1. become a surfing instructor, then
  2. branch out to selling surf boards and windsurfers, next
  3. sell sailboats and electric bikes.

I think it is a good idea to follow your bliss.
Problem is, GW and DC are apparently following their bliss.
We ordered an electric e-GO electric scooter a few months ago, which we can run off spare PV capacity. But they are major backordered, and I wonder when we'll ever see it.

Given the tiny market share of all "alternative" energy and transportation products, any largescale shift in demand can utterly swamp them, and the waiting lists could be interminable.

So if you are interested in any of these things, go for it now!

Just learned that one of those Google farms is going to be built in Ann Arbor.
Cheers to Dave for a great analysis. Cantarell, Ghawar, Burgan... the perfect storm?

I don't see that the crew running the US government are going to come up with any sort of effective national response. Action at the level of cities, counties, and metropolitan region may be the biggest determinant as to how traumatic powerdown will be. Local policies that create sustainable transport networks, replace imported goods with local ones, create energy-conserving building codes, secure electrical power and the integrity of the grids, and preserve good farmland for food production will serve us well in the near future.

The discussion of scooters and electric bikes prompted a thought -- peak oilers should get involved in local bicycle federations, and push for creation of local bike networks. Bike networks are a low-cost, near term solution, mostly involving striping lanes on roads, and gives folks a low-cost, sustainable transport option. Worldchanging had a recent article on the success of Davis, California in creating a bicycle-friendly city; 17% of Davis residents commute to work on bicycles. Not quite as impressive as Copenhagen or Amsterdam, but head and shoulders above any US city. Thunderhead Alliance is a national bicycle and pedestrian organization that assists folks in starting up local bike or pedestrian organizations.

My problem with bikes (including electric ones) is the limited applicability. Personally I don't think that even 1% of the passenger-miles fall into the category when you actually may use a bike - say distance within 2-3 miles, no luggage (shopping excluded!), no rain/snow/hot weather, no time pressed, physically fit biker, no companions, clothing restrictions etc. On a larger scale I see bike's contribution to be very very marginal at best.

IMO we should emphasize on the mass transit and perhaps using a larger number of small and fast buses (10-12 seats) would be the best start.

A while back I wrote ... "an episode from an earlier Changing Places series, on the National Cycle Network, a web of 10,000 miles of cycle paths across Britain. An interesting tidbit here (if I heard it correctly) was that while Britons cycle for 2% of their journeys, Danes (in far worse weather) cycle for 20% of their journeys. Do I cycle half the time because I'm half Danish? Is there a cycling gene? Experiments to follow ... (this is my attempt at BBC-style humor)"

The bbc radio programe is still available here:

FWIW, having experimented a bit, I think if you start walking and biking you find more within that 2-3 mile range than you notice as a car driver.  Within 1 mile I've got parks, a Japanese Restaurant, video rental, cleaners, Taco joints, Supermarkets, ...

Miami 2014.  First of two waves of new elevated Rapid Rail (subway type) is open. 55% of population within 3 miles of a station, 25% within 2 miles.  (After second wave is finished in 2023, 90% and 50% without the "the other TOD").

Fuel costs (insert large number) !

Miami Metro converts 1/4 of Park & Ride spaces to bicycle parking with security.  Auto Park & Ride is overwhelmed but always room for more bikes.  Bus service cut due to high cost of fuel and strategic decision to spend limited $ on finishing Rapid Rail ASAP instead of bus service.

Large employers add showers & changing rooms.  Also limited capacity public showers & changing rooms added at some Metro stations.

What % of commutes become bike-rail-walk ?

My GUESS, 6% to 10%.  Total rail commutes (walk-rail-walk, drive-rail-walk, walk-bus-rail-walk) about 40%.  1/4 to 1/7th of rail commuters arrive by bike.

Miami 2024. 90+% within 3 miles of a station.  Fuel ++++ Bicycling culture "takes hold".  Perhaps 30% by bike (including old folks electric assist trike, which becomes a stereotype & standing "joke").

IMHO, 15% to 20% of the population will live within 4 blocks of a station.

Different #s for Minneapolis >:D

Biking in Miami? At 120 degrees? I would agree with it if there were showers at the work places, but what is the realistic percentage for the employers that will do it?
In Miami today, 88 F high, dew point 72 F, current 75 F at 11:43 PM, low this morning 73 F.   Likely 7:30 AM temp 75 or 76 F.
Sorry for not checking my statements - was just assuming it is hotter than in St.Petersburg (where it was constantly at/above 100 during my stay).

OK, probably not valid for everywhere/everybody, but at least for me biking, most of the time is out of question in the hot and humid climate here on the south.

100 what? It doesn't get that hot in Florida.
It ain't the heat it's the humidity. A lot of people mistake "good weather" for a lack of snow. I appreciate that a lot of people like Florida, but without air conditioning the climate IMO is pretty nasty.

I agree public transit deserves more support.  I'd like to see rail expanded, especially light electric trains.  But I despise the foul diesel buses that plague our streets.  Perhaps your smaller buses would be more pleasant though I don't see as much need for them.

I live in Chicago, a fairly big city with four seasons and a lot of traffic.  I am a 42 year old man with a progressive neuromuscular wasting disease that makes me weaker then men twice my age.  Fearful of prematurely ending up helpless in a wheel chair I decided to become more active by driving less and biking more.

I've been successful enough at it that I've stopped driving completely for several years.  My driver's license expired in 2003 and I haven't bothered to renew it and don't expect I ever will.  I travel roughly 100% of my trips by bicycle or tricycle, 365 days a year.  I occaisionally take a train or a bus, but I go with a folding bike because walking to/from the stops is too difficult for me.  When I travel by air I also take a folding bike to have local transportation at my destination.

I've completed several projects at home, remodeling a bathroom, building a greenhouse, etc. hauling materials and appliances home on my bike trailer.  I do my shopping for groceries, clothing, welding supplies, etc. and other errands like taking my dogs to the park and the vet, socializing, going on dates, etc. by bicycle.

I'm sure you can come up with examples of folks who can't do this, such as those without a useable arm or leg and those that can't afford a rain coat or galoshes but they make up less than 99% of the population.  I'm curious why you believe that less than 1% of passenger miles actually fall into the bikeable category?

As for electric bikes, as I've become weaker I started to explore assist systems.  I've built several electric bikes, my most recent has a top speed of roughly 40 mph and a range over 100 miles at 30 mph with modest pedaling.  I get around town much faster and more conveniently than I ever could by driving.  I usually park by the door of most places I go which is nice because as previously noted I'm not good at walking.

I'm working on building an assisted/self powered bike trailer that will be controlled by modest pressure on the hitch and have a 1000+ lb cargo capacity.  This will be my SUV and enable me to haul a great many things such as construction materials, compost, manure, etc. that most folks with SUVs are unable or unwilling to haul.

I've also been slowly acquiring the pieces to let me build a  suspended enclosed pedalable electric assisted recumbent tricycle.  If I get the aerodynamics right and can purchase sufficient battery cells from A123Systems or another manufacturer with an equivalent battery for a reasonable price, a range of 200+ miles at 60+ mph should be doable.  I'm getting by fine without that level of performance, but it should be fun and a good demo to show what's possible.

But ignoring the high tech, even the most basic old steel framed single speed bicycles are capable of far more than you realize.  In my spare time I volunteer for an organization called Working Bikes Coop that gathers and restores unwanted bikes and sends them overseas to the poorest regions in the world.  These bikes are cleverly put to a variety of uses from basic transportation to hauling crops, cultivation, planting, pumping water, grinding grain, churning butter, making soap, washing clothes, powering generators, ... With simple parts these bikes are converted into trailers, wagons, wheelbarrows and stationary power sources that allow people to use leg power instead of hand power to ease doing many essential tasks.  When the majority of people on this planet have gotten by fine with the equivalent of a bicycle or even less, just their legs, why would you believe that only 1% of trips can be accomplished by bike?

While I expect some difficulties I'm looking forward to the challenges that peak oil will bring.  Most of the changes I've experienced transitioning towards a post-peak lifestyle, like less time spent watching television and idling in traffic jams and eating better quality food that I grow myself have been beneficial.

The single biggest downside of bicycling has been coping with traffic, especially the predominantly higher speed traffic outside of the city.  If peak oil causes motorized traffic speed and density to be reduced or increases the number of cyclists then it will be an improvement for me.

Todd Allen

Inspiring story - thanks.
Todd, I agree that for the most cases, where there is a will there is a way.

But 95% of the people of this country need a car or faster transportation to get to their work some 10-20-30 miles away, and 99% want a car so they go for vacations, be free not to waste hours for getting from here to there, driving their kids etc. etc.

Personally I lived comfortably 25 years of my life without one, and hardly evem wanting the trouble, and if I considered I had a choice after moving to US I would have preffered to go on like this. But even then I preffered mass transit because it was convenient, much faster (for the average distances of dense residentials) and relieved me from the trouble of biking or worring for my life on the streets.

A modern mass transit for the US conditions and distances IMO will include numbers of small shuttles/vans (imagine something between taxis and buses, probably NG fueled and/or hybrid driven) that will cover the long distances here for not much longer than a car, and will not worsen the traffic to that extent. In Atlanta for example you can hardly use a bus for anything - they are arriving each 45 minutes at best and are not servicing some 80% of the metro area. Increasing their number in a traffic which has already reached a unbearable level I would deem madness. Unfortunately bikes are not an option for almost anything but sports or recreation in the climate and the air quality here.

That's where the electric bike comes in.  I'm in Atlanta and I'm planning on getting one.
How about electric scissors. Think about how much time that would save you. C'mon people.

Although I'm annoyed by OIL CEO's sarcasm, in a way he's right.  Commercially available electric bikes just barely cut it.  If you are fit spending the same amount on a conventional bike may provide as much or more utility.

Cheaper Ebikes use lead acid batteries which have poor energy density for their weight.  They have terrible range or they are sluggish and heavy.

More expensive ones using Nimh batteries still have modest performance because US federal law limits assisted bikes to a top speed of 20 mph and a max of 1 hp or it has to be classified as motorized vehicle.

What you'll typically find are bikes good for 15 to maybe 20 mph with a range of 10 to maybe 20 miles of useful assist before the bike then becomes heavier and more sluggish than unassisted bike.

Most of the published range figures are optimistic, assuming a fresh fully charged pack under good conditions, ie smooth, flat pavement, low wind, moderate temps, etc.  Divide the published range by half and use the low end of their quoted speed range to evaluate whether the bike will likely be useful to you.  Test ride as extensively as possible before buying.

My most recent ebike started out as a $2500 mountain bike that I bought on clearance for $1600.  This provided a frame and components able to handle the weight and speed.  To that I added about $200 to stiffen the suspension, $400 for a motor and controller (wholesale cost), $100 for instrumentation, $1200 for batteries (wholesale) and $450 for a special geared crankset to allow me to pedal at a reasonable cadence at 40 mph.  Add in time spent welding, fabricating, wiring, etc. and I've got about $5000 into this bike.  To finish the 60 mph 200+ mile trike will take twice as much.

But quality bike frames and components have a very long useful lifespan.  For the second year I'll spend about $25 on electricity and $35 for brake pads.  Next year will  be similar, maybe add in a set of tires.  The year after that I expect to replace the battery pack.

Replacing a car its quite a bargain, though it's not about the cost or even the energy independence - I'm still dependent on replacement batteries.

I prefer it as a way to travel.  Unlike a moped my bike feels good to pedal and when I feel good I push hard and get a great workout while traveling.  When I don't feel as energetic I contribute less and still get where I need to go.  I enjoy the seasons and the weather and take satisfaction from experiencing the elements without suffering by dressing appropriately.  I like being able to use busy thoroughfares when needed and the rest of the time using a mix of side streets, shortcuts through cul-de-sacs, bikepaths and forest preserve trails.

With a car to get off the beaten path one must drive out to the wilderness.  I can do it while fetching a loaf of bread.

"But quality bike frames and components have a very long useful lifespan."

If they don't get stolen.  :-(

Pedaling isn't that hard, so I'm saving electric power for something that also offers protection from the weather.

I see that as the most major obstacle for buying an expensive bike in poorer countries. Probably annoying and solvable, but a true problem still.
I'm not that fit, nor very young, and what you describe as a way to travel is what has appealed to me, along with cutting way down on my car use.  I have done some test rides.
I was at Working Bikes co-op on Western Avenue last year (I lived a few miles south down the street) when I was looking for a frame to make a single speed fixed gear bike. Neat place! I wish you had longer hours so I could check it out more often.
The most inspiring post I have seen here !

Would you mind if I copies it and sent it elsewhere ?

Best Hopes,



Thanks!  Sure repost freely.  Anything I write on the net to a forum I expect can end up anywhere or be read by anyone.

I agree with your emphasis on rail and enjoy each of your posts on it.  I believe expanding rail would solve many problems.  We only need look at the past to see how efficient it is for long haul freight and urban commuting.  I expect new high speed rail service could also displace a lot of short hop airline service.

My utopia would have conventional bikes, electric bikes/trikes and small electric cars all of which can be easily ridden or driven onto high speed electric trains for travel between cities.  And the bikes of course would go on commuter trains within cities too.

This vision doesn't have to wait for new tech like fuel cells or finding new ways to turn coal, shale or biomass into liquid fuels.  We have lots of ways of producing electricity and we know how to build electric trains.  Current battery technology can build small electric vehicles with respectable performance.  With a recycling infrastructure put in place as we have for lead acid batteries, the environmental impact and the cost of newer batteries like liion would be reasonable.  I expect this recycling infrastructure will come about regardless to handle the ever growing number of liion batteries in cell phones, pdas, laptops, cordless tools, etc.  Packs to power a bike can be made from the same cells used to power a laptop.  It just takes more of them.

I can't build railways.  And I don't know how to sway the government to spend more improving our country (they might have to cut back the military budget) so I focus on bikes, gardening and the other little things I can do immediately.

I'm a great believer in technology.  But I think it prudent to live our individual lives and as a society sustainably within the limits of current technology.  If something like fuel cells of fusion doesn't pan out on schedule it shouldn't lead to a crisis.  We should tax consumption of finite resources heavily in proportion to their rate of exhaustion to encourage transition to alternatives.

Don't forget the detention camps that Halliburton has been contracted to build.

Some argue that these camps are not related to possible floods of immigrants from Mexico but rather are in preparation for domestic unrest.

Either way, interesting preparation by our relentlessly fascistic republican govt.

Yeah. In case you hadn't noticed - the Supreme Court pretty much fucked the Bush Admin's plans on the Gitmo last week.

Today, The Bush Admin apparently capitulated and agreed to at least article 3 of the Geneva Convention.

While I certainly didn't predict these occurences, I am definitely the only one here who held faith that this would happen. Sorry. Go scour the record. You'll find it.

Eagerly awaiting your response which never comes.

Oh shit. July 12th. Halliburton loses Army No Bid Contracts. Oh you are so fucked. You're whole plan depended on that shit. What are you gonna do without The Big H's No Bid Contracts.

What are you gonna do? If you are having trouble inventing a new conspiracy, call me, I've got some movie-script ideas, I just don't know how to write a script. I'm sure you can help in that department.

Not much talk about Gitmo changes last week here. Wonder if Halliburton deal will be discussed much. My guess is that most conspiracy theorists will likely stay away from reality.

Oh forgot a link regarding the Halliburton detention camps:

I guess the most interesting part of this to me is that there may be a lot more oil in Mexico.  It appears that there hasn't been much E&P in recent years.  Yet like Iraq, if you spend all of the money before the oil comes out of the ground how do you get the oil out of the ground when the bills come due?
What we need is data on exploration.  I don't think that there are vast tracts of land with the cap rock geology that have not been explored.  Cantarell is an indication that offshore exploration has been carried out by Mexico.  I suppose that going out into deeper water holds potential.
The WSJ article on Cantarell, based on leaked internal reports, suggested that the worst case decline rate for Cantarell is up to 40% per year.

IMO, the Ghawar/Çantarell story is important because the world economy is hanging by a thread suspended from two wobbly poles--these two oil fields, on opposite sides of the globe.

2007 and 2008 are going to be intresting years.

Cantrell should start collapse at some point in the next two years.

The results of the SA drilling will start coming in.

Two more years of FSU production numbers

Not long before we really know exactly whats going to happen next.

Glad I have not bought a house.

I'm glad I refinanced my house at 4.15% interest/15 yr. locked loan three years ago.
Darn, I got 4.5% 15 year and I thought I had done about as good as could be done.
my wife and I built an adobe house for under 10K and don't owe anybody anything.
Unfortunately, I couldn't do better than 5.875% on a 20yr fixed last month.

Interest rates jumped 0.75% while I was looking for 4 months...

Oh well, at least I didn't morgage myself into a grave and budgeted for $3.50 average gas prices this year (starting to wonder if $4.00 would have been better?)

Hello Memmel,

Wild speculation on what happens next?

It would behoove the Mexican vote crisis to simplify their societal organization by the poor oil-producing states forming a internal Mexican OPEC as Cantarell starts crashing.  The coming export truncation to the US is inevitable [unless the US interferes], but the poor states charging high prices to the richer northern Mex. states is the obvious way to equalize incomes and drive internal mexican conservation.  It would allow smoother political functions and decrease violence too as biosolar powerdown drives would be greatly enhanced.

This is similar to what I have posted before on AZ being dependent on TX & CA pipelines.  If AZ can go proactively biosolar, the occasional pipeline shipment from the dominant states will allow the spiderweb to remain functional much longer than if normal market policies prevail.

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

Link to the WSJ article, please?  Thanks.
The article is here, but you must pay:

Note that is was published on February 9, 2006.

Google for "Mexico's Oil Output May Decline Sharply" to find a free version of the article at another site.

I don't know how much of this report is allowed.  The WSJ based its story on an earlier report that was supposed to be at least semi-secret.

The report below came out earlier than the WSJ and appears to based on the underlying report also.  Sorry I can not provide a link.

Mexico & NAFTA Report
Copyright 2006 Latin American Newsletters

January 17, 2006

THE OIL INDUSTRY: Boom to bust?

The next government will have to make some difficult decisions about the oil industry. The decline in the country's main oilfield, Cantarell, is much more rapid than had been forecast. Under current projections, in 2008, the field will be producing only a quarter of what it has been producing over the past five years.

Over the past 20 years, Cantarell has been the world's fourth biggest oil field, producing over 2m bpd. Cantarell has supplied around two-thirds of the daily production of Petróleos Mexicanos, the state-owned oil monopoly. Mexico is the world's sixth biggest oil producer. The problem is that it is producing much more oil than it is finding. Ranked by reserves, Mexico comes 14th in the world league.

The latest projection from Petróleos Mexicanos Exploración y Producción is that in 2008 Cantarell's production will average only 700,000bpd while in 2009 output will drop to 520,000bpd. The concern for policymakers is that if this happens, Mexico will stop being an oil exporter. Currently the country produces about 3.3m bpd and exports about 1.8m bpd.

There are major differences between experts about how much oil Mexico has. The government and Petróleos Mexicans claim that reserves top 50bn barrels. The Oil & Gas Journal reckons that reserves come to just 14.6bn barrels. This means that at the current rate of production Mexico would exhaust its reserves in 12 years. Saudi Arabia, by contrast, has reserves for 81 years. The difference is caused by the government's inclusion of reserves that are proven to exist but cannot be worked with current technology.

What experts do agree on is that production from Cantarell is set to plummet. The big question is whether Mexico can find new oil reserves to stop its overall production collapsing. If Mexico's overall production collapses there will be major implications for government spending. In 2005 the government enjoyed windfall oil revenues of M$100bn (US$10bn), according to Alejandro Werner, head of the planning unit at the finance ministry.

The big issue with Cantarell is the increased presence of gas in the field. This appears to have been the result of a short-termist plan for keeping production from the field up. In the past three years, the state-oil company drilled over 50 new wells in the field. These enabled the company to keep production up but in the longer term such overexploitation will mean that less of the field's oil reserves are recovered.

The initial forecasts for production from Cantarell in 2006 were for 2m bpd, but these have already been cut. Production is now scheduled to open the year at 1.9m bpd and fall to 1.54m bpd by the end of 2006. The average production will be 1.748m bpd, or over 250,000bpd less than initially forecast.

Pemex has been hoping that increased production from newer fields will obscure the problem caused by the swift decline at Cantarell. It is expecting to add 650,000bpd from Ku-Zaap-Maloob and the Chicontepec project. If it hits this target the overall fall in crude oil output will be about 850,000bpd.

The worry is that although policymakers and petroleum geologists assume that the unexplored deepwaters of the Mexican part of the Gulf of Mexico are brimming with oil, little has actually been proved to exist. Although Pemex is starting to find more oil it is still quite a way from new discoveries matching production. The average new discovery rate over the past decade has been less than 10%, though now it is getting closer to 40%.

The government's reliance on oil revenues to balance the budget (oil revenues provide the government with about 40% of its total revenues) means that if there is a major drop off in production over the next six years, there could be another economic crisis looming by 2012.

Pemex's managing director, Luis Ramírez Corzo, says that the company is making progress on addressing its problems. He said that two crucial things had happened in 2005. First, Congress approved the new fiscal system for the company that should allow it to retain more of its revenues. This should mean that it can invest more in developing new fields. Previously Pemex handed over virtually all its profits to the government and then borrowed from the international capital markets, with a government guarantee, to finance new projects. Ramírez Corzo said that in 2006 alone the company would save US$2.3bn, which could either be used to reduce debt or to pep up new projects.

The second big change is its move into electricity generation in partnership with the Comisión Federal de Electricidad (CFE). The company has already started on its first US$350m project. The idea is that Pemex will either use the electricity it produces itself (it is refurbishing three refineries and building another new one) or sell what it does not use on to the CFE.

Ramírez Corzo is bullish about the company's prospects. He said that the ratio of new discoveries to production should rise to two-thirds this year. Pemex claims to have the world's third biggest reserves of oil but analysts say that a lot of the claimed resources are in fields that are geologically impossible to work with given current technology.

Inefficient: It is worth noting that by world standards Pemex is hugely inefficient. Among major oil companies, only PetroChina employs more people than Pemex's 138,215. The company's average income per employee was just under US$405,000 in 2003. ExxonMobil, the world's biggest oil company, employs only 88,000 people and its revenue per employee is more than six times Pemex's at US$2.53m. Worryingly, for policymakers, Pemex appears to be using the high oil price to pad its payroll even further. In 2004 it took on almost 4,000 new employees and it is likely to have hired more in 2005. On top of this, Pemex also has a hefty number of pensioners: 69,000. The number of pensions is likely to rise sharply as Pemex's ageing workforce takes advantage of the rules that allow retirement at 55.

Balance sheet: Pemex's balance sheet is a mess because of the way the company has been run as a cash cow by successive governments. They swipe its income and load it down with debt. At the end of 2004 the company had assets of US$90.4bn and liabilities of US$85.2bn. Under US Generally Agreed Accounting Principles (GAAP), Pemex would be bankrupt.

Gas: Pemex increased its natural gas production by 1.7% in 2004. Mexico's demand for natural gas, however, increased by 9%.

Thanks for posting that.
I was at Agua Azul [an extremely pretty white travertine dominated series of blue waterfalls near Palenque in 1979. I watched a couple of tents blown over while a group of PEMEX bigshots flew in on fleet of three large transport helicopters. Efficiency? Agua Azul did not have a damn thing to do with oil producion. Just sight seeing in style at the public's expense. My guess is that PEMEX could not have cared less then and that is probably as bad now as then.
Good lead into a story that will become much longer and interesting, soon. Remarks:

1/ I have no time to look it up now, but I do know that Canada, where I reside, has obligations under NAFTA to sell the US a share, I think defined as a percentage, of its oil production. Even if we freeze to death, we still have to do that. Hard to believe that is not true for Mexico as well. No oil for export? Tough, Juan.

2/The election stories are coming in fast. Ballots found in landfills etc. Obrador once paralyzed a province in protest over an election for a governor's post. He may well repeat that nationally. Before the election, of course, it was obvious that the US had too much at stake to sit still. They haven't.

A possible scenario assuming an URR at 74 Gb (probably generous) and a constant consumption per capita at 6.5 barrels/capita/year:

The next few years will be critical for the Mexican production (and the US!) and great pressure will be put on the Canadian exports if ever the Mexican exports are falling!

Holy Shishkebabs!

Actually, though, I'm partial to Donor Khebabs.

What kind of a khebab are you? Of all the Turks I have ever met, I have liked every single one. But I also like Greeks. In fact, the only nationality/ethnicity that I find truly obnoxious are the Saudis.

I have found that if you treat people right, after they get to know you, most of them will treat you right. I'm one of the few people I know with more than six friends from Israel and six Palestinean friends or acquaintances.

We sailors get around . . . .

Eyeballing the numbers, that graph only appears to be a 3% decline curve.  Isn't Cantarell (& Mexico as a whole) expected to decline faster than 3%?
It's probably a little bit optimistic. The Hubbert linearization gives a logistic decline rate around 7.4%:

Khebab, I really apppreciate your work. I find your production curve confusing however. If you look at PEMEXs own numbers you find production at its greatest around mid 2003 with a gradual fluctuating decline since then. I think the charts would be more representative using their own numbers, which reach all the way to May this year and will be updated again next week.
I used BP data (2005 statistical review) where the 2004 production  is at peak at 3.824 mbpd (crude + condensate). The last BP review (2006) shows a decline 2005 (3.759 mbpd) probably due to the hurricane season with a big loss of 200 kbpd in July 2005. Note that BP numbers are coming from PEMEX.

It seems that production has reached a plateau around 3.8 mbpd. If production stays the same this year, cumulative production will reach 51% of the URR.

Precision: the last point on the BP curve (in red) is the mean of the PEMEX data for the first five months of 2006.
Thanks. I was mainly confused about the first graph which showed a peak around 2007 when I think it's clear production has been very slowly & erratically declining since late 2003/early 2004. Without the hurricanes, 2005 would probably still wind up less than 2004 (I did calcs at the time but don't have them handy), but very close.
"If production stays the same this year, cumulative production will reach 51% of the URR"

Khebab, where does your URR come from?  Is it a projection of the HL graph or is it an official reserve figure?

If Cantarell is about to start declining at between 14% (official figure) and 40% (Jeffrey quoted this the other day), then what does the URR look like if we project that decline?  Would it look similar to the Yibel production from the other day?

Also, can you please point me to the statistical data for fields like this at BP?  I'd like to have a closer look at some of the top 10 fields.

See my blog (here) for details about the URR estimation. The HL gives 72 Gb (see figure above). My cumulative production in 2004 is maybe a little bit too strong (should be around 26 Gb instead of 33.9) so the URR should be around 72-8= 64 Gb. ASPO estimate is 50 Gb.

If Cantarell is about to start declining at between 14% (official figure) and 40% (Jeffrey quoted this the other day), then what does the URR look like if we project that decline?  Would it look similar to the Yibel production from the other day?

It's a good question, I don't have Cantarell production profile but future production decline could be simulated from PEMEX reports.
Also, can you please point me to the statistical data for fields like this at BP?  I'd like to have a closer look at some of the top 10 fields.

There is no data on individual oil fields production in the BP dataset.
According to PEMEX reports:
Total cumulative production (December, 31 2005): 33.56 Gb
Cantarell cumulative production: 11.67 Gb
Cantarell production (2005): 0.743 Gb= 2.04 mbpd?
The original OIP estimate for Cantarell was 35Gb.  If 50% (an optimistic recovery estimate) is recovered, then the URR should be 17.5Gb.  So the cumulative production of 11.67Gb would be 66% of Cantarell's URR.

Again this points to the HL plot being too optimistic.

It means that more than 50% of the production will have a rapid decline and the rest should follow the decline rate given by the HL.
khebab, what do you mean by this?  Do you mean that the production will rapidly decline down to 50% and then the decline rate will lessen when it 'meets' the original Hubbert Curve?

Why should the decline slow?  Are there other examples of this happening?

I have actually a post coming out in the next few days about Cantarell and Mexico. I compare the HL applied on the total production and a two-stage HL (Cantarell + Other Fields). The logistic decline rate of the "other fields" category is close to the value obtained for the HL on the total production whereas the decline rate for Cantarell is much higher. The two-stage HL is strongly affected by Cantarell decline leading to a smaller URR for the overall production.
Today's (July 10th) Wall St. Journal had an interesting front page article on Gulf Of Mexico insurance that contrasted strongly with Barron's "no worries" Saturday article.
The Wall St. Journal had a deal to buy an oil platform fall through when the buyers found out that their estimate of 2 million dollars for insurance was going to be 25 million.
Hurricanes missed Cantarell and Houston last year. Let's hope they miss again.

I know a lot of production was not restarted if it was to badly damaged by hurricanes in the gulf.

How would a hurricane effect Cantrell lets say if it was a direct hit. Would the field in its current depletion status be worth bringing back ? I assume the nitrogen injects has to be extensive to continue pumping it.

Just wondering

Honest :)

If a category-five hurricane (a la Hugo, Katrina or Rita) struck the cantarell region, this is what would happen to the U.S. economy:


Or maybe it would look more like this:

I shouldn't do this, but I'm going to be juvenile and say that I told you guys back here and here that Fox's claim was very dubious.  (My insider was dead on with what he told me).  

Never believe a politician, especially with an election coming up.

Oh, and thanks Dave for keeping us informed on this.

I only wish I could share with you all of the crap I am seeing that we in the industry are referring to these days as "investment opportunities".  

Hi Bubba. Nice to hear from you again.

I feel like quoting some song ... but I can't figure out the right one....

best, Dave

For a song, how about
"It ain't necessarily true . . ."

If memory serves, this is from the Opera "Porgy and Bess," by far my favorite of modern operas.

Note that opera flourished in late 18th century Europe.


Did we pass Peak Opera?

Ain't necessarily so,

We're still looking on to see if that fat lady is going to sing, right?  And what a climax it should be!

I think it's "It ain't necessarily so . . ."
It ain't necessarily so,
It ain't necessarily so,
De t'ings dat you' li'ble
To read in de Bible,
It ain't necessarily so.

Li'l David was small, but oh my!
Li'l David was small, but oh my!
He fought big Goliath
Who lay down an' dieth,
Li'l David was small, but oh my!

Wa-doo -- Zim bam boodle-oo
Hoodle ah da wa da --Scatty wah. Yeah!

Oh, Jonah, he lived in a whale,

I have a daughter that has become interested in Geology, don't know where that came from since i am in aviation maintenance. But 6 yrs ago we went to Pheonix, AZ.  aka PHX, and she wanted to go to the rock museum in downtown PHX, little did i know she was taken aback and enjoyed it so much.
Now she is starting her second yr of college at Texas Tech, concentrating on petroleum Geology.

Well? is she making a wrong move? I have always said "make sure you enjoy your work". But now i am beginning to wonder, should i try and steer her away from Geology?


I wish my daughters were interested. I see a good income for those picking through the US oil field remnants for at least their working lifetime, plus opportunities for stock options, etc.  The first barrels from texan fields sold for $1/b. The last 1% from these depleted fields might fetch more than the first 99%.
Cheer that girl on,
We need scientists!, and earth-scientists no less.  She might have to retool a bit if she gets too specialised,  but there's some valuable insight to be gotten in the 'Belly of the Beast'.. which has got me right back to Porgy again, with 'Ol' Jonah..

Oh, Jonah, he lived in a whale,
Oh, Jonah, he lived in a whale,
Fo' he made his home in
Dat fish's abdomen.
Oh, Jonah, he lived in a whale.

De Tings dat yo li-ble
to read in de Bible
It ain't necessarily so..

I can't see a degree in geology hurting though I hope she can avoid massive debt to get it.

I can see 3 general scenarios emerging and in each of them a degree in geology either is very useful or doesn't hurt.

  1. Oil continues to rise generally due to supply constraints. In this case, petroleum companies will be hiring like mad so that degree is golden.

  2. We pass peak and head into serious decline with a global economic recession resulting. Still that degree is golden because whatever oil is left will be highly prized.

  3. We pass peak and suffer a catabolic collapse. In this case the degree doesn't hurt and may still be useful just for the general science knowledge that it would give your daughter in a post-collapse situation.

Note that I do not ever anticipate oil prices going down drastically or supply loosening much. Even in the cornucopian dreams, oil remains a fairly tight commodity so the price should hold fairly well barring anything short of massive collapse.
Thank you GreyZone, massive debt to get it? Nope not at all, paid for with pure cold cash. I'm working my ass off to pay for it. Though she has told that a masters would help more. But we'll concentrate on undergraduate degree first.  
Thank you for the kind words!
In a lot of cases with graduate degrees in science, you can find places that will pay for your degree if you do research for them.
I thought about that too, what a sweet deal. She can cross that bridge when she gets there.

You might be interested on the take of Raymond James on Mexico

"You are not authorized to look at this page".

I just happened to read Raymond James' Energy Stat Of The Week, too. Very interesting (and disconcerting, to say the least).

In case the link to the document doesn't work, here's a quick summary.

  • Mexico's next President will face a major challenge, peaking Mexican oil production.
  • Mexico's oil production is on the verge of peaking in the next few years, if it hasn't already. Raymond James thinks it may have peaked in 2004.
  • Mexico's sluggish oil production comes despite a big jump in offshore oil rigs.
  • Mexico basically concedes that Cantarell is essentially at its peak.
  • It's unlikely that PEMEX can/will get the needed infusion of capital it desperately needs to boost production
  • A peak in Mexican oil production will have "significant consequences for the global supply/demand balance".

Last November Oilcast posted an "exclusive interview with a senior engineer" from Pemex. They discuss the decline rates, which the engineer estimates will be much steeper than reported in all the news I've seen - at least ten percent for next year and up to twenty percent within two years.

Most of the Mexican oil production is being pumped form one single field, the super giant Cantarell deposit, which is in shallow waters in the Gulf of Mexico. Some 65 miles off the Campeche State shores. The Campeche production represents 63 percent of all our pumping capacity. This field has been very carefully exploited, by using all our skill in geology, trying to recover as much as was possible.

The original volume of the field was estimated at 33 billion barrels, but the recoverable oil was some 16 billion. We have frantically pumped about 11 billion barrels throughout the life of the field. It is completing its natural cycle. Cantarell is a carbonated field, which in the future could show a deep decline of up to a 15 percent annually. If we factor in more efficient pumping, we could see an even higher depletion rate. That is without mentioning that other fields, like for instance Abkatun, is already showing a twenty percent annual decline for more than 5 years now.

OC:  How would you assess the Cantarell decline?

Despite a huge effort and a lot of new technology, the estimate is a depletion rate of at least ten percent  for next year and probably it will reach up to twenty percent within two years. With Cantarell, Pemex was carefully and progressively recording geological studies and data analysis of oil recovery factors, to be able to adjust and modify the wells. With Cantarell, a careful task of repair and modification of the field is being permanently conducted. Because if the gas invades the deposit, then the well is deepened. And if the water cut reaches the well head, then that well position is corrected.
Basically the work with Cantarell has never stopped. There are already some twenty developed wells. That is why I'm warning that depletion is inevitable, there is nothing else we can do. We started Cantarell in 1979. My concern is that when the depletion of Cantarell becomes official, it will be a new pressure on the oil price. Because this field plays a fundamental role in the world oil production structure.

See Oilcast #28 (transcripts available in the righthand column, if you scroll to the bottom):

The WSJ story described five internal estimated decline rates for Cantarell.  The worst case was about 40% per year.  I use this number so much because the remaining oil column of about 825' is thinning rapidly--by roughly 300' per year.
I never knew USA imported more oil from Mexico than Saudi Arabia.

As I read from here

here are some excerpts........
Left opposition candidate Andres Manuel Lopez Obrador (AMLO) included a promise to not privatize PEMEX, focusing on value added products like gasoline and plastics, as part of his 50 Promises, the core of AMLO's polticial program. What's certain is that Mexico's aging fields are in decline, and the skilled trades workers needed to keep Mexican crude flowing oppose any effort to privatize Mexican oil resources, vehemently. And their anger has been targeted at American companies Bechtel and Halliburton percieved as having recevived overpriced contracts from the conservative government.


And if AMLO and the skilled oil workers shut down the flow of crude from Mexico, be prepared for gas to skyrocket.  And for the possibility that American forces will be called upon to help Mexican military and police retake oil facitilies.

The contested election results are very important, because as a G.I. from Korea would say:
"We are in Deep Kempshi"

Goodness Sakes, and the hurricanes haven't even shown up yet to threaten prices yet!

This story is not available on conventional web sites, and available only through a pay service.  A portion is posted here:

Copyright 2006 Kasturi & Sons Ltd (KSL). Source: Financial Times Information Limited - Asia Intelligence Wire.

July 12, 2006

Stage set for an oil bull run

from BUSINESS LINE, July 12, 2006 Even if we discover a new planet Earth worth of reserves, it would postpone peak oil only by about 33 years at the current consumption rate of 30 billion barrels a year, say SHANMUGANATHAN N and SATISH KUMAR, assessing the depletion scenarios and looking at the least acrimonious ways of tackling this deficit

We have been presenting a case that a higher oil price is warranted by supply shocks alone. In the first essay in the "Hubbert Speak" series (June 20), we focussed on the macro-side - that is, global reserves - that would limit future production. The argument was based on the fact the planet has about two trillion barrels of crude, and that peak oil happens when we have consumed about 50 per cent of these reserves

"Hubbertians" provide slightly different estimates of the reserves

Hubbert himself puts the reserves at two trillion barrels (2tb), Prof Deffeyes (author of Beyond Oil: The View from Hubbert's Peak) at 2.013tb and Dr Campbell (of Association for the Study of Peak Oil and Gas) at 1.9tb.Our argument is that, even if all of them are wrong, none of them is "very wrong". The fact that we have consumed over 1tb till date should mean that we are perilously close to Hubbert's Peak, if not already past it

Even if we discover a new planet Earth worth of reserves, it would postpone peak oil only by about 33 years at the current consumption rate of 30 billion barrels a year. However, our monetary systems have been designed with assumptions of perpetual growth and so the peak will happen far sooner, perhaps in 15-20 years. Given that we do not have another planet Earth worth of reserves to discover, we probably have, if at all, a couple of years before reaching Hubbert's Peak


Disappearance of spare capacity From a spare capacity of over 5mbpd just four years back, we are now at a situation of less than 1mbpd (source: EIA, Apr 2006). Even in the absence of external shocks, this 0.5 mbpd isn't going to last too far into the future as Chart 1 indicates. All mature fields start declining once they reach their peak production with depletion rates ranging from 4 to 10 per cent

Ironically, the main reason for the higher depletion rates is "New Technology", that allows for a faster-than-normal extraction without increasing the recoverable reserves. So any of the new fields that come online have to first account for the depletion in the existing fields before adding to the Net capacity. Given in Table 1 is an estimate of planned production till 2010

As we can see, even without accounting for external shocks, we would be running a deficit this very year. Some producers have reported depletion rates much higher than the 3 per cent we have assumed. For example, for Saudi Arabia it is 8 per cent, Venezuela 7.8 per cent, UK at 8.9 per cent and Mexico at higher than 10 per cent

So if our depletion rate of 3 per cent turns out to be conservative, then we are in greater supply shocks in the years ahead. And this is without factoring in Iran, Iraq, Nigeria, Weather, rig shortages etc

We had earlier stated that the reserves as reported by some countries are highly questionable. Supporting that view, some of the largest fields have reported stunning declines. The Wall Street Journal (Feb 6, 2006) reported that because of encroaching water and gas at Cantarell, Mexico's biggest oilfield, output could drop precipitously over the next few years. From the current level of 2mbpd, production could drop to 0.9mbpd in 2007 and to 0.5mbpd by 2008

In November 2005, Kuwait admitted that its largest oil-field Burgan is in "serious decline", when it stated: "Burgan, world's second largest oilfield having produced 2mbpd for decades is exhausted..

by reducing production to 1.7mbpd we hope this sustains productions for decades to come"

More interestingly, a Petroleum Intelligence Weekly report of January 2006 stated that Kuwait's reserves could be just 45bb instead of the official claims of 98bb

The conclusion is that the future "reserve surprises", if any, is likely to result in higher depletion rates rather than lower depletion rates. There are also other uncertainties that could alter our estimates of demand and supply. Listed in Table 2 are the factors and it's easy to see why any optimism isn't warranted

Conclusions So what happens by 2010 when demand would be 89mbpd and supply is likely to be 85mbpd? Outside of the "Oil Depletion Protocol" as suggested by Dr Campbell, we think a price rationing would be the least acrimonious way to solve such a problem and that would send prices soaring...

The Burgos Basin offshore and south of the US-Mexico border may contain 6 billion barrels of oil + several TCF of gas according to the USGS.  Mexico will be prospecting there over the next three years (reported Nov 2006).  

There is a heavy oil field in Mexico with an estimated 100 billion barrels of oil in place at Chicontepec, this field is partially developed with some contracts towards increasing production awarded.  PEMEX will take its nitrogen tertiary recovery units and start pumping up the Ku-Zaap-Maloob field in hopes of partially offsetting the declines at Cantarell.

With Tengiz, Kashagan, and the Azeri fields in the Caspian and more discoveries following these there is hope for some stability in world oil markets, and enough to cause fear of oil gluts in producing nations. West Africa yet had alot of proven reserves that have not been brought to production, Brazil had undeveloped projects, and projects in the US GOM were in inventory without enough rigs to develop them.  The shipyards will be making more rigs.  

The Tarim Basin in China might contain 60 billion barrels.  Numerous fields have been discovered in the basin and 3.5 billion barrels recoverable proven by drill bit.  The drilling success rate was about 50%.  The area was in a sandy desert with hundred foot dunes shifting across the landscape.  It is more isolated than the Caspian.  Many parts of the world have been little explored and less developed.  

Peaks and troughs in production for some time to come.  Eventually people may switch to natural gas as they have been finding more natural gas than they have been using and many fields were not yet developed.