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February 10, 2006

Cantarell Facing "Precipitous" Decline Peak Oil

We noted a few weeks back that Cantarell, Mexico's largest oil field and the second most productive oil field in the world, is in decline. Further confirmation comes in an AFX report (via John Robb) that suggests the production decline may be "precipitous." Excerpt:

Mexico's huge state-owned oil company, Petroleos Mexicanos, or Pemex, may be facing a steep decline in output that would further tighten global oil supply and add to global woes over high oil prices, the online edition of the Wall Street Journal reported.

The potential decline faced by Pemex, also could undermine US efforts to reduce dependence on Middle East oil, and complicate Mexican politics and financial stability.

An internal study reviewed by The Wall Street Journal shows water and gas are encroaching more quickly than expected in Cantarell, Mexico's biggest oil field, and might cause output to drop precipitously over the next few years.

Currently, Cantarell produces 2 mln barrels of oil a day, or six of every 10 barrels produced by Mexico, and is the world's second-biggest-producing field after Saudi Arabia's Ghawar.

Pemex says it is confident it can make up for any decline at Cantarell by squeezing more output from other fields, but some analysts outside the company are far less sanguine. The study was carried out last year by Pemex experts. [Emphasis added]

Technology lets producers empty a reservoir more efficiently, keeping the pressure up and pushing the oil out, even as the reservoir empties. Everything seems fine, and then suddenly you're in free fall. Remember this amazing picture.

Posted by Jonathan at February 10, 2006 06:58 PM  del.icio.us digg NewsVine Reddit YahooMyWeb