Peak Oil News: The missing link in Mexico's declining oil production

Thursday, April 05, 2007

The missing link in Mexico's declining oil production

By Andrew Leonard

In a miraculous feat of journalistic legerdemain this morning, a lengthy, detailed front-page article in the Wall Street Journal reports on declining production at Mexico's giant Cantarell oil field, without once ever mentioning the words "peak oil."

Reporter David Luhnow manages to achieve this while at the same time providing a textbook illustration of precisely why peak oilers are so worried that maximum production is nigh.

...the field that bears Mr. Cantarell's name is dying, and Pemex, as the state-owned company is known, is struggling to stave off the field's demise. From January 2006 though February 2007, Cantarell lost a staggering one-fifth of its production, with daily output falling to 1.6 million barrels from two million.

...The demise of Cantarell highlights a global issue: Nearly a quarter of the world's daily oil output of 85 million barrels is pumped from the biggest 20 fields, according to estimates from Wood Mackenzie, a Scotland-based oil consulting firm. And many of those fields, discovered decades ago, could soon follow in Cantarell's footsteps.

It's widely believed that the world's biggest oil fields have already been found. In the decades leading up to the 1970s, the world discovered eight big fields that produced between 500,000 to one million barrels a day, according to Matthew Simmons, a veteran oil industry banker. During the 1970s and 1980s, only two were found. Since then, only one -- the Kashagan field in Kazakhstan -- has the potential to easily top the 500,000 barrel-a-day mark.

It is instructive to compare this article with the happy-go-lucky piece written by Jad Mouwad in the New York Times exactly one month ago, which, on the one hand, dismissed peak oil as "still a minority view, held largely by a small band of retired petroleum geologists and some members of Congress, that oil production has peaked, but the theory has been fading."

Mouwad's contention was that new technology and investment, spurred by high oil prices, would allow older fields to keep producing for decades to come, and would enable hitherto uneconomic sources -- oil sands, oil shale -- to join the production lines. There is undoubtedly a good bit of truth to that theory -- the power of the price mechanism is a mighty thing -- but it certainly doesn't negate the premise that the era of cheap oil is over. But while the Journal makes some unkind comments as to how Pemex is far behind the state-of-the-art in terms of oil-recovery technology and has bungled its management of the fields in many ways, the unavoidable conclusion of the article is that the decline, even if it can be slowed, cannot be stopped.

Editorially speaking, the Journal is no friend to peak oil doomsayers -- last fall, it even headlined one recapitulation of Exxon propaganda as "Poking at peak oilers." But the Journal's editorial page juvenilia rarely infects its top-notch reporting. Cantarell's decline has been hailed as proof of the peak oil concept for at least a year -- the lack of so much as a mention of that fact is a bit inexplicable.


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