Mexico's Cantarell oil field is entering a period of catastrophic decline.
The country's energy ministry has just fessed up that Cantarell's output has plunged by one-third in just the last year — from 1.6 million barrels a day to just over 1 million. That annual decline rate is more than double the previous figure of 14%. Soon it will no longer be possible to label Cantarell of the "Big Four" world oil fields. (The others are Saudi Arabia's Ghawar, Kuwait's Burgan, and China's Daqing.)
To try to boost production from other Mexican reserves, President Felipe Calderon is trying to convince lawmakers to loosen the limits on the role of foreign oil-services companies. It's a tough sell — state control of the oil sector via the national oil company Pemex is tantamount to a secular faith in Mexico — but something's gotta give, and soon.
Based on the account of the Financial Times, there seems to be a strange debate going on in Mexico that sort of parallels the one in this country. Here, it's the question of more drilling versus alternative energy. (How about both? We're gonna need whatever we can get.) While in Mexico…
Many opposition leaders argue the problems stem mainly from the government’s rising dependence on oil income, which has starved Pemex of cash it could use for exploration.
But the government maintains the vast bulk of the country’s [remaining] reserves lie in deep waters and require technology and knowhow to develop that Pemex does not possess.
There is nothing about these two arguments that's mutually exclusive. Both of them are true. Pemex is starved of cash for exploration, but even with that cash it's going to need outside help. And the new head of Pemex recognizes that reality.
In the latest issue of Outstanding Investments, Byron King clues his subscribers in to a company uniquely positioned to provide that help.