Mexico's Fading Oil Output Crimps Exports

Mexico’s oil output is falling faster than expected, increasing the chance that the country will lose its status as a major oil exporter in coming years and face a worsening budget shortfall.

Output at state-owned oil monopoly Petr
Carlos Morales, head of Pemex’s exploration and production division, says Cantarell is expected to stabilize at 400,000 barrels a day. The company has offset some of Cantarell’s decline by raising output at other fields, notably offshore field Ku-Maloob-Zaap — now Mexico’s biggest field — which produces roughly 800,000 barrels a day. In coming years, “when Ku-Maloob-Zaap goes into decline, we have enough other projects to raise overall output slightly,” Mr. Morales says.

David Shields, an independent oil consultant in Mexico City who warned about Cantarell’s impending collapse years ago, says he is dismayed at the lack of accountability at Pemex. “Production at Cantarell is almost being allowed to run out without any decent explanation” of the technical reasons, he said.

Mr. Morales says Pemex relied too heavily on Cantarell, but is trying to fix that by stepping up exploration and focusing on a greater number of smaller fields. “Diversification is the name of the game,” he says.

One big bet is Chicontepec, a massive onshore field discovered in the 1920s. It has resisted exploitation because it is made up of small pockets of oil spread out over thousands of square miles. So far, though, output at the field has disappointed.

A better long-term bet, say analysts, are oil deposits in the deep waters of theZ Gulf of Mexico. Pemex, however, lacks the technology to operate in deep water.

Wall Street Journal (through Google News)