As I have reported many times these past few months, Mexican oil production has been declining rapidly. Last year’s full numbers were just released, and the country produced ~9% less oil in 2008 than the year before, even though prices hit their highest ever. But there was an interesting trend at the end of last year that could determine whether their exports will fall to zero by the end of Obama’s first term.December oil production was similar to September and November production levels, signaling the potential of some sort of production stabilization. I will review the production patterns at other major oil producers in decline to help get a sense of where Mexican oil production may go.
I wrote last month on the potential production path if current declines continue at a mostly constant rate. This would lead to close to zero net exports by 2013. There of course is the possibility that decline rates accelerate, especially since oil’s price collapse and the credit crisis make enhanced oil recovery projects less profitable. But I now want to briefly go over the cases of the US, Indonesia, and the UK from data available in the BP Statistical Review of World Energy.
The US had peak oil production in 1970 at over 11 million barrels per day (Mbd), larger than Saudi Arabia’s output today. Ever since then, production has been in steady decline except for a few years of gains after prices skyrocketed in the 1970s and 1980s. Production is now ~40% below its peak of 39 years ago and is finally roughly stabilizing due to the high prices of the last few years.
Indonesian production peaked ~1991 at ~1.6 Mbd and has since fallen a similar ~40% before some stabilization at less than 1 Mbd. The UK peaked in 1999 at ~2.6 Mbd and has fallen ~45% before its slowly declining ouput ~1.6 Mbd.
If Mexico has a similar trajectory to these major producers, then production may begin to stabilize in the years ahead at ~2.3 Mbd (40% below the 2004 peak of 3.825 Mbd). This level of production would preserve some small exports beyond 2012 as long as Mexico accelerates its energy efficiency efforts.
I will monitor Mexico’s monthly production figures and report any major insight on future supply as the year progresses. Whatever the exact numbers turn out to be, efficiency will be a smart move for us as this top source of imports faces less and less oil as time goes by.
Tags: 2008, 2009, Mexico, oil supply, prices