From the latest ASPO weekly newsletter:
4. Mexico admits problems
The CEO of Mexico’s state oil company, PEMEX, said the company expects production from its giant Cantarell oil field to decline by an average of 14 percent a year between 2007 and 2015. Cantarell is expected to have an average daily production of 1.8 million b/d in 2006 down from a record 2.13 million b/d in 2004. PEMEX is currently producing around 3.29 million b/d down from 3.38 in 2004. About 1.7 million b/d is exported, mostly to the US.
Mexico says it will need to start spending $18 billion per year on exploration and development of new oil sources in order to offset anticipated declines in oil and natural gas production. Deep-water oil from the Gulf is Mexico’s most promising new source but will require foreign assistance to exploit.
The government has become addicted to PEMEX earnings and currently takes 60 percent of PEMEX’s revenue which now constitute nearly a third of the national budget. In 2005 PEMEX sustained an operating loss of $7 billion.
It is unlikely that PEMEX and the Mexican government can find the revenue to finance heavy exploration costs over the next ten years. President-elect Calderon, who takes office on December 1, has stepped carefully around the sensitive subject of energy reform, and while he favors allowing PEMEX to form alliances for deep-water oil and refining, he hasn't called for a constitutional amendment to open up the industry.
Should Calderon be unable to pass some sort of energy reform in the next year, it seems unlikely that Mexico will be able to continue exporting oil to the US at the current rates much longer. While the government is claiming that Cantarell is going to decline at 14 percent a year, there is evidence that the decline could be much faster.
Lets have a look at how the optimistic scenario works out. Depleting at 14 percent a year the Cantarell’s production is going to look something like this:
Year Barrels of Production per day
2006 - 1,800,000
2007 - 1,548,000
2008 - 1,331,280
2009 - 1,144,900
2010 - 984,614
2011 - 846,768
2012 - 728,221
2013 - 626,270
2014 - 538,592
2015 - 463,189
Meanwhile in Iran we have this little snippet:
In September, Oil Minister Kazem Vaziri-Hamaneh suggested that with no new investment, output from Iran's fields would fall by about 13% a year, roughly twice the rate that outside oil experts had expected. "NIOC is likely to find that even maintaining the status quo is a mounting challenge," says PFC Energy's Rahim.
I wish that we could get accurate data about how things are going in Kuwait with the Burgan field or Saudi Arabia with the Ghawar.
The XLE, CVX, XOM, DVN all broke out to new 52 week closing highs on Friday. The XOI is within 4 points of an all time closing high. The Big Dogs are running. This is what is known as the continuation of the trend in a secular bull market. As Jesse Livermore said in the book Reminiscences of a Stock Operator the hardest thing to do is sit tight and do nothing.
I bought a sizable position in VLO and I absolutely love how the daily chart looks. I’m thinking $64 to $67 sometime in January. Which would just be enough to pay off the mortgage on my condo here. Knowing me though, I’ll probably roll all the profits into COSWF and let the dividends pay it off.
At Tocumen Airport in Panama, flying back to the States for Thanksgiving, I sat next to two guys that worked for Chevron. They are planning on expanding a refinery here in Panama. I asked them what their opinion was on Peak Oil and they thought I was talking about a company called Peak Oil. They had never heard of the term before despite working for Chevron their entire careers (they appeared to be in their late 40’s – early 50’s). One of them was from Houston and the other from London. At first I think they thought I was a quack.
People, we are going to look back at this time period and wish we bought all the oil and oil stocks that we possible could have. Less than one percent of the population is aware that peak oil is near.
As Don Coxe says peak oil might not have happened already but the amount of oil controlled by public companies that you can invest in certainly has peaked.
Was the peak December 2005?
eia.doe.gov
To early to say but the evidence is mounting.
My favorites haven’t changed – The top two have to be COSWF and SU. Followed up by CNQ, ECA and NXY. Buy long life reserves in politically secure areas of the world.
Did anyone’s account hit a 52 week high on Friday? (VVVBG) |
