Canta y no Llores Cantarell
If you are an oil investor and you are not following the dramatic news coming from Mexico, I recommend you to wake up, get out of bed and get a new news source. Just look at this dramatic chart:
What is Cantarell? Hey you really need a new news source. This is from the Financial Times in 2007
In 1976, the future of Pemex, Mexico’s state-owned oil monopoly, looked as bright as it ever had. The discovery of Cantarell, a huge oil complex located in the Gulf of Mexico, assured abundant supplies of crude for the foreseeable future and cemented the country’s place as one of the world’s most formidable oil exporters.
For the best part of three decades oil from Cantarell flowed fast and furious – so furious, in fact, that by 2004 its average daily volume of just over 2.1m barrels ranked it the world’s second-fastest-producing oil complex after the Ghawar field in Saudi Arabia.
The decline is very important and not only for Mexico, well the Economist explained it all also in 2007
CANTARELL, in the Gulf of Mexico, was once the world’s biggest offshore oilfield, holding over 35 billion barrels of the black stuff. Now, after nearly three decades, it is running out. At its peak in 2004 it produced 2.1m barrels of oil per day (b/d), making up 60% of Mexico’s total output. That figure has already fallen by more than 500,000 b/d and could fall by another 200,000 b/d by the spring.
This is a worry for both Mexico and the world. Although Mexico contains less than 1% of the world’s proven oil reserves, it is the sixth-largest producer. Its output of 3.1m b/d is well above that of Venezuela or Kuwait. And although oil no longer dominates the Mexican economy—even at recent high prices it provided 16% of exports in 2006, down from 68% in 1982—it lubricates the public finances, contributing nearly 40% of federal revenues.
The prospects for the Mexican Oil industry and Pemex in particular do not look very bright. The New York Times shows that every once in a while it can still do great reporting:
Government interference is only part of the story. Pemex has been hamstrung by years of short-sighted management aimed at extracting the most cash for the government treasury — Mexico’s president and Congress must approve the company’s budget, its output, investments and exports each year. By law, Pemex is closed to any outside investment, shutting it off from private capital and expertise.In addition, Pemex has not reinvested enough for decades and, because it faces no competition at home, has lagged behind many of the industry’s technical advances. Its labor union has locked it into rigid work rules and siphoned off hundreds of millions of dollars for unexplained benefits. And that does not even touch on the widespread corruption and waste.
Another wasted opportunity for Mexico and I only hope that Lula reads history. Who was that Mexican president that said something like that the challenge for Mexico was to “administrar la abundancia” of Cantarell?