Mexican Output to Fall Without Foreign Investment, Study Says
Mexico's oil output will likely decline in the next two years if the government does not allow foreign investors to boost drilling, a study from analysts Raymond James & Associates says.
The firm released a report last month saying production in Mexico might have peaked in 2004, given that the huge Cantarell field has reached maximum output and is projected to decline 8 percent this year.
"The country's oil production looks like it already might have peaked -- quite possibly for good," the report said. "At the very least, production appears stagnant. Following a decline in 2005, we project that Mexican production will again show modest year-over-year declines in 2006 and 2007."
Cantarell is producing 7 percent less than it was at the beginning of the year and 15 percent less than when it peaked in late 2004 at just over 2.1 million barrels per day. State-owned Pemex projected last year that Cantarell would produce 1.9 million bpd in 2006 and 1.4 million bpd in 2008, but it has also projected its overall output to increase this year to 3.4 million bpd, up from 3.3 million last year. Leaked internal reports put the worst-case scenario at 520,000 bpd by the end of 2008, or a 71 percent drop from May 2006 levels.
Mexico is the No. 2 petroleum supplier to the United States, behind Canada, so a precipitous decline in Pemex's output could exacerbate tight supplies and high global prices (Greenwire, July 24).
State oil company Pemex has prohibitions against foreign investment, and President-elect Felipe Calderon said he does not favor privatization, although he could allow Pemex to form joint ventures with foreign companies (Amy Strahan, Bloomberg/Houston Chronicle, Aug. 8).
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