Is Peak Oil a Myth?

Trend: At least one of the world's giant oil wells is fading fast. It's not good news for Mexico and its energy customers.

The Los Angeles Times provides some insight into possible depletion of Mexico's largest oil well. Excerpts below.

Link: Will Mexico Soon Be Tapped Out? - Los Angeles Times

Output at Mexico's most important oil field has fallen steeply this year, raising fears that wells there that generate 60% of the country's petroleum are in the throes of a major decline.

Production at Cantarell, the world's second-largest oil complex, in the shallow gulf waters off the shore of Mexico's southern Campeche state, averaged just over 1.8 million barrels a day in May, according to the most recent government figures. That's a 7% drop from the first of the year and the lowest monthly output since July 2005, when Hurricane Emily forced the evacuation of thousands of oil workers from the region.

Though analysts have long forecast the withering of this mature field, a rapid demise would pose serious challenges for the world's No. 5 oil producer. The oil field has supplied the bulk of Mexico's oil riches for the last quarter of a century, and petroleum revenue funds more than a third of federal spending.

It would also be bad news for the United States, for which Mexico is the No. 2 petroleum supplier, behind Canada. And it could exacerbate tight global supplies that have kept oil at record prices.

The world's "elephantine" fields have already been bagged, forcing companies to hunt in ever-more-remote areas for smaller amounts of oil to feed burgeoning demand, according to Houston energy analyst William Herbert.

"Unfortunately, the era of low-hanging fruit … has really run its course," said Herbert, co-head of research at Simmons & Co. International, a Houston-based energy investment bank. He put the odds of finding another field the size of Cantarell in Mexico or anywhere else at "slim and none."

Exceeded in size only by Saudi Arabia's leviathan Ghawar field, Cantarell is a prolific giant that is past its prime. Monthly production peaked in late 2004 at just over 2.1 million barrels a day and has fallen more than 15% since then. Experts agree it has nowhere to go but down.

The multibillion-dollar question is just how quickly Cantarell will lose its productive capacity, and whether Pemex will be able to coax more oil out of existing fields to take up the slack while it searches for new deposits.

via John Robb