[A-List] Mexican Gov't Strives to Save Oil Field
mstainsby at resist.ca
Sun Apr 8 13:32:22 MDT 2007
Gov´t strives to save oil field
In March 1971, a fisherman named Rudesindo Cantarell took a few
geologists from state-run oil company Petróleos Mexicanos to this spot,
where he had seen oil slicks
Viernes 06 de abril de 2007
AKAL C OIL PLATFORM, Gulf of Mexico - In March 1971, a fisherman named
Rudesindo Cantarell took a few geologists from state-run oil company
Petróleos Mexicanos to this spot, where he had seen oil slicks.
Cantarell didn´t know it, but he had stumbled across one of the largest
offshore oil fields ever found.
A few decades and 12 billion barrels of oil later, the field that bears
Cantarell´s name is dying, and Pemex, as the state-owned company is
known, is struggling to stave off the field´s demise.
From January 2006 through February 2007, Cantarell lost a staggering
one-fifth of its production, with daily output falling to 1.6 million
barrels from 2 million.
The oil industry was stunned.
Cantarell, which currently produces one of every 50 barrels of oil on
the world market, is fading so fast analysts believe Mexico may become
an oil importer in eight years. That would batter Mexico´s economy,
which depends on oil exports to fund 40 percent of its government spending.
The continued deterioration of the world´s second-biggest field by
output would also put pressure on prices on the global oil market, where
supplies are barely keeping up with growing demand as it is.
And it would leave the United States even more dependent on Middle
Eastern supplies - and that much more vulnerable to political tumult in
The demise of Cantarell highlights a global issue: Nearly one-quarter of
the world´s daily oil output of 85 million barrels is pumped from the
biggest 20 fields, according to estimates from Wood Mackenzie, a
Scotland-based oil consulting firm.
And many of those fields, discovered decades ago, could soon follow in
It´s widely believed that the world´s biggest oil fields have already
been found. In the decades leading up to the 1970s, the world discovered
eight big fields that produced between 500,000 to 1 million barrels a
day, according to Matthew Simmons, a veteran oil industry banker.
During the 1970s and 1980s, only two were found. Since then, only one -
the Kashagan field in Kazakhstan - has the potential to easily top the
500,000 barrel-a-day mark.
Two decades ago, about a dozen fields produced more than 1 million
barrels a day. Now there are only four, one of which is Cantarell.
The future of two others, discovered more than 50 years ago, remains in
question. Some analysts speculate Saudi Arabia´s Ghawar, the biggest
field by far, could begin a gradual decline within a decade or so.
Another, Kuwait´s Burgan, is showing signs of maturity. In November of
2005, Kuwait Oil Co. lowered its estimate of the field´s sustainable
production level to 1.7 million barrels a day from 1.9 million a day.
Replacing big gushers is difficult. Industrialized countries, which
tapped out their big fields years earlier, haven´t been able to maintain
output despite finding large numbers of smaller fields and investing
heavily in technology. Alaska production, hurt by declines at the giant
Prudhoe Bay field, dropped from 2 million barrels a day in 1988 to a
current rate of about 900,000 a day.
"The world faces a situation where we have production from smaller and
smaller fields trying to keep up with declines from the big fields like
Cantarell," says Mike Rodgers, a partner at industry consulting firm PFC
Energy in Houston.
"You´re on a treadmill trying to keep up, and you get to a point where
you can´t make any more forward progress."
POLITICS GETS IN THE WAY
Some industry veterans are more sanguine. They argue that technology and
high prices are helping tap vast sources of so-called "unconventional"
crude oil, such as Canada´s tar sands.
Plus, they say technologies will also delay any decline in big fields by
dislodging billions of barrels of additional oil that used to be too
costly or difficult to reach.
In Texas and California, fields discovered in the late 19th century are
"The world has managed depending on giant oil fields for the last
several decades," says Khalid Al-Roldan, a visiting fellow at the Center
for Strategic and International Studies, based in Washington, D.C.
But even if there is enough oil under the ground, the politics above the
ground get in the way. The vast majority of the world´s remaining big
fields are in developing countries and run by government-owned oil
companies, which are often less efficient than their investor-owned
State-owned companies in many countries, like those in Venezuela and
Iran, are milked by their government for taxes, which reduces their
ability to invest in new oil technology.
Legal restrictions make it hard for national oil companies to work with
foreign firms, cutting them off from techniques used in the rest of the
Pemex suffers many of these limitations.
Its last two chief executives failed to persuade Congress to remove
foreign investment restrictions, which are embedded in the Constitution
and viewed as an embodiment of Mexican nationalism.
The new president, Felipe Calderón, is expected to try to end the
investment restrictions, but he too faces long odds.
Cantarell, like all giant oil fields, boasts an unusual geological history.
Geologists say it may have been formed thanks to the asteroid that
slammed into the Yucatán Peninsula some 65 million years ago - the same
event that is believed to have led to the extinction of the dinosaurs.
The impact caused giant cracks underground that allowed oil from
previous millennia to accumulate in a single spot.
The field lay unnoticed until Cantarell, the fisherman, kept getting his
nets smeared with oil as he trawled for shrimp in the 1960s.
Assuming that the oil came from Pemex operations, he regularly hauled
his oil-stained nets hundreds of miles to the nearest Pemex offices in
the neighboring state of Veracruz to seek compensation.
Finally, local Pemex officials say, the oil giant grew so exasperated
with Cantarell that it went to check out his story.
The find was spectacular.
Unlike most oil fields, which have a thin band of oil-rich rock that
stretches for miles in every direction, Cantarell is shaped like a
massive underground volcano, with huge amounts of oil in a relatively
While Saudi Arabia´s Ghawar takes up about 2,700 square miles, Cantarell
is just 70 square miles. From one platform, one can see the entire field.
Cantarell´s formation made the field easy to exploit.
It had so much initial pressure that Pemex´s first well at the field
produced 36,000 barrels of oil a day, compared with a few hundred
barrels at most wells.
The field is also in relatively shallow waters - it is 50 yards deep.
The water is so calm one can spot barracuda swimming between the
platforms and there is no need for expensive deep-sea platforms.
Today, Cantarell needs just 208 wells to produce the equivalent of
one-fourth the entire U.S. oil output, while the United States needs
hundreds of thousands of wells for a similar haul.
But the field´s abundance also bred a sense of complacency. As is the
case in many oil-rich countries, Mexico relied on oil to foot its
current spending but gave little thought to what happens when the oil
Last year, Cantarell was responsible for some US$25 billion of the US$53
billion that Pemex handed over to the government.
The steep tax bill has left Pemex chronically short of cash to invest in
finding new fields to replace its aging giant.
Cantarell produced about 1 million barrels a day from 1980 to the
mid-1990s, when the field began to slowly lose pressure.
This happens to all fields: They begin with enormous natural pressure
because they are buried deeply beneath layers of heavy rock.
But from the moment a well pricks a field and the oil is taken out, the
pressure eases, like letting air out of a balloon.
So in 1998, Pemex began injecting massive amounts of nitrogen into the
field, which was the oil-field equivalent of squeezing a balloon from
Output more than doubled to a peak of 2.3 million barrels a day in 2004.
That decision was hailed as a technical success, but it was just a
temporary fix: It only sucked the field dry faster and set the stage for
a steeper decline.
Now, Pemex´s lack of money and technology is a handicap in managing the
The company didn´t have any machinery on its Cantarell platforms to
separate water from oil - standard equipment for most of the rest of the
So when water from an underground aquifer began to creep into wells, a
common occurrence in an older field, Pemex had to shut down the wells.
The company closed any well where the water content rose to between 3
percent and 5 percent of the oil. By contrast, there are wells in Texas
that are able to produce with 99 percent water.
"The water problem took us by surprise, but we are handling it," says
Gustavo Hernández, Pemex´s head of planning at the field.
Standing atop an oil platform in the Gulf, Hernández says the company
has overhauled platforms to handle water content of between 8 percent
and 9 percent and is installing an additional water separation plant
this year, allowing it to reopen more wells.
Last year, Pemex drilled its first horizontal wells at the field,
something investor-owned oil companies have been using since the early
Horizontal wells bore down into a field like a traditional vertical
well, but then spread out horizontally, extending for miles and allowing
a single platform to suck up oil from a much larger area. Pemex plans to
drill more such wells this year.
Pemex says steps like these, part of US$2.4 billion in investment in the
field this year, will slow the field´s decline by about half of last
Instead of a decrease of 400,000 barrels a day, Pemex hopes Cantarell
will lose some 200,000 barrels of daily output by year´s end.
After that, the company says Cantarell will probably continue to decline
by roughly 10 percent a year, down to a daily average of 600,000 in 2013.
Pemex hopes to largely offset Cantarell´s decline in the next three
years by doing the same kind of nitrogen injection at its second-biggest
producer, Ku-Maloob-Zaap, a collection of three fields within eyeshot of
Cantarell´s platform. (Its Mayan names translate to "nest," "good," and
But Ku-Maloob-Zaap, which is also ranked in the world´s top 20 fields,
will start its own decline in 2011, according to Pemex.
That leaves Chicontepec, a massive onshore field in eastern Mexico that
was discovered in the 1920s, but hasn´t been fully developed because it
is broken up into tiny pockets of oil that spread out over thousands of
square miles in rocky terrain.
Pemex says it will need more than 15,000 wells to fully tap the field -
a big stretch for a company that has drilled about 23,000 wells since it
was formed in 1938. Developing Chicontepec is also difficult
politically; there are scores of nearby towns that may take a dim view
of oil production in their backyard.
For now, Pemex is doing what it can to keep Cantarell going as long as
A narrowing band of oil means that wells that are drilled at lesser
depths have started to hit gas, which is less valuable than oil. Wells
that are too deep hit greater amounts of water, which must be extracted
from the oil before sale.
"It´s a constant game of adjustment," says Hernández, the field´s top
In most cases, Pemex tries to replace the production by re-drilling the
same well either higher or lower. Still, Hernández expects to lose 30
wells this year.
Benjamín Melo, manager of the Akal C platform, tries to assess the
future by looking out across the field: "This has been a generous field.
And there is still a lot of oil down there. But it won´t last forever."
In the contradiction lies the hope
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