Mexico and Venezuela Oil Patch News - 3/30/09

Recently some bad news has come from the giant Cantarell oil fields in Mexico.  The field’s production continues to decline faster than expected.  State Oil Company PEMEX talks optimistically of producing 2.75 million b/d of crude oil during 2009, but production in February was down 8.6 percent from February 2008. 

EIA is expecting oil production to drop 10% this year.  The IEA expects production from Cantarell will be at the 600,000 b/d level when PEMEX is expecting 756,000 b/d.

Production from Cantarell is falling in a worst-case scenario contained in a PEMEX document leaked four years ago. 

As oil prices remain low and Venezuela’s economy falters, Caracas is looking for new investments to replace the US and European oil companies that were driven out two years ago.  Having cash flow problems Venezuela is holding up payments to contractors.  Adding to this Venezuela owes $10 billion to pay for firms it has nationalized.

President Chavez hopes to increase production from the heavy oil deposits, which they believe have 272 billion barrels in reserve. Chavez has recently cut a $6 billion dollar deal with a number of Russian firms to drill the Orinoco basin.  Caracas is evaluating bids from Chinese, South Korean, and Japanese oil firms.

These agreements will take many years to produce oil.  Chavez made a mistake kicking many of these contractors out last year, which had the capital to invest in long term oil projects.  This could result in political unrest.   

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