The Peak Oil Crisis:Cantarell — An Omen?

The Peak Oil Crisis
Cantarell — An Omen?
By Tom Whipple

There are a lot of bad things out there waiting to bite as the world moves towards peak oil— Iran, Iraq, Nigeria, Venezuela, China, globalization, and hurricanes to name a few. Last week a new bogeyman arose — super fast oil depletion.

Our story begins 65 million years ago when the Chicxulub meteor (or perhaps comet) crashed into the sea near the Yucatan Peninsula . This was one big bang, for it not only wiped out all our dinosaurs, but also took out 75% of the species living on earth.

As our 10 km wide meteor was tooling along at 60,000 miles per hour when it hit, there was not much left of the meteor but vapor after the impact, but for a few seconds, there was a monster hole in the earth 100 miles in diameter. I won't go into all the terrible things that happened to our earth in the months after the blast, but few living things survived.

Our new hole promptly filled up with rubble (breccia, to geologists) pushed in by the rushing waters of the returning sea and landslides along the sides of the crater. Somewhere, between 65 million years ago and 1976, parts of this underwater rubble filled hole, filled up with about 35 billion barrels of oil. Making it one of the world's greatest oil fields. It is now called Cantarell.

Within a few years of its discovery in 1976, it was producing over a million barrels a day from only 40 wells. Fifteen years later however, the natural gas pressure driving out the oil started to give out and production started dropping. In response, the Mexican Oil Company PEMEX built a large nitrogen separation plant near the field and started injecting 1.2 billion cubic feet of high-pressure nitrogen into Cantarell each day.

The program worked like a dream; a few years later Cantarell was producing 2.1 million barrels per day— making it number two in the world right up there behind the Saudi's great Ghawar field which is producing on the order of 4.4 million barrels a day. This 2 million barrels a day represents about 60% of Mexican oil production and is what allows the country to export 1.82 million barrels a day most of which went to the United States.

Like all good things, massive flows of cheap oil must one day come to an end, so only four years after getting production up to over 2 million barrels a day, PEMEX announced the end was in sight and Cantarell was going into depletion. Last year, they announced the decline had actually started and that 2005 production would be down to 2.0 million barrels a day— 5% lower than in 2004.

There the matter rested. However, as we know in Washington , you simply can't keep a really good secret very long. Last week, somebody leaked the top secret PEMEX Cantarell Depletion study, and guess what? The situation might just well be a whole lot worse than the Mexicans have been letting on.

An energy consultant in Mexico City published parts of the study and later the Wall Street Journal got to examine the document. It seems there is only 825 feet between the gas cap over the oil and the water that is pushing into Cantarell from the bottom. This distance is closing at between 250 and 360 feet per year.

The more pessimistic of the study's scenarios have Cantarell's production dropping from 2 million b/d to 875 thousand barrels a day by the end of next year and 520 thousand barrels a day by the end of 2008.

PEMEX, while refusing to release the study comments the pessimistic scenarios will only happen if they do nothing and they are taking aggressive steps to mitigate the situation.

Outside experts are not so sure. Cantarell is a meteor-crater based field and as such is unlike any other. Extremely high depletion rates are not completely unknown. Production at Oman 's 35 year-old Yibil field peaked in 1997 at 225-250 thousand barrels a day and then declined to 88-95 thousand barrels a day in three years. In the case of Yibil, part of the rapid decline was attributed to the introduction of horizontal and multi-lateral drilling into field that increased the percentage of water being brought to the surface with the oil to a greater extent then anticipated.

If the pessimistic scenarios outlined in the PEMEX study come to pass, it will be very serious. The loss of nearly 1.5 million barrels a day of production capacity within three years will be very difficult to overcome either from other Mexican fields or from new production in other countries. Unlike political stoppages from exporters such as Iran or Nigeria , depletion can't be put right. Mexican exports will be seriously reduced or perhaps even eliminated forever.

Cantarell could turn out to be another case where advanced technology —in this case nitrogen injection— does not ultimately increase the quantity of oil recovered from a field, but simply gets a smaller amount out faster.

In the meantime, oil production from Cantarell bears close watching. An unusually fast decline will be yet another indicator that peak oil is indeed very near at hand.