Peak Oil

PEAK OIL….I haven’t posted much about peak oil lately, but here’s a story that caught my eye this morning. Mexico’s main oil field showed a very sharp drop in production last year:

Production at Cantarell, the world’s second-largest oil complex, which provides about 60% of Mexico’s crude, averaged 1.78 million barrels a day in 2006. That’s a 13% drop from 2005….The decline was more than twice as great as the company’s published predictions, and the slide will almost surely continue in 2007.

….”They are feeling pressure from the market to say that things are fine … and that they are doing well in production,” said Mexico City energy analyst David Shields, the author of two books on Pemex. “But oil engineers will tell you that when a major field is in decline, it doesn’t come back up again unless you do something very radical to change the dynamics….I don’t see that happening.”

The issue here isn’t that Cantarell is declining. That began a couple of years ago and had been widely anticipated. What’s news is that, just as many peak oil theorists have been warning, when big fields start to decline they decline faster than anyone expects. So far, Cantarell appears to be evidence that they’re right.

By itself, this is nothing to get alarmed about (unless you’re a Mexican politician or a Pemex executive). However, if it turns out that the peak oil guys are broadly correct, and declining fields start turning into collapsing fields across the world, that would be something to get alarmed about. We don’t know yet if that will turn out to be the case, but it’s very definitely worth keeping an eye on.