NEXT OIL DOMINO TO FALL? Mexico Becomes A Net Oil Importer

While Mexico suffered the bloodiest year of violent deaths in 2018, even bigger trouble may be ahead for the embattled country.  For the first time in more than 50 years, Mexico has become a net importer of oil.  This is undoubtedly bad news for the Mexican Government as it has relied upon its oil revenues to fund a large percentage of its public spending.

And, the majority of these revenues came from just one prolific oil field.  After the discovery of the huge Cantarell Oil Field in the Gulf of Mexico in 1976, Mexico’s oil production surged from 894,000 barrels per day to a peak of 3.8 million barrels per day (mbd) in 2004.  That year, Mexico’s net oil exports exceeded 1.8 mbd.

Unfortunately, the downturn of Mexico’s oil production was also due to the peak and decline of the Cantarell Oil Field, which topped out at 2.1 mbd in 2004 and is now below 135,000 barrels per day:

With the rapid decline in Cantarell’s oil production, Mexico’s net oil exports also plummeted from 1.8 mbd in 2004 to only 314,000 barrels per day in 2017.  However, the situation for Mexico’s net oil exports continued to deteriorate in 2018 as its domestic oil supply fell to a new low at the end of the year.

According to several sources, the BP 2018 Statistical Review, IEA’s OMR Reports, and the EIA’s data on World Oil Production, Mexico became a net oil importer in November 2018:

I find it strange that this has not yet been mentioned in the news as it is a very critical factor for the future of Mexico.  Now, I would like to qualify that the data I am using is accurate.  I found Mexico’s total petroleum production and consumption data from the EIA, the U.S. Energy Information Agency’s World Oil Production Browser, the IEA’s, the International Energy Agency OMR Reports, and BP’s 2018  Statistical Review.

In just a little more than a year, Mexico’s net oil exports fell from 314,000 barrels per day to net imports of 90,000 barrels per day in December 2018. This next chart shows Mexico’s total oil supply versus consumption for each month in 2018:

Of course, we don’t know if Mexico will be able to increase production, but if we consider the disaster that is taking place at PEMEX, the country’s national oil company, I highly doubt domestic oil production will recover.  Why?  Well, let’s just say, PEMEX is on the verge of bankruptcy as the company published two troubling signs in its Q4 2018 Financial Report:

  1. Falling Oil Production
  2. Rising Long-Term Debt

According to PEMEX’s Q4 2018  Report, oil production fell from 1.90 mbd Q4 2017 to 1.76 mbd in Q4 2018. These figures are for oil production only and do not include NGPL (natural gas plant liquids) and refining gains.  Which is why it doesn’t add up to the 1.94 mbd for December 2018 shown in the chart above.

Regardless, oil production continues to decline at PEMEX while it’s long-term debt reached a new record high of $96 billion last year:

So, even with all the additional capital expenditures, (shown by the massive increase in long-term debt), PEMEX was not able to prevent the inevitable decline of its domestic oil production.  What happens to PEMEX when oil production really starts to decline?

Sadly, as domestic oil supply continues to decline, the Mexican Government will have lower oil revenues to support its public spending.  I believe Mexico is likely one of the next OIL DOMINOS to fall… and it won’t be pretty.

I will be doing a more detailed update on PEMEX’s financial information when they release their next quarterly report.

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4 oz
Guest
4 oz

I remember when play Dominos was a kids game. Nothing feels like a game these days. Central Banks increased their buying of physical gold in 2018 over the amount they bought in 2017. Are they wrong?? Miners are also holding back 20% of their supply going forwards. The Bank of International Settlements changes gold to a Tier-1 asset on April 1st AND, Basel-3 rules are taking effect, requiring banks to increase their holdings/liquidity from what, 2.5% to like 7% Then there’s the whole “peak gold” thing going on – no new major discoveries & the big miners are grouping together,… Read more »

james r
Guest
james r

4 oz,

If only investing was so easy then we all be doing it.

Eh?

Paul D Anders
Guest
Paul D Anders

Get your insurance policy put away and then get on with life. They could hold metals down for another 5 years…

petedivine
Guest
petedivine

Great article I’m sure as Steve continues his expose on PEMEX an by extension the Mexican economy it will become more obvious that BAU will be coming to a halt not just for Mexico but for the U.S. Mexico is our second largest trading partner and if you’re keeping track of agricultural imports from Mexico then you know produce prices are extremely high. Of course I’d be remiss in pointing out that Mexico exports something like 30% of the world’s silver. Can’t see how they can effectively mine if there is a major energy problem. Energy won’t just affect the… Read more »

Short Arizona
Guest

“I find it strange that this has not yet been mentioned in the news as it is a very critical factor for the future of Mexico.” Exactly! Because the main stream media doesn’t want you to know! The subject of this article will prove to be the one of the most relevant “memes” in the future. But of course it’s not mentioned anywhere. Mexico’s population is currently around 124,000,000. Approximately 50% of government income/taxes come from domestic oil revenues. The Mexican economy is very heavily dependent on government spending. How are they going to function if production is down 90%… Read more »

Short Arizona
Guest

Steve,
What I meant to say:
“Because the Main Stream Media doesn’t want US to know”

No offence. I know that YOU know. And I know that you know more than I know. Ya know?

pdxr13
Guest
pdxr13

Don’t forget remittances sent South by the 35M+ Mexicans inside the ConUS.

Tom
Guest
Tom

Very interesting. I’ve also wondered for a long time why the oil decline in Mexico is not getting more coverage. The problem will become even more acute now that a socialist is in charge. I think AMLO is a decent guy, but like all other socialists he will cost his country dearly. This will not end well for our neighbor to the south, and by extension will exacerbate the illegal immigration problem at the border.

Doc Rich
Guest
Doc Rich

This is another example of Jeffery Browns(Westexas) Export Land Model in action. Just took longer than with other countries such as Indonesia, United Kingdom etc. which took 9 years from a net exporter to become a net importer. Mexico up until recently was the third largest oil exporter to the USA.

dale
Guest
dale

I was just thinking that, could only remember Westexas. Milestone. Great observation Steve. Thanks

Lance Steele
Guest
Lance Steele

Think the USA has an illegal immigration problem now ? We ain’t seen nothing yet.

Northwest Resident
Guest
Northwest Resident

Seeing this coming probably explains the big push to get the wall built. From the looks of things, Mexico is on the brink of financial ruin. If it goes down hard, there will be literal hordes crossing the border and they’ll be desperate. I doubt even a wall will stop it.

Milo
Guest

Might explain why the US is so anxious to install a puppet to lead Venezuela?

Rob
Guest
Rob

Ding ding ding ding! Someone hit the jackpot here. It’s amazing how the Venezuela coverup is identical to the oil coverup – completely fake news. Venezuela has one of the most up to date electrical grids in the world (with modern equipment installed by Canada) yet the drones dropping conductive strands across power lines, and the physical and cyber attacks on infrastructure are all blamed on “aged” infrastructure (which of course Guaido would have fixed instantly by having the attacks cease once he overthrows the existing government). Venezuela is a HUGE part of the oil equation. So too is the… Read more »

Brant Lee
Guest
Brant Lee

Too bad Mexico can’t be stable and it’s getting worse. I would love to spend a lot of time there. But how far behind the Mexican bust is the U.S. with smothering debt and Ponzi oil fracking?

Barry
Guest
Barry

Who is holding all the PEMEX debt ? It looks like a haircut is in the cards.

Chris
Guest
Chris

Someone mentioned on here that the price of oil has risen recently in Mexico? This should negatively impact supply of silver going forward.

ep
Guest
ep

I think hes trying to say, stay out of Mexico, even when they stay offering buy one get on free deals..

Andreas
Guest
DisappearingCulture
Guest
DisappearingCulture

No one has mentioned the hundreds of BILLIONS of dollars that go into Mexico from the illegal drug trade. The cartels may hoard some of he dollars, but they spend many, many billions also, stimulating the Mexican economy directly or indirectly.

Alfred
Guest

Mexico invest almost 100 bn dollars in Pemex, even this it was not possible to increse reserves and production. Part of the main issues here is the culture of nationalism. This made very difficult to achieve the energy reform.
Hence, the new president has not idea on how to manage the oil and gas industry. even worst he has acted with s strong nepotism appointed to CEO of Pemex a guy with none idea about the oil industry.
I see very difficult to emerge pemex in this conditions.