The International Energy Agency, in its much-discussed World Energy Outlook 2012 (WEO 2012), said North America would become a net exporter of oil around 2030. Most observers probably thought IEA was talking just about the US and Canada, which it mostly was. Developments in those countries—surging production of oil from unconventional resources and deep water coupled with flattened consumption—drive changes with global consequence.
Then there's Mexico.
Stinging developments
For Enrique Pena Nieto, who became president of the third-largest North American country on Dec. 1, developments to the north must sting. His country has geologic potential comparable to those of the US and Canada. Yet Mexico's oil trade position, unlike that of all of North America, is deteriorating. The country is a net importer of oil products, and its status as a crude-oil exporter is in jeopardy. As the Worldwide Production Report on p. 28 shows, production of crude oil and lease condensate this year in the US has grown by an estimated 12% to 6.3 million b/d, in Canada by 7% to 3.1 million b/d. In Mexico, production is down by 0.6% to an estimated 2.54 million b/d. Mexican oil consumption has been recovering from a dip in 2009, averaging 2.13 million b/d in 2011.
In WEO 2012, IEA projects increases in US production of crude oil and natural gas liquids to 11.1 million b/d in 2020, followed by a slide to 9.2 million b/d in 2035. For Canada, the agency sees increases throughout the period—to 6.3 million b/d in 2035. IEA expects Mexican oil and NGL production to fall to 2.7 million b/d in 2015 from 2.9 million b/d in 2011, then to 2.6 million b/d in 2020-35.
For the leader of a government that relies on oil for one third of its revenue, sagging oil production is ominous. Pena Nieto therefore has reason to be envious when WEO 2012 calls the recent increase in output of light, tight oil to the north "nothing short of spectacular." In North Dakota, production from the Bakken "shale" exceeded 600,000 b/d in mid-2012, the report notes. In South Texas, production from the Eagle Ford shale climbed from almost nothing 3 years ago to more than 300,000 b/d. In its reference scenario, WEO 2012 says, "Combined US production from the Bakken, the Eagle Ford, and other emerging plays such as the Niobrara...the Texas Permian basin, and the Californian plays is expected to reach over 3.2 million b/d by 2025."
Production of light oil from tight formations is surging in Canada, too. In 2011, output from the Canadian part of the Bakken and other emerging plays had reached 190,000 b/d, WEO 2012 notes. The outlook: more than 500,000 b/d by 2035. And the report projects production from the Canadian oil sands at 4.3 million b/d in 2035, compared with 1.6 million b/d in 2011, if environmental concerns are addressed and transportation capacity keeps pace.
Geology and politics
Mexico could be looking forward to similar bounty. It has shale resources. The US Energy Information Administration estimates the technically recoverable gas resource in Mexican shales at 681 tcf, fourth highest in a 2011 assessment of 14 regions outside the US. Mexico also has deepwater potential in the Gulf of Mexico, where state-owned Pemex has reported two discoveries. But the promising Mexican shales are complex. Drilling and completing wells in shales and under deep water are always challenging and expensive. Mexico needs technology and capital from abroad. But it repels them with a fierce resource nationalism that dates back to independence in 1938.
Mexico thus underperforms its oil and gas potential. It's missing the "spectacular" North American boom described by the IEA—and the associated economic benefits. The reasons are not geologic; they're political. But they might be giving way to hopeful changes, about which more will appear here next week.
