StrategyTalk.org

[JLK]

Accordingly to the EIA, Mexico is thought to have the third largest reserves of crude oil in the Western Hemispere, after the United States and Venezuela. More importantly from a US energy security perspective, Mexico is America's third largest foreign supplier of crude oil, after Saudi Arabia and Canada, accounting for about 14 percent or 1.6 million barrels per day of US crude oil imports. Mexican reserves have been produced energetically in the past decade, and according to a statement made by Mexican Energy Secretary Elizondo in June 2004, Mexico's oil reserves could run out in 11 years given current rates of production.

There was therefore great cause for optimism when in August 2004 the Mexican national oil company Pemex announced that seismic exploration had identified an additional 54 billion barrels of possible deepwater crude oil reserves in the Gulf of Mexico. There was some speculation that this estimate was somewhat speculative, given that Pemex made it without any confirmatory drilling, but many analysts put good faith in the estimates given the success that the US had had with its own deepwater production in the Gulf.

Pemex thus turned a few heads last Sunday by releasing a report concluding that its estimated offshore oil reserves in the Gulf of Mexico are less than half of the 54 billion barrels previously estimated. To put this in perspective, the reduction in estimated reserves is about nine times greater than the estimated reserves contained in Alaska's Arctic National Wildlife Reserve.

Moreover, and somewhat surprisingly, the Pemex report concluded that the deepwater reserves that were confirmed in its part of the Gulf were not considered to be economically suitable for exploitation. In 2004, Mexican officials had advocated $130 billion of new investments be made over a ten year period to exploit the deepwater reserves, with foreign investment to be permitted. My own take on this is that Pemex is holding out for additional investment from multinational partners or from the US government before it will give the go-ahead for the necessary deepwater infrastructure to be put into place. Given the importance that this project has to long term North American energy security, expect it to be a major issue in US-Mexico relations in the coming months.

[vitaliy]

<p>This is a proof that we need to get away from oil as soon as we can. How much will a barrel cost us in a long run in terms of foreign relationships and wars?

[JLK]

Easier said than done, vitaliy. The fact is that most of America's national infrastructure (suburban development for example) is heavily reliant on plentiful, cheap oil, and more so than any other major country.

We're about to be between a rock and a hard place, as they say.

[vitaliy]

I was always under impression that in the U.S. a good chuck of the oil was used in order to generate energy, not to power regular passanger vehicles. Am I totally wrong on this one?

I can't understand why public transportation, trucks and other industries switch to bio-disiel and other alternatives to oil. Normal cars will follow. For example, at the University of Vermont all busses were powered by bio-disiel: a mix of veggie oil and disiel. It worked out just fine. I suspect that if more public and goverment own transportation is like that, then automakers will take notice.

Also, check this out. This site is rather interesting. http://www.oilendgame.com/

Thank you.

[JLK]