Mexico has a variety of oil resources located in different parts of the country. The main oil producing regions are located in the southern part of Mexico along the Gulf coast. The three largest oil fields in Mexico are Cantarell, Ku-Maloob-Zaap and Litoral de Tabasco.
Types of Crude Oil in Mexico
There are several different grades and types of crude oil produced in Mexico:
- Maya – A heavy, high-sulfur crude oil that accounts for most Mexico’s oil production. It has an API gravity of 22-24 degrees.
- Isthmus – A lighter grade crude with an API gravity of 32-34 degrees.
- Olmeca – A super light crude oil with an API gravity of 39-41 degrees.
- Altamira – A sweet, sour crude oil with low sulfur content and an API gravity of 30-31 degrees.
The majority of Mexico’s oil production, about 60%, comes from the super-giant Cantarell oil field located in the Bay of Campeche. This field produces a medium weight sour crude oil with an API gravity of 22-24 degrees.
History of Oil Production in Mexico
Oil exploration and production in Mexico began in the early 1900s when the first commercial oil well was drilled near Tampico in 1901 by an American company. This launched Mexico’s modern oil industry. In the 1930s, President Lázaro Cárdenas nationalized the oil industry and formed the state-owned company Petroleos Mexicanos (Pemex). Since then, Pemex has had a monopoly over oil exploration, production, refining and distribution in Mexico.
In the 1970s, the discovery of the enormous Cantarell oil field propelled Mexico into one of the top oil producing countries in the world. By the early 1980s, Cantarell was producing over 2 million barrels per day, accounting for over 60% of Mexico’s total production. However, output at Cantarell began declining in the mid-2000s due to natural depletion of the field.
In 2013, Mexico passed constitutional reforms to allow private companies to once again participate in oil exploration and production. This opened up new investment into Mexico’s oil and gas resources after years of Pemex having sole control. The first bidding rounds took place in 2015-2016 under these reforms.
Major Oil Producing Regions in Mexico
The main oil producing regions in Mexico are located along the Gulf coast and in the southeastern part of the country. Here is an overview of the major oil producing zones:
Southern Gulf Coast
The prolific southern Gulf coast is home to Mexico’s largest oil fields including:
- Cantarell – Once one of the largest oil fields in the world. Production has steeply declined but it still produces significant heavy crude volumes.
- Ku-Maloob-Zaap – Mexico’s second largest field, produces medium weight sour crude oil.
- Litoral de Tabasco – Located further inland, this field produces mainly heavy crude oil.
Northern Gulf Coast
Important fields in the northern Gulf of Mexico include:
- Abkatún-Pol-Chuc – A large offshore field, produces light crude oil.
- Ogarrio – Also an offshore field, yields light crude.
- Magallanes – Located south of Texas in the Bay of Campeche, produces medium crude oils.
The Southeastern region has several onshore fields producing lighter grades of crude oil such as:
- Cinco Presidentes – Located in the state of Tabasco, yields light crude.
- Macuspana – Another light crude field in Tabasco.
- Muspac – An extra light crude field located in Chiapas.
Crude Oil Production Trends
Mexico’s crude oil production rose steadily from the 1970s to peak at over 3.4 million barrels per day in 2004. The vast majority of this oil came from the super-giant Cantarell complex. However, as Cantarell entered terminal decline, Mexico’s overall crude output also started falling.
By 2016, Mexico’s crude production had dropped to just 2.1 million barrels per day. The chart below shows Mexico’s historical crude oil production between 1980-2018.
|Crude Oil Production (million bbl/day)
As shown in the table, crude oil production declined by over 1 million barrels per day between 2004-2018 due to falling output from Cantarell. New production from other fields has not been enough to offset these declines so far.
Outlook for Mexico’s Oil Production
Mexico is hoping to reverse declining oil production through increased investment from private companies partnering with Pemex. The government aims to raise oil output back to over 2 million barrels per day in the coming years. Major themes for the future include:
- Developing unconventional resources – Mexico has significant shale oil and gas potential in the Burgos and Tampico basins that could be tapped with modern drilling methods.
- Enhanced oil recovery at mature fields – Using techniques like gas or chemical injection to boost recovery factors at aging giants like Cantarell.
- New discoveries – Recent finds like the Zama field offshore indicate Mexico still has significant undiscovered deposits.
- Deepwater exploration – The Mexican Gulf has promising deepwater plays in the Perdido Fold Belt and Mexican Ridges areas.
While Mexico faces challenges from maturing production and lack of investment, the country still possesses abundant oil resources both onshore and offshore. Unlocking these resources could revive Mexico’s production in the long term once new projects begin yielding results. But reversing current declines will take significant time, effort and money.
Uses of Mexican Crude Oil
Most of the crude oil Mexico produces is exported to the United States. In 2017, about 75% of Mexico’s crude exports went to the U.S. Some of the main uses of Mexican crude oil include:
- Feedstock for U.S. refineries – Most Mexican heavy and medium crudes are well suited for complex U.S. Gulf Coast refineries.
- Exports of refined products – Mexico also imports refined products from the U.S. that are made from its crude.
- Feed Mexican refineries – Some Mexican crude is refined domestically into products like gasoline and diesel.
- Petrochemical feedstock – Lighter Mexican crudes are good feedstock for petrochemical plants producing plastics, fertilizers, etc.
Having a stable export market in the U.S. has allowed Mexico to continue growing its oil industry over past decades. Proximity to Gulf Coast refineries that can process heavy crudes provides an advantage.
Challenges Facing Mexico’s Oil Sector
While Mexico’s oil industry holds promise, it also must overcome several challenges including:
- Declining production – As noted earlier, overall crude output has dropped by over 1 mbd since 2004.
- Lack of investment – Pemex did not reinvest enough revenue to sustain production or exploration.
- Technical constraints – Pemex lacks expertise and technology for areas like deepwater drilling.
- Old infrastructure – Extensive pipelines and facilities need upgrades and maintenance.
- Organizational inefficiencies – Pemex has struggled with bureaucracy, corruption and ties to unions.
In the past, Pemex managed to overcome some of these issues due to abundant easy-to-access oil. But maturing fields and more complex resources have exposed Mexico’s institutional and technical gaps in the oil sector. Reversing the declines will require major reforms and capital investment from both the government and private sector.
In summary, Mexico possesses a range of high-quality oil resources located along the Gulf coast and in the southeast. Cantarell and Ku-Maloob-Zaap are two of the most prolific fields, producing mainly heavy crude oil. However, maturing production and lack of investment have led to output declines. Future production growth will rely on developing new fields offshore, tapping unconventional resources, and utilizing enhanced recovery at legacy assets. While Mexico’s oil industry faces challenges, the country still holds significant untapped potential both onshore and offshore.