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Mexico Can Finally Afford Trump's Wall

The Bakken Moment Has Come for Mexico

Written by Keith Kohl
Posted June 30, 2017 at 6:37PM

“We’ve seen this story before, haven’t we?” I asked my colleague Christian DeHaemer this morning.

This wasn’t mindless chatter by the water cooler, mind you. Earlier this morning, I had overheard Christian muttering excitedly to himself.

Once I saw his eyes light up as he stared at the chart on his screen, I recognized it immediately. It’s a look I’ve gotten used to from being his cubicle cellmate for the last nine years.

You see, he’s traveled from one end of the globe to the other, his boots caked with soil from every continent, searching for investments from the most unlikely regions and sectors today.

I remember his first day back after a junket in Mongolia a couple of years ago. He had the same crooked smile he was giving me this morning.

His readers banked a cool 759% from just one tiny oil driller that time.

Needless to say, when he gets excited, you make money.

“Seen it before?” he grunted, then continued as if he was just about to reveal a well-kept secret. “We see it all the time! It happened ten years back here in the States. Now it’s Mexico’s turn.”

A Tale of Two Oil Booms

I’ll confess he caught me off guard.

Knowing the kind of energy crisis facing Mexico currently, I needed to know more. After all, we’re talking about a country whose oil industry has been in a death spiral since 2004.

And it all started with a boat christened the Centenario del Carmen... and the unrelenting pestering of a 44-year-old Mexican fisherman named Rudesindo Cantarell.

Don’t beat yourself up if you’ve never heard his name before; few have.

Back in 1961, Rudesindo was pissed off... and you can’t blame him. Perhaps the last thing you want to see as a fisherman is an oil slick in the water.

So when Rudesindo spied a few spots of crude in his spot, he did the only thing he could: complain.

The problem is that nobody was listening.

After he told a friend about it in 1968, it took Pemex three full years to get around to investigating the matter.

It’s a good thing they did — it turned into one of the biggest oil fields in history, with 1.6 million barrels of oil flowing out of the play in 1981.

And I know you’ve heard of the Cantarell oil field before.

At one point, it was the second-largest oil field in the world, behind only Saudi Arabia’s mighty wishing well known as Ghawar.

Thanks to the keen eyes of Rudesindo, Mexico’s oil production rose to over 3.5 million barrels per day — almost two-thirds of which was being pumped directly out of the Cantarell complex.

Sadly, this story doesn’t have a fairy tale ending.

By 1995, production from the Cantarell field was already declining.

Well, desperate times called for desperate measures...

Pemex’s solution was to inject nitrogen into the field in 2000. Output jumped to 2.1 million barrels per day in 2003.

It was all they could do, and it wasn’t enough.

A year later, Pemex announced that production from the Cantarell complex had peaked, and some very sharp declines were in store.

That, dear reader, turned out to be a gross understatement.

Production soon started falling drastically: 13.1% in 2006, 36% in 2008.

You can probably guess what that did for the country’s overall output:

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Are things starting to sound a little familiar?

Here in the U.S., oil production had declined for more than 30 years before the drillers finally unlocked the tight oil and natural gas resources that have led to an oil renaissance for the industry.

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Some people seem to have forgotten how bleak U.S. oil production looked back then, before the Bakken became a household name.

Mexico wasn’t so fortunate. Even though the Mexican government has successfully managed to reduce its reliance on oil revenue (Pemex still accounts for about 20% of its annual budget), falling oil production has seriously limited how much is available to export.

Since Cantarell peaked, Mexican crude exports to the United States have plummeted:

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But is Mexico’s oil industry really on death’s door?

The investment herd started writing off Mexico’s oil industry the moment Pemex started filling it up with nitrogen.

“It’s a perfect cover for these guys,” Chris told me.

You see, he’s been quietly following a development that is poised to revitalize Mexico’s flailing oil industry. It’s a story that was lost throughout the rise and fall of the Cantarell oil complex.

He’s calling it Mexico’s “Bakken moment.”

And right now, the government is ready to hand the keys over to one of Chris’ investment gems.

Next Thursday, he’s going to release all of his research to you.

Stay tuned.

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.

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