Will Mexico soon be tapped out?

Output at Mexico's most important oil field has fallen steeply this year, raising fears that wells there that generate 60% of the country's petroleum are in the throes of a major decline. Exceeded in size only by Saudi Arabia's leviathan Ghawar field, Cantarell is a prolific giant that is past its prime. Monthly production peaked in late 2004 at just over 2.1 million barrels per day (mbpd) and has fallen more than 15% since then, down to 1.8 mbpd in May. Experts agree it has nowhere to go but down.

Seawater is threatening to swamp the wells of Cantarell as the field's pressure diminishes, a debilitating symptom of old age that makes it tougher to extract the remaining oil. Leaked internal reports of Pemex's own worst-case scenarios published in Mexican newspapers show production plummeting to about 520,000 barrels a day by the end of 2008 - a 71% free-fall from May levels in less than three years.

A rapid demise would pose serious challenges for the world's No. 5 oil producer. The oil field has supplied the bulk of Mexico's oil riches for the last quarter of a century. It would also be bad news for the United States, for which Mexico is the No. 2 petroleum supplier, behind Canada. And it could exacerbate tight global supplies that have kept oil at record prices.

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