Much of the shale oil and gas formations under Texas extend into Mexico, and oil experts argue over whether the nation should invest in drilling in the scrublands of Coahuila state, as it lacks much of the technology and drilling rigs to do so. But experts do agree on one thing: Mexico has abundant shale gas.
The U.S. Energy Information Administration estimates that Mexico has the world’s sixth-largest shale-gas reserves, thought to be 555 trillion cubic feet.
“Look at the map. Geology tells you that the Eagle Ford plate obviously continues into Mexico,” said Ernesto Marcos, a partner in Marcos y Asociados, a Mexico City consulting firm, referring to a vast natural gas and petroleum field in southern Texas.
Marcos said, however, that big, lumbering Pemex was incapable of finding and tapping into unconventional gas resources economically.
“Asking Pemex to develop shale gas reserves is like asking an elephant to eat with chopsticks,” Marcos said.
While hundreds of independent operators have flooded into Texas to coax out shale gas and oil through the process of hydraulic fracturing, or “fracking,” of the underground rock layers, Pemex has been cautious in taking action.
“It’s been one of those, ‘ready, aim, study’ strategies by Pemex,” said George Baker, a consultant and editor of Mexico Energy Intelligence, a newsletter out of Houston.
Because Pemex, which supplies the revenue for Mexico’s government operations, must look for higher-profit oil reserves, Baker said, it “has to pass up lots of opportunities that wouldn’t be passed up in Texas and Canada.”
In addition to economic and technological considerations, Pemex must deal with tougher environmental constraints in arid northern Mexico than those in Texas.
“In Coahuila, there’s no water, and that’s where our shale plays are,” said Miriam Grunstein Dickter, an energy expert at Mexico City’s Center for Research and Teaching of Economics. “We’d have to transport the water in pipelines to Coahuila to do the fracking, and we’re not a water-rich country.”
So as Mexico settles on a strategy of urgently building more pipelines – the first phase of a 520-mile pipeline that will stretch from Agua Dulce, Texas, to central Mexico should be completed in December – and working out new legislation to attract private companies to its energy sector, huge cargo tankers arrive steadily at its liquefied natural gas terminals. Last week, it was the LNG EDO from Nigeria and the Seri Balqis from Yemen.
“We’re importing really expensive gas from Angola and Nigeria,” Grunstein Dickter said. “We’re moving the tankers through Tierra del Fuego,” at the far tip of South America – a very expensive journey – because they’re too large to pass through the Panama Canal.
In announcing his plans last month to open the energy sector to foreign companies, Pena Nieto noted that Pemex had proved to be incapable of both hunting for major oil discoveries and exploring and producing more natural gas.
“In the United States in recent years more than 9,000 wells have been drilled for the extraction of gas, while in Mexico only three, because only Pemex can do it,” Pena Nieto said, referring to the monopoly that the country’s constitution grants the state company on all exploration and production.
Mexico used to be self-sufficient in natural gas, but now it imports a third of its needs. Shortages have hurt the steel, cement, glass, automotive, chemical, tire, cardboard, cooking oil and agriculture industries, Economy Secretary Ildefonso Guajardo Villarreal said last month.
Without luring outside companies that have the technology to extract natural gas from unconventional reserves, “we’re going to lose competitiveness. We’re going to lose productivity in a very ferocious way,” said Marcos, the energy consultant.
The higher costs of imported liquefied natural gas have had other impacts, as well. Electricity rates have soared in Mexico, for example. “In the United States, you can find places where electricity is half the cost of what it is in Mexico,” Marcos said.
If Mexico succeeds in obtaining cheaper natural gas, it will have widespread collateral effects, allowing the development of other industries. “Nobody can build a plastics company if they can’t have an assured supply of ethylene, your raw materials,” Marcos said.
Once natural-gas production and distribution can satisfy domestic demand again, he said, some industry will roar back to life. “You could see a rebirth of the petrochemical industry,” Marcos said.