Fracking: A Pragmatic Turn for Energy Security

As we know, Mexico's resources include many unconventional deposits that require hydraulic fracturing to be extracted. It may feel like the conversation about this is new or recent, but it's not. We've known about it and discussed it for years.

In various conversations with colleagues in the sector since the previous administration (AMLO), most agree that the ideological stance would sooner or later need to change. The challenge for the current government is to do so without losing its political essence, thus avoiding internal friction that complicates solutions and delays projects. My experience in this industry tells me that decisions must be made promptly; otherwise, the market itself will make them for you sooner rather than later. There is no other option.

In particular, the conversation evolved at a faster pace in 2025 at various forums and conferences, especially in the discourse of PEMEX and SENER, as we can now see more clearly. I remember the expert forum held by the College of Petroleum Engineers in early 2025, where one of the key conclusions was that countries with unconventional resources were now exploiting them to bolster their public finances, achieve energy self-sufficiency, and strike a more balanced trade agreement. In short, the message is clear: Let's embrace fracking.

I believe that this discussion has now moved beyond ideology and that we are beginning to focus on the practicalities of "how" and "when." Pragmatism is welcome! Today, we are beginning to focus on the contractual and commercial solutions that will deliver the best results. As I mentioned in my previous article, 2026 will be a defining year for the next two decades at least. While it will not be a year of significant growth, it will be a year of defining the structure of future oil production.

It should be emphasized here that unconventional deposits are more complex than conventional fields, in which PEMEX has experience. Essentially, fracking involves lower production per well, so a large number of wells are required. This process is more akin to a production line in a manufacturing plant. This has an impact on many financial metrics, capital allocation assessments, learning curves, and regulatory challenges, as well as enabling more accurate measurement of environmental and social impacts.

A useful reference point for illustrating paradigm shifts driven by political will and sound institutional design is Vaca Muerta, which is now central to oil and gas production in Argentina. Here, there is a positive combination of regulatory certainty, long-term tax incentives (which are very important), and a stable legal framework. This has been fundamental in attracting both local and foreign investment. This case demonstrates that the investment environment (not just geology) is decisive in making the development of unconventional resources economically viable and, above all, perceived as strategic opportunities rather than risks that are difficult to control.

So far in Mexico, PEMEX has made a very moderate progress in signing the so-called 'mixed contracts' with the private sector (all with Mexican companies). At the time of writing, there are seven contracts, with some under discussion. However, they are essentially focused on existing fields, and we have not yet fully embraced fracking. This clearly indicates that there is still room for improvement in the contractual model. Furthermore, further evaluation is required to adapt contractual and commercial vehicles to better reflect the complexity, capital intensity, and specific risks involved in fracking.

I believe that more open partnership models, such as farmouts, would provide greater certainty and, consequently, better prospects for investment decisions, particularly for international players.

This would enable the government to prioritize providing greater legal and regulatory certainty, bearing in mind that these projects have a long investment cycle, and long-term visibility and regulatory predictability are crucial. Conversely, a more open partnership scheme enables a fairer distribution of risks and benefits, aligning incentives between PEMEX and private partners who possess the necessary technology and capital. Finally, it would facilitate the establishment of incentives to encourage financing and access to fracturing technologies with a lower environmental impact — a key factor in making politically significant decisions.

Social licenses are a fundamental element. We must take into account that. Unlike the state of Texas (with a different property regime), Mexico has geographical challenges and a wide variety of communities. I have been fortunate enough to participate in various projects where issues that initially seemed easy to solve evolved in such diverse ways that they suddenly became threats to the entire project. Hence, the importance of the government's paradigm shift with regard to fracking is accompanied by active and decisive participation in social initiatives. It cannot leave this entirely to the private sector without doing everything possible to facilitate, interact, and help contain associated risks, including in matters of physical safety.

The debate on fracking should no longer focus on its ideological viability. Instead, today we must focus on how to implement it responsibly and competitively in line with the energy sector's strategic plans, and all participants must be pragmatic. The real paradigm shift lies not in accepting the technical viability of fracking, but in creating the political, regulatory, social, and contractual conditions that enable the long-term development of unconventional resources with sufficient certainty. I am certain that the will exists to take this step with clarity and consistency. If we postpone this decision, we will only be reducing the room for maneuver to ensure oil and gas production in the coming decades, which is essential for Mexico's energy security.