Is Fracking in Unconventional Reservoirs an Option for Mexico?

Unconventional hydrocarbon reservoirs are natural gas reservoirs of very low permeability or sedimentary formations containing oil of very high viscosity, which makes it difficult to flow into wells.

Unconventional hydrocarbons are oil and natural gas which, although found in large quantities in nature, due to their location, type of reservoir and physical characteristics, they cannot be economically exploited with traditional extraction technologies. Instead, they require special procedures to be recovered.

These types of geological formations have been known for centuries but there were two problems: the price of oil was not high enough to justify the profitability of exploiting these formations and there was no adequate technology for their exploration.

What is Fracking?

Fracking is a drilling and well stimulation technology in unconventional hydrocarbon reservoirs, which makes possible or increases the extraction of gas and oil from the subsoil.

This technique consists of drilling a vertical or horizontal well, cased and cemented, at a depth of more than 2,500m, with the objective of generating one or several high permeability channels through the injection of high-pressure water, so that it overcomes the resistance of the rock and opens a controlled fracture at the bottom of the well or desired section of the formation containing the hydrocarbon.

The pressurized water is mixed with some proppant material and chemicals, with the objective of widening the existing fractures in the rock substrate that enclose gas or oil, which are typically smaller than 1mm, favoring its exit to the surface.

The first incident of fracking dates to 1930, when acids were used instead of explosives to break rocks. In 1947, studies began on the possible use of water. This method began to be applied in 1949 by Standard Oil but it was Mitchell Energy, a company owned by George Mitchell, known as the father of fracking, that achieved the first commercial hydraulic fracturing in 1998.

Advantages

• The exploitation of unconventional resources will satisfy the growing demand for hydrocarbons in Mexico and will reduce dependence on imports.
• Developing this industry will create thousands of well-paid jobs and train professional and specialized Mexicans.
• Access to natural gas will activate its consumption, substituting other fuels such as coal and oil, with gas being the fuel that will help the transition to renewable energies, even using natural gas associated with fracking to produce electricity (gasify the country).
• In terms of regulations, Mexico has the highest standards to carry out this activity safely.
• Countries that have unconventional deposits and use this technique reinforce their energy sovereignty.

Disadvantages

• This technique uses various substances that may represent hazards to the environment and affect the health and quality of life of the inhabitants in the areas where it is practiced.
• Contamination of aquifers is much debated, but not proven.
• Ruptures of the subsoil layers cause increased risk of seismic activity.

Countries using fracking

• Canada, United States, Mexico, Argentina, Germany, England, China, and Australia.

After various factors led to its prohibition, hydraulic drilling returned to nations such as Germany, England, and Australia.

An interesting case is that of Australia, where the restriction on these procedures was lifted to “replicate the American revolution” in this field.

Increased US Production From Fracking

US oil production had declined since 1985. However, the entry of the 2000s saw gains in oil prices again and many large companies saw unconventional geological formations as a new way to produce oil and natural gas. They began to implement new techniques, such as fracking.

Oil production in the US had a downward trend from 1985 to 2008, but increased in 2009.

Thanks to fracking, US production increased over eight years (2011-2019), from 6 million barrels per day to 13.1 million barrels per day, which has allowed it to rank globally as the leading oil and gas producer in recent years.

Currently, more than 70 percent of oil production in the US comes from unconventional wells and almost 40 percent of that total comes from the Permian Basin (which also produces more than 15 percent of the natural gas produced in the country).

Texas is the state that produces the largest amount of oil, in large part due to the Permian Basin, which produces 5.8 million barrels per day. Texas produced 1.78 billion barrels, or 43 percent of the country's total production, in 2020.

Fracking in Mexico

According to the latest available data from the National Hydrocarbons Commission (CNH), fracking began to be used in 1996, in the Jacinto-5 well in Tabasco. By the end of that same year, 11 more wells had been fracked in Veracruz, Tamaulipas and Nuevo Leon.

Currently, the number of oil wells that have been hydraulically fractured amounts to 7,879 of the 32,464 existing wells. They are in Coahuila, Nuevo Leon, Puebla, Tabasco, Tamaulipas and Veracruz. San Luis Potosi, Hidalgo, Chihuahua and Oaxaca have potential resources.

The states with the highest number of fracking wells are Veracruz and Puebla (with 2,288 and 1,440 wells, respectively). These wells were drilled and operated by large companies subcontracted by PEMEX, even before the Energy Reform. Among them: Halliburton, Weatherford, and Schlumberger.

Can Fracking Benefit Mexico?

The answer is YES, as long as there is adequate regulation and it is implemented correctly, mainly to avoid the controversy about groundwater contamination. In addition, it can help to create jobs and contribute to achieving energy sovereignty.

Fracking is already used in our country. The more important decision is whether to encourage a more extensive application of this technology.

It is a very important decision, in which several aspects must be analyzed in order to plan an implementation that will have a positive effect.

An important point would be to create an alliance to reach agreements with the US and Canada in which everyone can benefit, allowing a fracking project to be carried out, considering that these three countries form the largest energy market in the world.

Unlike the natural gas extracted by fracking in the US, which is mainly used for industrial and domestic purposes, our proposal is that the natural gas obtained in Mexico associated with the extraction of other hydrocarbons be used for the production of electricity, making the operations of CFE cleaner, in addition to the fact that this type of project has easy access to credits from the international financial community, as demonstrated by the cases in Africa and South America.

The World Bank has an initiative to stop burning methane associated with oil extraction by 2030 and is supporting projects in various countries where this strategy is already being implemented. In Mexico, we think it would be beneficial to obtain this type of aid, while also integrating funds from the private sector.