Juan Fernando Ibañez
Managing Partner
Ibáñez Parkman

Conditions Determining Mexico´s Gas Production

Wed, 01/20/2016 - 15:25

Juan Fernando Ibáñez, Managing Partner at Ibáñez Parkman, illustrates how much room for growth Mexico’s pipeline network provides. “In Texas, there are more than 90,000km of pipelines, but in Mexico, a territory at least seven times the size of the southern US state, there are no more than 11,000km.” This may soon change thanks to the many pipeline projects that are being undertaken, such as Los Ramones, which is only the beginning of a bigger picture for Mexico in terms of infrastructure. Furthermore, Ibáñez provides a reminder that PPPs are instruments that could play an important role. “PPPs will be a vital factor in onshore, midstream and upstream projects with PEMEX, as well as in the transmission and distribution segments of the electricity industry. In my view, they are the most important sources for the power industry,” he asserts. Ibáñez points out that Mexico’s approach to clean energies will also create opportunities for all business related to gas, from extraction to conduction and distribution to storage.

For Ibáñez, it is possible that Mexico could produce its gas resources, but various factors must fall into place beforehand. “The future of Mexican gas production depends entirely on the success of this Energy Reform, but the gas imports from the US will offset current low levels of gas production.” Mexico’s shale reserves could contribute to increasing the country’s natural gas production, but developing these resources entails two challenges, in Ibáñez’s view. “There needs to be a policy that allows for the redistribution of water. In fact, starting water-intensive activity in Tamaulipas and Burgos, the two regions with the country’s major shale reserves, will be a delicate matter due to water availability.”

The second concern involves environmental regulations given that the extraction of shale oil and gas is done through fracking, a technique resulting in considerable CO2 equivalent emissions. “The government needs to find a way to address these two issues before the extraction of shale resources can begin. This is time sensitive, as these reserves are estimated to be the world’s fourth largest and thus represent significant resources for our country,” Ibáñez concludes.