Natural Gas and the Stuff of Legends

The Mexican petroleum industry is the stuff of legends. Let us consider two of our most famous ones.

Near a small town in northern Veracruz lies the Cerro Azul #4 Well (the municipality would later adopt its name from the well). It produced the astonishing amount of 260,858 barrels a day when it initially came in. Discovered in 1916, this prodigious well accumulated over 64 million barrels by 1922 and continues to produce small amounts of oil today.

Now we go off to the giant oil fields beneath the Gulf of Mexico, off Campeche, Tabasco and Veracruz. The largest one by far — the Cantarell Field — is one of the five-largest oil fields ever found. At its peak, it supplied over 2 million barrels a day to Mexico. This level of production is larger than all but the world’s 10 principal oil-producing countries.

Indigenous peoples have used oil resources for centuries for sealing their canoes and for incense. The modern oil industry started when the first exploratory oil well was drilled in Mexico back in 1869 and by 1901, commercial production had begun.

Mexico Matters ….

Mexico is among the 15 largest global economies and is the second-largest trading partner of the US. It is a geographical and cultural bridge between North and South America. However, none of these facts will likely be surprising.

What is unexpected is the fact that Mexico is the ninth-largest consumer of natural gas. The country has abundant hydrocarbon resources. During the 1980s and 1990s, domestic natural gas production grew as consumption ramped up. The industry has invested heavily in developing natural gas resources, especially from the prolific Burgos Basin.

From 2006 onward, the story changes: drilling activity suffered a dramatic drop as PEMEX turned its attention away from natural gas and toward drilling for offshore oil. The fall has resulted in domestic production first leveling off then entering into a steep decline, and imports soaring to meet the ever-increasing demand.

Today, every day, 6 billion cubic feet of gas flows into Mexico, mostly from the US. An undernourished industry causes dependence, not the lack of potential in the Mexican subsurface. PEMEX has chosen to focus elsewhere, so gas deposits in Mexican soil have been left underexplored and underdeveloped.

Mexico’s demand for natural gas continues to grow. Growth is a sign of an economy interested in moving toward cleaner forms of fuel to generate power and develop it. When thinking of a growing economy, increased demand for natural gas and the potential under the Mexican soil, it would seem logical to explore and develop more natural gas.

The importation of almost 6 billion cubic feet a day of gas from the US represents around MX$90 billion (US$4.5 billion) in money that could be invested in Mexico and benefit the Mexican economy that is going to producers in the US.

Experts everywhere agree that natural gas plays a vital role in the energy transition. Power generation with natural gas burns cleaner and more effectively than other options used in Mexico today.

Beyond the immediate need to reduce emissions associated with power generation, and even as the world makes great strides to increase the use of renewable energy sources, natural gas is essential for manufacturing petrochemicals for an ever-cleaner global grid and is essentially in the transition to a cleaner and better world.

Why Does This Matter? 

Mexico has made strides in improvements in indexes such as the Social Progress Index and the Environmental Progress Index. Nonetheless, its efforts have been insufficient. Governments alone cannot take the necessary steps to improve these indicators.

It is my view that companies should take a more active role in driving social and environmental change. Companies have come to realize that doing things the right way — that is, engaging with communities, working with all stakeholders and finding better ways to do business — are the keys to achieving long-term sustainable and profitable businesses.   

In Mexico, natural gas is an excellent place to start; it is a global necessity, especially in Mexico. We are blessed with an exceptional endowment of natural resources that remain underdeveloped. Once responsibly developed, these resources will generate significant social benefits, employment, tax revenue and could guarantee a cleaner, more sustainable future. I am confident the stuff of the future Mexican legends will originate in natural gas