Is Shale Gas the Key to Mexico's Energy Independence?

Wed, 01/25/2012 - 12:06

Mexico’s energy sector naturally welcomed the announcement made by the US Energy Information Administration (EIA) the first quarter of 2011 that the country would become a natural gas power. Provided the existence of shale gas in northern Mexico is confirmed, potentially representing 680.87 Tcf, or 11 times the total gas reserves formerly quantified, the EIA forecasted that Mexico would begin exporting gas. Pemex has a more conservative estimate for its potential shale gas resources, putting the figure at between 150 and 459 Tcf of shale gas, spread across five geological provinces.

Shale gas reserves in Mexico are located between the state of Texas on the US side of the border and the Mexican state of Coahuila, which is where Pemex drilled the first exploratory well to identify the rock, determine whether it contained gas, and whether that gas could be produced. This well produced first gas in February 2011, thus confirming that the US Eagle Ford shale formation crosses over to Mexico.

These results prompted Pemex in April 2011 to consider a preliminary investment of US$200 million for studies and the drilling of three more wells in Coahuila. At the time, there was still no detailed map of the region and the potential volume of shale gas or of shale oil, which is more profitable.

Mexico’s Energy Ministry is confident that shale gas will play an important role in the transformation of the country from a net gas importer to a net gas exporter. Current Mexican Energy Minister Jordy Herrera Flores, former head of Pemex Gas, said shortly after taking oce that he believed shale gas would become vitally important for the Mexican economy, adding that the industry could be worth between US$7 and US$10 billion in investments each year.

Pemex plans to spend just 2% of its annual budget on shale gas exploration over the next three years. In March 2011, the company reported the successful completion of its first shale gas well, Emergente-1, with production of 2.9Mcf/ day. In 2012, the NOC will complete three more shale gas wells: Montañes-1, Nomada-1 and Navajo-1.

Shale gas development is not without its issues. Hydraulic fracturing, or fracking, continues to be controversial from an environmental perspective. In 2011, there was an upsurge in the number of opponents to fracking in many countries such as France, Switzerland, Germany, Bulgaria, Ireland and Romania. Some governments have imposed a moratorium on fracking or banned the process in response to protests.