Technology Acquisition Required?

Wed, 01/25/2012 - 12:46

In 2009, ExxonMobil paid US$41 billion to acquire Houston-based XTO Energy, in order to gain access not only to the company’s shale gas reserves, but to gain access to their experience and technology for shale gas development. The move paid o for Exxon, with the company fast establishing itself as one of the world leaders in shale gas exploitation.

Exxon is not alone in moving into the shale gas market through acquisition. Wood MacKenzie indicated that in 2010, one third of global upstream mergers and acquisitions were related to shale gas. By the third quarter of 2011, 46% of all energy M&As were related to shale gas, according to PwC. Companies such as BHP Billiton and Sinopec have made acquisitions in the last two years to strengthen their shale gas reserves and expertise.

In Mexico, shale gas still remains the exclusive domain of Pemex, who has the sole rights to develop the resource. As a result, gaining access to reserves is not a priority for the company; rather, it needs to focus on gaining technology in order to properly exploit Mexico’s shale gas reserves. It also needs to ensure that gas gains the budget share it needs in the Pemex portfolio.

Since natural gas is not as profitable as oil exploitation, especially given the current market prices for both hydrocarbons, it remains to be seen which share of Pemex Exploration and Production’s budget will be allocated to shale gas development in the future. As a result, rather than acquisition, Pemex might consider creating a separate shale gas subsidiary dedicated to exploration and production. This is a model that other NOCs around the world have followed, including Statoil who acquired a company primarily to develop shale gas reserves. Like Statoil, Pemex could look to acquiring the technology it needs to successfully capitalize on Mexico’s shale resources.