HOUSTON—Mexico’s increasing power demand has U.S. pipeline gas imports soaring, but the nation’s own large, untapped resources mean opportunity for domestically-sourced resources awaits in an increasingly deregulated country.
Estimates put Mexico’s shale natural gas stores at 545 trillion cubic feet (Tcf) of technically recoverable gas and 13.1 billion barrels of oil (Bbbl), according to the U.S. Energy Information Administration (EIA).
A large portion of that estimated gas sits in the top-ranked Burgos Basin, across the border from the South Texas Eagle Ford and is “high-graded prospective” in both the Eagle Ford and Pimienta shale formations at depths ranging from 1,500 m to 5,000 m (4,921 ft to 16,404 ft), according to Brian Link, chief geophysicist for Global Shale Plays (GSP), a Conroe, Texas, firm that provides production equipment, engineering and other services.
Link was among the presenters delivering eight-minute investor pitches during the 2017 NAPE Summit business conference on Feb. 16 in hopes of luring business to basins south of the border. The Eagle Ford and Pimienta could hold more than 17.9 Bbbl of oil and 162 Tcf of gas in the Upper Cretaceous and Upper Jurassic geologic trends, he said, referring to a map of shale bid round blocks.
In 2015, the EIA said the Burgos’ overall risked recoverable wet and dry gas was an estimated 341.8 Tcf.
“The resources are huge and the desire to get to them and begin operations is huge,” Link said.
With Pemex no longer in the driver’s seat in Mexico since the country opened to foreign investors in 2014, investors have an opportunity to enter the Mexican shale scene, according to Link.
The international and domestic prospect previews, which ran concurrently at NAPE, were delivered as oil and gas companies make plans to increase spending and drilling in North American shale plays following a downturn marked by a mothballing of rigs and massive layoffs.
Improving market conditions and oil prices that have consistently held above $50/bbl, thanks largely to a cut in OPEC members’ production, have given the industry confidence to spend more and crank up more rigs.
Mexico’s National Hydrocarbon Commission awarded GSP a 16,100 sq-km prospect area, giving the company permission to conduct geological and geophysical (G&G) studies and assist in the joint operating agreement (JOA) process, Link said.
“We can do a G&G for you and you can pick your own blocks and we can negotiate directly with Pemex and various government authorities to obtain your own JOA or get started in an exploration block,” Link told a crowd that included potential investors.
It also spares investors from competitive bid rounds.
Link noted that the Pemex managed to hold on to the area, but the company neither has the money nor operational skills to develop the shale resources. The state-owned company has drilled about 20 wells in the Burgos Basin, including about 10 or 11 in the GSP area.
Link highlighted the Habano-1 well in the gas window to demonstrate its economics.
“When we factor in the dry and wet gas it comes to a $2.58 breakeven; however, the point is that these wells were drilled without much real effort to identify sweet spots and the drilling and completions operations can be greatly improved,” Link said. “We believe that the economic costs can be lowered.”
He added that Mexico is looking for long-term partners as part of the farm-in application process. GSP is looking for oil and gas companies with shale production operational experience and capital to negotiate leasing blocks with the Mexican government.
“The bottom line is that right now, Mexico is currently importing a ton of gas from the U.S. They simply can’t afford to do that,” Link added.
The third phase of Mexico’s Round One focused on shale blocks, including in Campos Burgos, Campos Norte and Campos Sur, and attracted 40 bidders. Twenty-five blocks were awarded.
Velda Addison can be reached at email@example.com or via Twitter @VeldaAddison.