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Carlos Morales Gil, head of exploration and production at Pemex, announced at the end of last week that the NOC plans to drill 175 shale gas wells in the next two to four years, having already begun tests in the Salinas-Burgos-Picachos basin, an extension of the US’s massive Eagle Ford shale gas formation that extends across the Mexican border. The planned investment for the project is US$2.9 billion.
The US Department of Energy recently estimated that Mexico has potential shale gas resources of over 19 trillion cubic metres of shale gas reserves, leading Mexico to look again at its shale gas potential. The results, according to Morales Gil, are promising: Pemex’s own estimates show that the company has reserves of around 4.2 trillion cubic metres with a 90% probability of production, with 12.7 trillion cubic metres with a 10% production probability.
One of the key points Morales Gil made at the event was that Pemex should not rush into development of its shale gas reserves, because of the continuous improvement to shale gas production technology. “We’re working with a high degree of uncertainty and this is why we have to be patient and let the technology mature,” Morales Gil said to Bloomberg at the event.
With the second largest reserves of shale gas in Latin America, Mexico has a lot of potential in terms of developing shale gas. However, there are those that feel that Pemex will be incapable of developing such an ambitious amount of gas reserves under current conditions. Edgar Rangel from Mexico’s upstream regulator CNH said recently that in order to drill the required number of wells for shale gas production, the company would need to increase its capacity either through the participation of foreign companies, or a serious cash injection from the Mexican government.
The problem is that currently, gas production is not attractive enough to prioritize over oil, as it has been at other moments in the last few decades. When asked if the current integrated service contracts would provide enough incentive for foreign investment, Rangel answered that “contracts (with private companies) only help you to get a small fraction of production capacity. Legally it is a good scheme, but it does not give you the speed you need.” It seems that in order to develop shale gas successfully, the leading players feel that a more drastic overhaul of the current system will be needed in the years to come.