Shale resources have long been a potential alternative for the Mexican energy sector. The size of alleged potential reserves, the low price that governs the gas market and the environmental advantages that they have over other  fossil fuels keep pressing Pemex to take a further look into the possibility of satisfying the nation’s demand struggles with these resources.

The subject concerning shale gas has been examined at length. For the Mexican market, shale gas represents a raw energy source that could be further exploited and commercialized. The rising demand of gas that has recently sparkled a new critical alert calls for alternate efforts for it to be satisfied. The problems for development, though, originate in the fact that Mexico currently does not own the necessary infrastructure or the technical expertise in shale gas to be able to develop the resources.

Pipeline (Image courtesy from ortizfeliciano.blogpost.com)

Pipeline (Image courtesy from ortizfeliciano.blogpost.com)

This does not mean that Pemex is not working on getting the information it needs to start developing this potential energy source. The idea has been thoroughly evaluated, as can be inferred from the comments from several people in Pemex executive positions, made during last year about shale gas production. The financial implications from the shale gas wells that have been exploited in Mexico so far, though, are not promising. The income from the production that has been so far obtained amounts to less than the initial investment for drilling, facilities, and extraction activities. While those calculations were originally evaluated with a price of US$4 per million btu, the price has further fallen to US$3.68 per million btu, which makes it even less of a profitable business.

Gustavo Hernández García, Subdirector of Pemex E&P, also commented on the importance of shale for Mexico. “We know that the shale gas business is profitable when liquids are being produced. As long as we discover shale with wet gas or shale oil, we will be interested because it is easy and fast to drill – in 20-22 days we drill a well, and through multi-fracking, it only takes 40 days to achieve well completion. In 60 days, you have one well producing around 3-5 mcf of gas, but also some liquids, which are important due to the the fact that these liquids fetch an even higher price than the light oil: around $US120 per barrel,” he explains. “This is what makes shale gas profitable.”

With the issue at hand and the knowledge of the possible benefits it could bring, Pemex is paying greater attention to infrastructure and technology projects, with two of them at the fore: the pipeline investment in the northern regions of Mexico and the exploration project alongside IMP and Comesa for shale resources.

As Pemex knows that the prospects of suddenly becoming experts at shale gas production take time, importing part of the surplus that the US is currently producing should be taken into consideration. “Right now,” says Hernández García, “the new Los Ramones pipeline will give us the flexibility to bring more gas from the north or move Mexican shale gas into the domestic market, but we need to get the pipelines first.” First steps for doing it are already been taken: Sempra Energy was recently awarded the contract to build and operate 530km of the planned 1,000km Northwestern pipeline in northern Mexico. The planned infrastructure to deliver gas from Sasabe, Arizona, on the Mexico-US border, to Puerto Libertad, in Sonora, and furthermore to the Pacific Coast port of Guaymas in Sonora is slated to be finished by the middle of 2015. Sempra, through its Mexican subsidiary, Gasoducto de Aguaprieta, bid at a price of $0.13 per million btu, and earned the right to initiate the new infrastructure efforts for a better distribution and transmission network in the country.

 

Pipeline Map (Image courtesy from rbnenergy.com)

Pipeline Map (Image courtesy from rbnenergy.com)

Transcanada, on the other side, is already investing US$400 million on the construction of the Mazatlán pipeline, which will further connect the company’s El Encino-to-Topolobampo pipeline, from El Oro to Mazatlán. This second Transcanada pipeline will continue the efforts to build the necessary infrastructure to potentially amass the amount of gas necessary to satisfy the country’s demand – whether produced inside the country or imported from the US.

The Ramones pipeline that Hernández García mentioned will also be finished by early 2015, which gives Pemex the necessary time to develop the technical resources to better approach its shale resources.

To be able to have everything ready by then, the Sener-Conacyt-Hydrocarbons fund awarded a US$0.25 billion financing promise to IMP and Pemex in a project called Assimilation and Technology Development in Design, Acquisition, Processing and Interpretation of 3D Seismic Data with a Focus on Shale Oil and Gas Plays in Mexico. The main goal behind this endeavor is to finally assess the prospective shale oil and gas resources that the country has, and convert the much-discussed Mexican potential shale reserves into tangible prospective resources through cutting-edge technology. The project will also look to experiment with new conceptual designs for drilling and well completion programs, in order to minimize social and environmental impacts within E&P activities and improve their profitability at the same time.

With the intention of prioritizing possible source regions on their potential, IMP has formed a consortium with Comesa. “We will acquire 1,000 km2 of new 3D seismic in the Limonaria area, close to Tampico, starting April 2013,” says Adán Ernesto Oviedo Pérez, Director General of Comesa. “We are going to be very active in the coming months with the acquisition of seismic for prospective shale oil and gas plays both in Tampico, and later on in the Mexican side of Eagle Ford.”

Pemex continues to invest in obtaining the expertise needed to be able to optimize the shale resources’ prospects that the country has. As José Antonio Escalera Alcocer, Subdirector of Exploration at Pemex E&P mentioned in his interview with MOGR, projects have to take the communities and the environment into consideration, and require the participation of all sectors to construe a better future for the country. By dedicating investments and efforts on infrastructure projects and exploration projects, the company has already begun producing shale oil this year: 400 b/d in Anhélido-1, located at the Tampico-Misantla basin. Soon enough, and hopefully with the help of a successful energy reform, efforts will be multiplied until converting shale potential for the country in a reality.

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