Mexico debates opening its doors for shale development

Duncan Wood, the director of the Mexico Institute at the Woodrow Wilson International Center (Emily Pickrell/Houston Chronicle)

Duncan Wood, the director of the Mexico Institute at the Woodrow Wilson International Center (Emily Pickrell/Houston Chronicle)

Energy reform is likely to be one of the most important sweeping legislative changes that an incoming Mexican government will address, experts said Wednesday at a Houston conference on energy issues.

The PRI government, which led the government for most of last century and who won the 2012 election, has indicated that it may consider expanding opportunities for private and international companies to help it expand needed infrastructure to develop its natural resources, including a wealth of natural gas.

One of the key issues is whether any reforms will focus on Mexico’s state-owned energy company, PEMEX, or will make more sweeping, fundamental changes.

Either way will open up additional energy supply, said Duncan Wood, the director of the Mexico Institute at the Woodrow Wilson International Center

“That is a crazy situation for a country that has the fourth largest share of natural gas in the world,” Duncan said. “PEMEX can’t do it alone. It doesn’t have the know-how and technological experience to work in deeper waters and on shale.”

Top trade partner: Mexico is third largest exporter of oil to United States

The Mexican private sector is seeking a constitutional change that would allow private and overseas companies the opportunity to work alongside state-owned PEMEX to develop its shale resources, which is considered more politically palatable than foreign-owned exploration of its deep-water facilities.

Mexico shares the Eagle Ford, considered to be one of the most bountiful shales in the world, with southern Texas. However, unlike the frenetic activity north of the border, Mexico has not developed its resources, lacking both the experience and the infrastructure to extract the oil and natural gas.

The investment needed to bring natural gas to customers throughout Mexico is considerable: in western Mexico, a lack of pipeline infrastructure means there is almost no access to natural gas, Wood said.

Mexican and international investors and producers are also interested in pursuing deepwater opportunities in the Mexican waters of the Gulf of Mexico, but many believe there is more political support for international investment in shale development, because of the scarcity of domestic experience and technology development.