HOUSTON — As Mexico moves to open its energy sector to international companies, the new investments and increased activity could mean a bonanza for border towns on both sides, attracting as much as $1.2 trillion in economic activity to the region in the next decade, according to a BBVA Compass economist.
Investment in Mexican Eagle Ford Shale, increased pipeline development and improvements to the electric grid could help to transform border cities in Texas and Mexico, bringing millions of jobs and ancillary businesses, said BBVA Compass economist Marcial Nava in a webinar Tuesday.
The Birmingham, Ala.-based financial services firm, owned by Spanish bank BBVA, is one of the largest banks operating in Mexico and Texas.
But while the details are still forthcoming, the investment and new projects expected to flow from these reforms could create 2.5 million jobs in Mexico by 2025, according to BBVA, opening the door to residents who had not had these opportunities before, particularly in northern Mexico.
“More jobs in Mexico could potentially reduce illegal immigration,” Nava said, noting that a significant portion of the new jobs would be well-paid.
The reforms will remove the limitations that prevented international investment from developing Mexican shale plays, especially in the Burgos Basin, which is the portion of the Eagle Ford Shale that extends into Mexico. This play could hold more than 300 trillion cubic feet of technically recoverable shale gas, while Mexico’s other shale plays — the Sabinas, Tampico and Veracruz Basins — are estimated to hold more than 1 trillion cubic feet of natural gas reserves.
While shale plays in northern Mexico are complicated by water access issues, infrastructure limitations and security concerns, Nava suggests that the wealth of the resources could draw some big players, especially if the implementing legislation currently being drafted permits contracts with sufficient incentives for international companies.
“Companies familiar and experienced with the Eagle Ford such as EOG Resources, Chesapeake, and ConocoPhillips, have comparative advantages and could lead Mexico’s shale gas transformation,” Nava wrote in the BBVA report.
“Even if the country continues to import natural gas, it needs the infrastructure for that natural gas and to lower the prices to households,” Nava said.
The United States is Mexico’s largest natural gas supplier, providing 80 percent of imports. More than 60 percent of the natural gas supplied comes from Texas through pipelines that link the Lone Star state with its southern neighbor, Nava said.