Mexico could open shale fields to U.S. drillers next year

A pedestrian walks past a Petroleos Mexicanos (Pemex) gasoline station as customers fuel up vehicles in the Juarez neighborhood of Mexico City, Mexico, on Monday, Aug. 1, 2016. The country's finance ministry, which gave Pemex a 26.5 billion peso ($1.4 billion) capital boost this year amid the state-owned company's worst financial crunch, has cost the oil giant all of that and more this year by forcing it to sell gasoline and diesel below international prices. Photographer: Susana Gonzalez/Bloomberg
Photographer: Susana Gonzalez/Bloomberg

Mexico could open up its vast shale oil fields to U.S. drillers as soon as next year, the Mexican energy secretary said Friday.

Pedro Joaquin Coldwell, speaking to energy executives, attorneys and academics at Rice University, said the long-suspended auctions for northern Mexico’s shale fields could reopen after the first quarter of 2017.

“Everything will be ready by March,” Coldwell said of the environmental regulations necessary to start the work.

Mexico, in the middle of a sweeping reform of its government-run energy sector, has been holding auctions to sell the rights to private companies to drill in untapped oil fields. The state suspended bids for shale fields when oil prices crashed two years ago. “We thought industry wouldn’t be interested,” Coldwell told the roughly 100 attending a university event on the country’s energy reform efforts.

In addition, the country lacked environmental rules to regulate hydraulic fracturing and the pipelines necessary to transport natural gas, a byproduct of oil drilling.

But recently, Coldwell said, companies have asked the country to restart the shale auction.

Coldwell said he expects to have environmental regulations ready by March and bids prepared to issue soon thereafter.

Mexico kicked foreign oil drillers out of the country more than 70 years ago and nationalized its energy industry.

Three years ago, with soaring electricity rates and plummeting oil and gas production, Mexican politicians passed a sweeping set of energy reform laws, which opened the country to widespread private investment for the first time in decades.

Mexico has since attracted $22.4 billion in investment commitments over 70 contracts from 59 different private companies, Coldwell said.

Those have included $10 billion for 10,000 kilometers of pipelines, $7 billion in exploration and production, and $2.5 billion toward the creation of new seismic maps, which track untapped oil and gas reservoirs.

More than three-quarters of the prospective resources are in deep water or unconventional wells — wells most often hydraulicly fractured to release oil and gas. To access such reserves, the country needs access to drilling technology and financial resources “not now available in Mexico,” he said.