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Will A Fracking Boom Ever Happen In Mexico?

Mexico is sitting on top of the sixth biggest collective shale reserve in the entire world. At an estimated total of 545 trillion cubic feet, they’re just a hair behind the United States’ estimated 665 trillion cubic feet, which changed the global energy industry and handed the United States energy security on a silver platter thanks to the shale revolution. So why hasn’t Mexico had its own shale revolution?

Just across the U.S. border, Mexico is sitting on a veritable goldmine known as the Burgos Basin.” The Burgos Basin shale gas field, which spans the arid shrublands of Northern Tamaulipas, Mexico, is a potential bonanza as big or bigger than the record-setting Eagle Ford shale play across the Rio Grande in South Texas,” The North American Congress on Latin America (NACLA) reported this week. There are already thousands of active conventional gas wells in the area, but fracking has never exploded in the way that many speculators anticipated

It’s not that Mexico has never dabbled in fracking. The state-owned oil and gas company Petroleos Mexicanos (known as Pemex) has used hydraulic fracturing methods for oil and gas extraction since the 1980s. Pemex even announced successful fracking trails in the Burgos Basin in 2013. “But seven years later, shale gas wells remain at the exploratory stage,” NACLA reports. While Pemex has drilled around 20 exploratory shale gas test wells in the Burgos Basin, the development of the sector seems to have stalled out completely, with zero private firms currently drilling for shale gas in the region.

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Because the Burgos Basin hasn’t been fully (or really even partially) exploited, no one is sure exactly just how big and how valuable its reserves are. But there is consensus that the potential payoff is massive. Until now, however, private investors have been wary of getting involved in the shale play for a variety of reasons. “For now, challenges of infrastructure, investment, and regulation are leaving Mexico’s potentially massive shale deposits mostly untapped,” reports NACLA. “The market is dead right now. Fracking isn’t going forward,” expert Hatch Kuri from the National Autonomous University of Mexico was quoted as saying.

As usual, there are politics involved. Mexico’s current president Andrés Manuel López Obrador publically swore that he would ban fracking nationwide soon after his election in 2018. As of right now, however, there still isn’t a law on the books. And in light of state-owned oil company Pemex’s continually dismal performance and a particularly tough year economically, López Obrador seems to be wavering on his anti-fracking stance. Since the beginning of the pandemic, he has sent conflicting messages, quietly ramping up national oil production while simultaneously repeating his interest in repealing 2014’s energy reforms which welcomed foreign investors into the Mexican energy sector. If fracking is ever going to get off the ground in Mexico, these reforms would play an essential role.

This has led to a fracking stand-off in Mexico, where pro-fracking advocates are pushing hard for the government to open its arms to investment dollars to boost the domestic economy, and local constituents and environmental advocates are just as vocal about their desire for López Obrador to make good on his promise to ban fracking outright. Local activists have been getting louder and more exacting in their demands for environmental and community protections against the potential ramping up of domestic fracking.

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What’s more, while it may seem like a no brainer to copy the United States’ playbook to recreate the shale revolution south of the border, it’s not so simple. For one thing, communities in Mexico have a lot more control over their mineral rights than communities in Texas, where the U.S. shale boom was born. This means that drilling in Mexico is actually a whole lot more difficult and a lot more expensive. ““It's quite a bit more expensive to drill in Mexico compared to what they could pipe in from Texas,” said Matthew Fry, a geographer at the University of North Texas. “What happened with shale and the massive boom in the U.S. was really unique, and we haven’t seen it duplicated anywhere else.” 

That being said, there are still a whole lot of people who want to give it a try. And right now, when Mexico is particularly cash-strapped thanks to the pandemic, they may just get their chance - but the local anti-fracking movement won’t make it easy. 

By Haley Zaremba for Oilprice.com

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