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Mexico’s President Elect Reaffirms Opposition To Fracking Despite Natural Gas Output Woes

For the second time since his July 1 electoral victory, Mexican President-Elect Andrés Manuel López Obrador said publicly that his administration will not allow hydraulic fracturing, or fracking, to extract oil and gas.

The comments, which López Obrador made to local reporters last Friday after a meeting with San Luís Potosí state governor Juan Manuel Carreras, directly contradict the recommendations of national hydrocarbons commission CNH, which on September 20 published a 189-page policy document warning of the dire threat posed by plummeting natural gas output and reserves.

The document stated that, since 2010, Mexico’s proved plus probable (2P) gas reserves have fallen by half, to 19.38 Tcf from 37.51 Tcf.

CNH pointed out that, while the average decline rate of natural gas production was 4.7% from 2010-2017, that rate has accelerated dramatically over the last three years. Output in 2017 averaged 4.24 Bcf/d, down 13% from 2016.

Natural gas imports, meanwhile, have skyrocketed, surpassing 5 Bcf/d in 2018, compared to about 1.5 Bcf/d in 2010.

Mexico boasts 141.5 Tcf of prospective unconventional gas reserves, CNH said, compared to 76.3 Tcf of prospective conventional reserves. The unconventional prospective reserves are concentrated within the Sabinas, Burro-Picachos, Burgos, and Tampico-Misantla basins.

Nonetheless, López Obrador, commonly known by his initials AMLO, said that, “We will not use the famous fracking to exploit…oil and gas.”

To be sure, López Obrador’s comments are just one of several challenges facing unconventional exploration and production in Mexico, Arturo Carranza of Mexico’s Instituto Nacional de Administración Pública told NGI’s Mexico GPI.

“There’s a lot of other problems that have to be resolved before Mexico can exploit its shale resources,” he said. “And you have to remember that López Obrador has a massive majority in the election. And a very great number of his supporters are firmly opposed to fracking.”

Carranza added, “Supporters of fracking -- some of them supporters of López Obrador -- need to mount a campaign to convince public opinion of the benefits of fracking for both profits and the environment.”

CNH cited that in 2015, for the first time in Mexico’s modern history, primary energy consumption in the country exceeded domestic primary energy production. The country’s energy independence index for that year was 0.97, meaning that production was about 3% less than consumption.

In 2016, the most recent year for which the figure is available, the index fell to 0.84, meaning that domestic production was 16% below consumption.

The rapid decline of the index “confirms the substantial incremental increase of energy imports to our country,” CNH said.

“This is the result, in large part, of the lack of required investments in the sector, specifically in activities of exploration and extraction, principally in deepwater and unconventional discoveries, combined with the imminent natural exhaustion of mature fields.”

The report went on to state that, “the greatest prospective natural gas potential is located in unconventional discoveries. Independent of the geological and economic risks, the development of this type of project faces socio-political risks that can be as difficult, if not more so, to address.”

CNH also recommended the creation of a state company dedicated exclusively to natural gas E&P, similar to Russia’s Gazprom.

Mexico’s Round 3.3, an upstream tender slated for February 2018, will make available nine unconventional E&P blocks in the Burgos Basin. López Obrador has said that he plans to postpone the round, although it officially remains on the schedule of CNH.

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