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Discovery Could Multiply Mexican Natgas Reserves Sixfold

Mexico's energy secretary said Tuesday that the nation's natural gas reserves could be multiplied as much as six fold after the discovery of large shale gas deposits in the country's north and east, and could enable the country to stop importing natural gas.

In an interview with Radio Formula, Jordy Herrera said significant reserves have been found in Chihuahua and Tamaulipas states along the U.S.-Mexico border, in the northern state of San Luis Potosi and the southeastern state of Veracruz.

"Shale gas is being found in a large region of our country, and all that is lacking now is for us to find the best model to begin bringing in this wealth," Herrera said in a translated statement. "This will allow us to halt importing natural gas from other countries and promote development of our domestic petrochemicals industry."

Herrera stressed that the development of shale resources in the country needed the full support of Petroleos Mexicanos (Pemex), Mexico's state-owned petroleum company. He said Pemex should adopt an aggressive program and indicated the company should embrace hydraulic fracturing (fracking) because of its success in the United States.

"[Pemex] needs to determine, with some degree of accuracy, the size of these potential natural gas reserves," Herrera said. "The more we delay, the more we are going to be leaving behind a golden opportunity. We now have the possibility of extracting gas here for the benefit of Mexican companies and Mexican families."

Herrera added that energy companies in the United States "have discovered within the past couple of years that fracking is a profitable technique to extract gas deposits that have been known for 20 or 30 years. This remedy could be used here, and Pemex should begin recruiting firms that have this fracking experience so that they can help us extract our gas and we can start using this resource."

In the meantime, Mexico will continue to import natural gas and liquefied petroleum (LP) gas, Herrera said.

"The vast majority of cases [from this discovery] have found non-associated dry gas and, depending on the region, some extracts have been found which may be accompanied by some natural gas liquids [NGLs]," Herrera said. "These liquids can help us manufacture LP gas, among many other compounds. Shale gas is an unconventional gas and has peculiarities in geological terms, but at the end of the day it is still natural gas."

According to the U.S. Energy Information Administration (EIA), the United States exported 46.9 Bcf of natural gas via pipeline to Mexico in July, the latest month where figures were available. Mexico also imported 12 MMcf of liquefied natural gas (LNG) from the United States that month. The EIA said Mexico paid $4.52/Mcf ($212 million total) for the natural gas and $9.45/Mcf ($113,400 total) for the LNG.

Herrera said early estimates indicate that if shale resources were developed the national gross domestic product would grow 1% annually -- approximately $10 billion -- and that certified natural gas reserves could increase between three and six fold.

"The potential we're determining currently comes from studies with very little detail," Herrera said. "More conservative studies could modify our estimate to a threefold increase. In general terms, we're thinking that the gas reserves could and should increase from three to five or six times."

Pemex drilled its first shale gas test well into Mexico's portion of the Eagle Ford shale play in the northern state of Coahuila (see Shale Daily, March 25). The well, Emergente 1, began producing in February and was reportedly producing at a rate of 2.9 MMcf/d in February.

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