60 billion barrels worth are awaiting exploitation
BY NICK MIROFF
The Washington Post
BATIAL-1 WELL, Tamaulipas– The geological marvel known to Texas oilmen as the Eagle Ford Shale Play is buried deep underground, but at night you can see its outline from space in a twinkling arc that sweeps south of San Antonio toward the Mexico-U.S. border.
The light radiates from thousands of surface-level gas flares and drilling rigs. It is the glow of one of the most extravagant oil bonanzas in history, the result of the drilling technique known as hydraulic fracturing, or fracking.
Curving south and west, the lights suddenly go black at Mexico’s border, as if there were nothing on the other side.
This is a reflection of politics, not geology. The Eagle Ford shale formation is believed to continue hundreds of miles into Mexico, where it is known as the Burgos Basin. But while more than 5,400 wells have been sunk on the Texas side since 2008, Mexico has attempted fewer than 25.
A landmark energy bill approved by Mexico’s Congress in December is aimed at correcting this disparity. It has opened the country’s oil industry to private and foreign investment for the first time in 75 years, with the goal of bringing in new technology, expertise and a risk-taking culture long missing at the state oil monopoly, Pemex.
Lawmakers will be hashing out the nuts and bolts of the law over the coming weeks, but expectations are that U.S. and other global companies will be able to bid on oil and gas projects by the end of this year, beckoning the fracking crews across the border.
“The United States and Canada are exploiting their shale resources on a massive scale, and we’re still in the prospecting stage,” Gustavo Hernández, director of exploration and production at Pemex, said in an interview. “But we believe that the volumes we have are enormous.”
Pemex estimates that Mexico’s shale formations hold the energy equivalent of 60 billion barrels of oil, an amount exceeding the entire volume the country has pumped out by conventional means since 1904.
Natural gas is thought to be especially plentiful. In a 2013 survey, the U.S. Energy Information Administration ranked Mexico’s reserves of shale gas as the world’s sixth-largest after China, Argentina, Algeria, the United States and Canada.
A glut of gas production in Texas has pushed prices so low that drilling for gas alone is no longer profitable, and much of it is simply burned off, or “flared,” as it comes out of the ground.
Despite Mexico’s abundant resources, the country’s soaring demand for electricity and meager pipeline infrastructure have left it dependent on imported gas to cover roughly a third of its needs. In some parts of the country, natural gas prices are four times as high as those in the United States.
It is one reason Mexican officials say the shale reserves are crucial to the country’s economic and energy development, while advancing the broader goal of “North American energy independence” — making the entire free-trade zone self-sufficient for its fuel needs. Cross-border pipelines are also being added.
With cheaper gas, Mexico could lower electricity costs at the manufacturing and assembly plants that have become a pillar of the nation’s economy.
“This is critical to the re-industrialization of North America,” said Javier Treviño, the head of the Energy Committee in the Chamber of Deputies. “Mexico needs to develop these resources, or else we’ll be left behind.”
It’s not clear, however, if the U.S. contractors who have poured into south Texas would be willing to take their expertise into Mexico.
The biggest interest in Mexico’s energy overhaul is expected to come from large global companies such as Exxon Mobil and Shell that have the capital and equipment to hunt the most lucrative prize: huge oil fields deep under the Gulf of Mexico.
Developing northern Mexico’s shale beds could take much longer.
The reason, experts say, is that fracking is a completely different industry, dominated by smaller, independent companies and nimble contractors that can provide specialized equipment and services at precise moments in the drilling process.
Mexico has few of these things, and the willingness of foreign companies to test their fortunes in its northern borderlands remains unknown. The region is almost totally lacking in the pipelines, highways and other infrastructure that spread across south Texas, and Mexico’s shale beds sit beneath some of the most lawless parts of the country.
Then there is the problem of water. Fracking requires huge amounts of it, and northern Mexico is in the grips of a protracted drought.
Mexican geologists and petroleum engineers say they will worry about water later. They will bring a pipeline from the sea if they have to, or from wetter coastal regions. The important thing is to first figure out how much oil and gas they have.
Along a flat, baked expanse of scrubland south of the Mexican border city Reynosa in the state of Tamaulipas, Pemex engineers work alongside a fracking crew of 50 men in bright red roughneck suits that resemble baby pajamas, emblazoned with the logo of the global oil-field service firm Weatherford International.
The company and other international firms have been working for years in Mexico under the old model, earning a set fee from Pemex rather than a percentage of production. Once the new law takes effect, foreign operators will finally get a chance to obtain licenses to drill on their own.
It is costly, highly technical work. Clustered around the well, Batial-1, are dozens of trucks, noisy generators, acid vats and storage tanks for the sludgy wastewater coming out of the hole. From a tall crane, engineers feed a flexible steel tube 8,000 feet into the earth, then angle it 4,000 feet horizontally, allowing them to blast a mix of water, sand and chemicals at pressures so powerful that the rock shatters, squirting out oil and gas.
“Unless we fracture, this oil doesn’t even exist,” said Pemex geologist José Galicia.
“The first step will be getting land in the right places, and the rest of the operation will follow,” said Chris Robart, a consultant at PacWest Consulting Partners in Houston. “It’ll depend how interested people are in bringing equipment over the border.”
“That part will be relatively easy,” Robart said. “After all, it’s not that far.”
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