Thursday, December 08, 2011

Mexico: Rising Natural Gas Superstate?

A recent CD post highlighted how the "shale gale" of unconventional natural gas is starting to go global, with huge recent discoveries in Argentina and China, leading some to conclude that "peak oil" is losing relevance.  We can now add Mexico as another rising natural gas superstate:

"Mexico's [energy] future seems even brighter. According to U.S. Energy Information Administration Executive Director Maria van der Hoeven, Mexico's significant untapped natural gas reserves, if properly developed, could eventually provide Mexico with energy independence. She recently stated, "Mexico is sitting on very large natural gas fields that could allow it to end gas imports and could give it energy independence.

Van der Hoeven's assertions are backed by Mexican Energy Secretary Jordy Herrera, who said, "With the shale gas potential and reserves, and the gas associated with crude, we should become a country with sufficient energy resources, both fossil and renewable, to achieve independence, and we could eventually export, all we need to do is make decisions in favor of the Mexican people. Developing gas production is urgent, the country cannot be subjected to the political times." 

Herrera is salivating over official estimates, that developing Mexico's shale natural gas industry could attract $7-10 billion in annual investment. According to Herrera, government officials have been working with state-owned oil giant Petroleos Mexicanos, or Pemex, to determine the size of the country's natural gas fields and have contacted Congress to discuss the development of the country's indigenous natural gas reserves."

7 Comments:

At 12/08/2011 9:36 AM, Blogger morganovich said...

mexico is sitting on large oil fields too, but they fail to reinvest enough in them to keep the producing and therefore are suffering declines in output.

so long as the fields are run by the government, they are not going to be any kind of superstate.

 
At 12/08/2011 9:52 AM, Blogger VangelV said...

mexico is sitting on large oil fields too, but they fail to reinvest enough in them to keep the producing and therefore are suffering declines in output.

so long as the fields are run by the government, they are not going to be any kind of superstate.


It is not that simple. Most of Mexico's oil is in Cantarell. That has received a great deal of development money and has used enhancement methods for many years. The problem is that most of that oil is gone. While there should be more smaller fields that can be exploited, few of them will be large enough to slow down the precipitous decline in total oil production.

On the plus side Mexico should have serious reserves of conventional natural gas that can be exploited cheaply. The shale idea is stupid and makes little sense in a country where drills are hard to get, pipeline infrastructure does not exist, and water is in short supply.

If Mexico wants to solve its electricity generation problems nuclear reactors make much more sense.

 
At 12/08/2011 10:17 AM, Blogger morganovich said...

my understanding is that cantarell had about 35 bn bbls of oil in place, 50% recoverable and that cumulative extraction has been about 9bn.

that does not sound like most of the oil being gone to me.

am i missing something?

 
At 12/08/2011 10:30 AM, Blogger Buddy R Pacifico said...

VangelV finally makes a salient point on shale gas:

"...and water is in short supply"

Yes, because fresh water is scarce in Mexico, then fracking would have to be done without much water, to be successful.

Hmm, maybe fracking could be done without water. GasFrac Energy Services has developed a non-water fracking process using LPG (Liquified Petroleum Gas).

Quicksilver Resources is using GasFrac Energy Services in Colorado "using zero water in fracking".

 
At 12/08/2011 12:10 PM, Blogger Benjamin said...

Mexico will screw it up. That is the beginning, middle and end of any story about Mexico.

 
At 12/08/2011 9:48 PM, Blogger VangelV said...

my understanding is that cantarell had about 35 bn bbls of oil in place, 50% recoverable and that cumulative extraction has been about 9bn.

that does not sound like most of the oil being gone to me.

am i missing something?


Yes you are.

Cantarell has had its best days behind it. PEMEX spent a bundle on enhanced recovery by injecting nitrogen to pump up the pressure. The game is now almost over and you will see low and falling production for years to come.

 
At 12/08/2011 9:52 PM, Blogger VangelV said...

Yes, because fresh water is scarce in Mexico, then fracking would have to be done without much water, to be successful.

Hmm, maybe fracking could be done without water. GasFrac Energy Services

has developed a non-water fracking process using LPG (Liquified Petroleum Gas).

Quicksilver Resources

is using GasFrac Energy Services in Colorado "using zero water in fracking".


The issue is still going to be the return on the total energy invested and the cost. The US shale gas producers are not making money and most of them had hedges at much higher prices than today's market rate. They had access to cheaper and more efficient drillers and to better infrastructure.

Why wouldn't Mexico go after the conventional gas first? It certainly should have a lot of it. The only reason why PEMEX did not explore for it at the depths that you would find the gas is because there wasn't a market for it before. There is now.

 

Post a Comment

Links to this post:

Create a Link

<< Home