Non-Geologic Factors Necessary to Develop a Shale Industry in Mexico

Abstract

Abstract

In 2013, the U.S. Energy Information Administration (EIA) ranked Mexico 6^th and 8^th in technically recoverable shale gas and oil resources, respectively. These resources are distributed in the northern, central, and southern parts of the country. Mexico's challenging geology requires a better understanding by drilling more wells in areas that are most promising on the basis of reliable geologic data. Lessons learned in the U.S. indicate that a better understanding of the geology is not a guarantor of success in developing Mexico's shale resources. The purpose of this work is to understand the non-geologic factors that led a rapid emergence of the U.S. shale resources, in order to identify the main gaps, uncertainties, and challenges that Mexico must overcome to succeed. The study area comprises northeast and east Mexico where the Eagle Ford and equivalent formations (Late Cenomanian-Turonian) and the Pimienta Formation (Tithonian) were deposited. This work presents a brief geographic context of these areas, and discuss water resources, some population facts, socio-economic conditions, and road and pipeline infrastructure. Then, an explanation of the crucial roles that will play in Mexico's shale industry, the legal and regulatory framework, and the land and mineral ownership. In terms of geography, water resources, population facts, socio-economic conditions, and road infrastructure, northeast and east Mexico present specific and serious technical and operational challenges for companies, including water resources, insufficient road infrastructure, and the ability to deal with people with strong cultural and social roots. Regarding mineral and law ownership, although the law provides compensation for landowners and a process to negotiate, companies should consider that prioritization of energy sector activities over any other economic activity has raised concerns among civil, environmental, landowner, and indigenous groups and communities about the impacts of the law. Mexico is making considerable efforts to reinforce its pipeline capacity, however, it has a road ahead to ensure supply. Therefore, a shale industry in Mexico could be developed if the companies overcome the technical, infrastructure, social and cultural challenges. First and foremost, geology should permit commercially viable production in sufficiently large area to support the development of a shale supply chain.

AAPG Datapages/Search and Discovery Article #90260 © 2016 AAPG/SEG International Conference & Exhibition, Cancun, Mexico, September 6-9, 2016