September 27, 2013

Our goal with The Pulse and our other social media outlets is to provide you every month with the kind of information that will help you and your operation to be more successful.

To this end, I sometimes sift through as many as twenty news and industry articles a day, avoiding the rehashed headlines in order to post the most relevant news of the day through our Twitter account, @TolteqMWD.

If you’ve been following us lately, then you have probably noticed that Mexico is garnering quite the buzz, as Mexican President Lopez Peña attempts to reform national energy policies by ending a seventy-year state monopoly. Why is this soon-to-be-open market getting so much attention? Let’s drill down (pun intended).

The Facts: Mexico boasts the second largest economy in Latin America and is the ninth largest oil producer in the world, with vast conventional reserves (only Venezuela is higher in the Western hemisphere) and a true supergiant field, Cantarell.

Nevertheless, all is not well: although world oil production rose by 2.5% (the US had the largest increase at 14%), Mexico’s actually declined, and is down a full quarter since its peak in 2004 (July’s output was the lowest in 18 years). As conventional reserves have dwindled dramatically while the NOC, Pemex, has become a bureaucratic nightmare, the administration has realized that the time is right for reform.


The Reforms: The proposal by Peña Nieto that has received the most attention would allow for Pemex to enter “profit-sharing” contracts with private and foreign oil firms. This would open an untapped market with huge resources. Consider for a moment the booming Eagle Ford play in South Texas, which obviously doesn’t stop at the border!

U.S. experts put Mexico’s potential shale-rock resources at the fourth-largest in the world, which Pemex believes may hold up to 13.1 billion barrels of recoverable oil, twice as much as recent estimates for the Bakken. Pemex has already identified 175 shale exploratory opportunities, many of them in the Burgos Basin, the extension of the aforementioned Eagle Ford.

Pemex is not sitting back. So far, they have tested ten successful shale wells, and the company just drilled its first successful production well in late April. But in order for Mexico to join the North American unconventional boom, they will require the expertise and support of their neighbors to the North. And that shift may start this month, as their Senate convenes to discuss these reforms. On this side of the border, Houston will host the Eagle Ford & Burgos Basin Cross-Border Development Summit on November 7-8.

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