Friday, September 29, 2017

Global Shale Law Compendium: Shale Law Governance in Mexico

Written by Chloe Marie – Research Fellow

The Global Shale Law Compendium series addresses legal development and other issues related to the governance of shale oil and gas activities in various countries and regions of the world. In this article, we will highlight governance actions taken by Mexico.

According to the U.S. EIA, Mexico has considerable potential for shale gas production with approximately 546 Tcf of technically recoverable shale gas resources located along the onshore areas of the Gulf of Mexico. Mexico is believed to have the second largest shale gas reserves in Latin America behind only Argentina. The U.S. EIA estimates that the Burgos Basin, which extends from southern Texas to northern Mexico, holds most of the country’s shale gas reserves with about 343 Tcf of technically recoverable shale gas resources. Other basins located in southern Mexico may contain potential resources, including the Sabinas Basin, the Tampico Basin, the Tuxpan Platform and the Veracruz Basin; however, production testing has not yet occurred in those basins.

Mexico is no stranger to shale gas development as Pemex – a state-owned petroleum company that formerly was the exclusive operator for all petroleum activities in Mexico – drilled up to six shale oil and gas exploration wells in the Burgos and Sabinas Basins in 2011 and 2012. Pemex also announced that it would plan on drilling more wells in the Tampico and the Veracruz Basins as well as in the Tuxpan Platform but further development has not yet been reported.

According to the U.S. EIA, “based on analogy with the Eagle Ford Shale in Texas, industry and ARI considers the Eagle Ford Shale in the Burgos Basin to be Mexico’s top-ranked shale prospect.” Production results from the wells in the Burgos Basin, however, were not as expected when comparing them to the Eagle Ford Shale play results, primarily due to the Mexican hydrocarbon industry’s lack of knowledge relating to horizontal drilling and hydraulic fracturing technologies.

Interestingly, the U.S. EIA also noted that “Mexico’s potential development of its shale gas and shale oil resources could be constrained by several factors, including potential limits on upstream investment, the nascent capabilities of the local shale service sector, and public security concerns in many shale areas.” As shale gas exploration and production activities, however, are of significant interest for Mexico’s economic development, the Mexican Federal Congress passed a constitutional amendment on December 20, 2013, opening Mexico’s energy market to competition as well as attracting private and foreign investment and participation. On August 11, 2014, the Congress signed a Decree to reform and add new legislation in line with the Constitutional amendments. The 2014 Decree contains, among other things, a revised hydrocarbon taxation system and addresses environmental and emerging social issues related to hydrocarbon exploration and development.

Following the constitutional reform, the Mexican Secretary of Energy assigned petroleum exploration and extraction blocks to Pemex during licensing “Round Zero” covering nearly 90,000 square kilometers in order to maintain and expand Pemex production activities. The Secretary of Energy provided Pemex with a five-year period to develop the area; otherwise, the company could lose its exploration and development rights to the area. The Mexican government also planned to conduct five rounds of licensing bids open to foreign investors from 2015 to 2019. The Mexican National Hydrocarbons Commission (CNH) concluded the first licensing round in January 2017 with a total of 39 awarded contracts.


The Commission considered carrying out auctions for shale gas fields in final part of Round One; however, this project has never matured due largely to falling oil prices. The CNH stated that “even though an unconventional tender was included in Mexico’s five-year energy plan, it is ‘on stand-by’ until [further] regulations are in place,” according to a media report. The CNH launched the second licensing round in the summer 2016.

2 comments:

  1. This law has some good amendments too and will have a strong impact on people if the workers do all the possible work of this law.

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  2. The writer has truly done equity with his perusers and his work.Joseph Hayon

    ReplyDelete