Mexico’s vast shale oil and gas potential will attract private investment despite significantly higher operating costs, a top executive with a leading U.S. shale producer said on Wednesday. Carlos Garcia, international business development manager with San Antonio, Texas-based Lewis Energy, said Mexico’s shale potential is the biggest such untapped resource in the world.
“There isn’t another market that offers the opportunities that Mexico does right now,” Garcia said in a webinar hosted by the Institute of the Americas at the University of California San Diego. “As things develop and the framework is done properly, investors will come,” he said. Late last year, Mexico’s Congress passed a landmark energy overhaul that ended the 75-year-old monopoly held by state-owned oil company Pemex. The government has projected that private firms will invest billions of dollars to help reverse a decline in output over the last decade.
Privately held Lewis Energy is a top producer in the Eagle Ford Formation located in southern Texas where fracking technology has fueled a boom in U.S. oil and gas output. The company, which operates over 1,400 wells, also has a decade of experience operating in Mexico as a contractor for Pemex. “Our costs of operating in Mexico… are probably 30 percent higher than they are in the United States,” said Garcia said higher security costs and more expensive materials such as chemicals and sand used in multistage fracturing, or fracking, contribute to the higher operating costs.
“I would hope and expect that the costs will reduce as the industry grows,” he said. The U.S. Energy Information Administration says Mexico’s total combined shale oil and gas potential is the world’s seventh-biggest at 117 billion barrels of oil equivalent. Pemex is investing $800 million in exploratory shale projects this year while many sector analysts are downbeat on an immediate rush of interest from private investors to tap Mexican shale due to obstacles including drug cartel violence.