Focus: Natural Gas

Let’s Get Fracking

Let’s Get Fracking

Feb. 12, 2013

In 1999, PEMEX launched the first and most influential project in natural gas production, a plant at the Burgos gas field. Since then, the plant has developed to produce 1.2 billion cubic feet of gas per day, composing 26% of the oil and gas giant's daily production and 22% of Mexico's oil and gas supply. At 70,000 sqm in size, the plant is expected to produce 2.3 billion cubic feet of gas per day by 2015. With the discovery of five new wells in 2008, PEMEX plans to operate 166 wells from Burgos in 15 years' time. In 2007, the company also opened a pipeline to transport liquefied petroleum gas (LPG) gas to the cities of La Laguna, Saltillo, and Monterrey. With a capacity of 30,000 barrels a day, the pipeline stretches 188 kilometers and is operated by Gasoductos de Chihuahua. In total, the Burgos plant supplies 78% of LPG demanded by the energy market.

Another company seeing opportunities in the transportation of gas is Fermaca, which recently won the bid to construct the Chihuahua corridor pipeline project. Fernando Calvillo Álvarez, President of Fermaca, told TBY that the pipeline is set to be the “most important corridor in terms of gas. It's a 400-kilometer pipe, 36 inches in diameter, and represents an investment of around $500 million over 18 months." In the next few years, companies involved with the project will experience important progress and growth.

One of the entities spearheading the development of the natural gas industry is the Mexican government, in particular the Secretariat of Energy. Secretary Jordy Hernán Herrera Flores has been consistently optimistic about the sector, assuring that “national natural gas production, without including shale gas, will increase by an average of 0.5% annually for the next 15 years… if we develop an integral strategy for shale gas, imports could be reduced, strengthening energy security in our country and reducing exterior energy dependence." The potential to improve Mexico's resource security remains high on the agenda of the government, which has taken a special interest in shale gas resources. In an interview with TBY, Secretary Herrera emphasized the extra funds that will flow into the country as a result of shale gas retrieval, estimating that the exploitation of shale gas “could attract between $7 billion and $10 billion of annual investment while generating around 1.3 million jobs directly and indirectly."

To make this possibility a reality, government officials have been working with state-owned oil giant PEMEX to determine the size of the country's natural gas fields, and have been in contact with the nation's Congress to discuss the development of the country's domestic natural gas reserves. In doing so, PEMEX has determined five areas on which to focus its exploration efforts: Sabinas-Burro Picachos, Chihuahua, Burgos, Tampico-Misantla, and Veracruz. To identify the exact quantity of the total reserves and evaluate regional potential, PEMEX will drill at least 20 wells between 2012 and 2014. The company will also conduct research to analyze where and when the technique of hydraulic fracturing, or “fracking," can best be applied. A process that heavily depends on the characteristics of brittleness and ductility of the Earth's lower layers, a team of scientists will study the potential fracking areas very carefully before going underground.

However, much controversy surrounds the extraction process of fracking, which may negatively impact the environment. The procedure has been met with increased opposition in many countries, as it involves the injection of water and chemicals below the surface of the Earth and has the potential to pollute underground aquifers as well as contaminate air quality. More alarmist environmental scientists have tried to link the fracking process to plate instability, minor earthquakes, and radioactive contamination. Nevertheless, according to the US Energy Information Administration (EIA), Mexico must employ this technique to take full advantage of its reserves.

One company concerned with innovating solutions for the safe and eco-friendly extraction of natural gas is Integrated Gas Services of Mexico (IGASAMEX), a company that seeks to balance technological and operational advancements with low costs and low environmental impacts. Delivering more than 30,000 mmbtu per day, IGASAMEX serves 12 of the 13 states covered by the current natural gas pipeline system, including Baja California, Mexico State, Nuevo León, Puebla, Querétaro, Veracruz, and Yucatán. “We are evaluating a number of projects to deliver natural gas in either liquid or compressed form at the moment. If the projects meet our investment, environmental, safety, and operational criteria we will be investing in delivering to areas not covered by the pipeline system through either a LNG or CNG project," Carlos Arriola Jimenez, CEO of IGASAMEX, told TBY. With this in mind, industry experts may begin building a framework that allows Mexico to develop the next wave of innovations in shale gas production.

The natural gas market presents Mexico with an opportunity to improve its competitiveness in domestic segments and the international arena. As a result of the development of the industry, Mexico could benefit from increased FDI, greater economic growth, and job creation, leading to overall security in energy reserves and plenty of room to expand.

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