Mexico Gains Buzz as the Next Frontier for Fracking

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Mexico Gains Buzz as the Next Frontier for FrackingMexico is fast attracting the attention of U.S. oil firms eager to frack an underground shale formation that is thought to extend from the Texas border into the U.S. southern neighbour. The Eagle Ford shale formation is widely thought to extend hundreds of miles into Mexico, where it assumes the name Burgos Basin.

However, since 2008, Mexico has sunk less than 25 wells compared to over 5,400 wells in the Texas state. The issue lies with politics, not geology or general lack of initiative.

Nonetheless, matters are set to change in the coming months after Mexican Congress passed an energy bill in December that opens up the country’s oil and natural-gas sector to foreign and private investors after 75 years. Currently, the task of exploring for the resources has been left to Pemex, a state oil monopoly.

It is widely expected that U.S. and international oil firms will be able to submit bids for oil and gas projects before the end of 2014.

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“The United States and Canada are exploiting their shale resources on a massive scale, and we’re still in the prospecting stage,” Gustavo Hernandez, the director of exploration and production at Pemex, told Washington Post. “But we believe the volumes we have are enormous.”

Mexico potentially holds 60 billion barrels of oil in its shale reserves, according to Pemex. However, natural gas is estimated to be in plenty, with the U.S. Energy Information Administration estimating the country to have the sixth-largest reserves in the world after the United States, Canada, China, Argentina and Algeria.

However, fracking firms, which tend to be smaller than major players such as ExxonMobil and Chevron that are used to working in unstable territories such as Iraq and Nigeria, will have to deal with security risks posed by violent cartels such as the Zetas. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com