Mexico to rely on US natgas imports for years – official

19 September 2012 23:25  [Source: ICIS news]

HOUSTON (ICIS)--Mexico will likely rely on US imports of natural gas for several years as the country attempts to develop its own shale gas reserves, a government official said on Wednesday.

Mexico has substantial shale-gas reserves, which are estimated at 681 trillion cubic feet (tcf), (19 trillion cubic metres) said Guillermo Garcia Alcocer, general director of exploration and production of hydrocarbons for the Secretaria de Energia, Mexico's energy department.

Garcia Alcocer made his comments during the World Shale Oil and Gas Conference, held by The CWC Group.

However, Mexico is limited in its ability to develop those reserves.

The scale of work required to develop Mexico's shale-gas reserves is huge, he said. Mexico would likely need to develop 27,000 wells.

That is slightly less than all of the wells developed during the entire existence of state energy producer Pemex, Garcia Alcocer said.

For such an undertaking, third parties will be crucial, he said.

However, Mexican law limits energy production by foreign companies. Equity stakes and joint ventures are prohibited, Garcia Alcocer said.

Instead, Mexico can pay third-party companies through service-type contracts.

The companies would be paid based on the value of the natural gas produced by the well, he said.

Under this programme, 36 participants were pre-qualified, and 38 offers were submitted, Garcia Alcocer said.

Meanwhile, Pemex is concentrating on its deepwater oil production, he said.

Until Mexico can substantially develop its shale gas reserves, the country will likely rely on US imports to meet growing demand.

To facilitate those imports, Mexico plans to increase pipeline capacity by 38%, Garcia Alcocer said. The country plans to build eight new pipelines, which would add 4,260 km (2,650 miles). The project is valued at $7.8bn (€6.0bn).

Even though the shale gas is coming from the US, it is already benefitting Mexico's chemical industry.

Low-cost natural gas for the US helped increase first-quarter earnings for Mexichem, a Mexico-based vinyls producer.

($1 = €0.77)

By: Al Greenwood
+1 713 525 2645

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