Mexican Regulator Eyes Auctions to Boost Gas

After eight oil and gas auctions, spread over two rounds, Mexico’s National Hydrocarbons Commission (CNH) and its energy ministry (SENER), say companies from 20 countries have committed to invest more than $153bn in the country’s oil and gas industry.

And it's looking to those investments to help boost domestic natural gas production.

CNH, following the success of the January 31 auction of 19 of 29 blocks posted in the deep-water areas of the Gulf of Mexico, said the auctions are good news for the country. The latest auction, it said, could bring investments of some $93bn.

Mexican officials pointed to estimates by the International Energy Agency (IEA) that investments totalling $640bn – or some $26bn/year – will be needed in the country to achieve historic crude oil production levels of about 3.6mn b/d.

Between 2011 and 2014, state-owned Pemex spent about $14bn/year developing its many production assets, with 85% of that directed at crude oil. Little attention was paid to natural gas.

Now that the Pemex monopoly has ended, energy ministry SENER wants to focus again on natural gas, and is intent on boosting non-associated production. Virtually all of Mexico’s current production of 4bn ft³/day is associated with oil production. Unconventional gas development has been essentially non-existent, even though Pemex has estimated the country’s shale gas reserves at some 500 trillion ft³.

Meanwhile, as the shift to natural gas has accelerated in the country’s power and industrial sectors, imports from the US have exceeded 4bn ft³/day, and the availability of cheap, imported supplies is generally seen as a major reason why investments in domestic gas resources have withered.

On January 25, CNH announced that the country’s most prospective natural gas producing areas, located in the Burgos Basin, will be made available to private sector producers.

The Burgos, located on the US-Mexico border just south of the booming Eagle Ford shale play in Texas, is considered to be the largest unconventional shale resource in Mexico.

CNH said it will tender 37 onshore blocks covering 9,513 km² as license contracts for exploration and extraction, with bids due on July 25.

The Burgos Basin is the site of 21 of the blocks, while two are in the highly oil and gas prospective Tampico-Misantla Basin in the state of Veracruz. Seven are elsewhere in Veracruz, while another seven straddle the border between Veracruz and Tabasco.