Shale Endowed Mexico Could Learn from U.S. Fracking Technologies

Mexico is endowed with enormous shale resources. But now PEMEX in planning to form a subsidiary to work in the U.S. conventional day offshore and shale oil and gas! Why?

The WSJ in the past month has published several articles on the decision of the new President of Mexico to seek a revision of the Constitution, which forbids the award of concession to foreign oil companies. Foreign oil companies were major oil producers until 1938 when Mexico became the first country to resort to wholesale nationalization. From 1938 to the early 1970s Mexico, through its national oil company PEMEX, managed to produce enough oil for its own growing needs but in the early 1970s Mexico became a major exporter because of huge offshore discoveries. For the past 40 years Mexico has depended to a large extent on foreign exchange earnings from oil but good things always come to an end. As the attached article states, “Mexico’s oil production has fallen from a high of 3.4 million barrels per day to 2.5 million barrels and the trend is downwards.”

New offshore oil discoveries are huge but PEMEX cannot handle the complex technology needed. Hence the decision to revise the Constitution (a historic and difficult task) for help from foreign oil companies. Still Mexico is not prepared to issue regular concessions, which would allow foreign oil companies to own any reserves (and thus enable the foreign oil companies to book higher assets) although financial compensation would be similar to other concessions. In any case, even if the Constitutional reform is approved and foreign oil companies accept the terms, the earliest additional production cannot be expected until 5 years plus.

Mexico is also endowed with enormous shale resources. But now PEMEX in planning to form a subsidiary to work in the USA conventional day offshore and shale oil and gas! Why? To learn from American technologies! There must be ways to learn by inviting USA companies to explore in Mexico, especially independent USA technical companies which provide everything from exploration to drilling and production and train Mexicans.

In any case, oil and gas development in Mexico will continue to hit the headlines. They deserve watching.

New Global Safety and Regulations in Global Energy

Introduction: Safety and Regulations in Global Energy

Economic development has always depended on the application of new technologies in the production of new products and improved productivity. This has been particularly so since the beginning of the industrial revolution without much attention given to safety particularly when deleterious side effects could not be detected easily and left future generations to deal with it. The democratization of societies, higher education for what might be called the ordinary citizen, environmentalism and huge danger of some new technologies such as nuclear have in recent years resulted in critical eyes focusing on safety more intensely and demanding appropriate regulations in order to avoid catastrophes even at the expense of higher economic development. This has increasingly been evident in the field of energy. In the USA energy safety issues have become especially important because of the so-called Shale Revolution which has turned the country into an exporter of Liquefied Natural Gas (LNG) because of vast new reserves of shale-gas with prices at about 1/3 of gas in Europe and rapid production increases in shale oil which is rapidly replacing conventional oil imports. The Shale Revolution has raised safety and environmental concerns as described below. The paper describes environmental and safety problems in other energy sources as well as background for the debate, which is already in progress.