Burgos Shale

It may take a number of years to pan out, but Mexico is taking steps to accelerate the development of its natural gas-rich Burgos Shale region, which lies just across the Rio Grande from South Texas’s newly resurgent Eagle Ford play. Today (July 12, 2017), Mexico’s Secretaría de Energía (SENER) is expected to name the winners of a competitive bidding process for the rights to drill for natural gas within 1,500 square miles in the states of Nuevo Leon and Tamaulipas. If the effort to juice Burgos drilling activity and production proves successful, it could affect how much natural gas Mexico needs to import from the U.S. Today we discuss the prospects for reversing gas production declines south of the border and the challenges that exploration and production companies (E&Ps) face in Mexico’s most promising shale play.

Mexico’s energy relationship with the U.S. is undergoing radical changes as its oil production sags, its refineries produce too much high-sulfur fuel oil and too little gasoline and diesel, and its imports of U.S. natural gas and transportation fuels rise. Add to this already complicated story the Mexican government’s efforts to inject competition and private-sector participation into a national energy sector long-dominated by state-owned Petróleos Mexicanos (Pemex) and that company’s plan to swap light U.S. crude for heavy Mexican oil. In today’s blog, “With A Little Help From My Friends—Mexico’s Oil Sector in a State of Flux,” Housley Carr begins a look at the ongoing transformation of U.S.-Mexico hydrocarbon trade and what it may mean for U.S. players—and Pemex.