I understand that many people will disagree with me on this article, but I ask that you please take a few minutes to read my thoughts and the data below before forming an opinion.
Fracking is one of those topics that brings an immediate reaction (often negative) from people. People reference news programs they saw, oftentimes many years ago, where someone tasted gas in their water, or where a community reported seeing its water table drop from nearby fracking activity.
Mexico is currently evaluating the prospect of initiating fracking in the country, with President Claudia Sheinbaum appointing a special commission to investigate if and how the country can do “sustainable fracking.” The results of this investigation are due next week, and so I thought I would do some digging into what the potential for Mexico could be. I reached out to Pablo Eisner, a former geologist who is now the COO of the Houston and Mexico City-based Mexico Petroleum Company. I recently met Pablo at the U.S.-Mexico Chamber of Commerce annual meeting in Washington, D.C., and was impressed by his presentation. The following are the highlights of our conversation.
1. Some facts and figures on fracking in the United States: Thanks largely to fracking, in 15 years the U.S. has gone from importing 30% of its energy needs to becoming energy independent, as well as the world’s largest energy exporter. The Permian Basin alone has created over 800,000 jobs and has produced over US $1 trillion in value.
2. Mexico has a super basin that is geologically very similar to the Permian Basin, called the Tampico-Misantla Basin. The hydrocarbons in place in the Permian are estimated to be 150 billion barrels. In Tampico-Misantla, the estimate is 140 billion barrels. So the two basins are very similar in potential. Currently, the Permian is producing 6 million-plus barrels of oil and 24 billion cubic feet of gas per day. Tampico is producing 60,000 barrels of oil per day and 150 million cubic feet of gas per day. In other words, Tampico is producing approximately 1% of the Permian. Let me repeat that again: Despite similar sizes and potential, the Permian Basin in Texas is producing 100 times more than the Tampico-Misantla Basin in Mexico. Thousands of horizontal-multifrac wells are being drilled each year in the Permian, while just 62 of these have been drilled in total in Tampico-Misantla.
3. Mexico currently imports nearly 75% of its gas from the Permian and the Eagle Ford areas in the United States — all of which is produced by fracking. As a result, Mexico has become exceptionally dependent on U.S. energy to continue to power its economy. That alone is a geopolitical risk, made worse by the fact that if and when the Permian producers slow production of oil, there will likely not be sufficient gas available for Mexico. If falling oil prices cause production to be reduced, Mexico would need to find alternative sources for its natural gas. That gas would likely be at a much higher price in the post-Strait of Hormuz closure world. Given the new geopolitical risks, the shift in priorities of the Western Hemisphere, and a much more difficult global oil and gas market, Mexico needs to mitigate its exposure to this new reality.