Eagle Ford Shale In Mexico?

Pemex headquarters, Mexico City, Mexico.

Although the bulk of the formation lies in the United States, the Eagle Ford shale extends into Mexico as well. In an interesting development, Mexico’s state oil company Pemex, which has a monopoly over all oil and gas drilling in that country, announced the results of an Eagle Ford shale well in Mexico just across the border from Laredo. The well, the Emergente #1 is  in the Mexican state of Coahuila, in the Burgos basin. Initial production from the Emergente #1, drilled in Feb, 2011, was 3 million cubic feet / day. The well was drilled to a TVD of around 8,200′ with a 4,500′ lateral and fracked in 17 stages. Apparently this well was drilled solely by Pemex, with no help from foreign companies. Lewis Energy Group was initially going to be involved, but Pemex wanted the chance to drill their first Eagle Ford shale well.

Lewis Energy Group has been in Mexico since 2005. The company has built two 12″ pipelines under the Rio Grande and sells gas into their U.S. network from Olmos and Edwards wells. This year their capex in Mexico is $150 million. Lewis  has a 15 year lease agreement in Mexico and plans on drilling 20 to 30 wells during that time.

Mexico has several emerging shale plays, listed by the EIA as the Maltrata, Pimienta, Tamulipas, Eagle Ford – Tithonian, and Eagle Ford – La Casita.  Mexican president Felipe Calderon has acknowledged the decline of oil production from the Cantarell fields, and has stated that he is behind reform of the industry, including making it easier for U.S. and other foreign companies to  participate in joint ventures in Mexico. Under these reforms, Mexico will begin awarding contracts to foreign companies in August. Most of these will be for projects to boost production from existing fields. Pemex  is calling them “integrated E&P contracts”. Foreign companies will be paid by means of a tariff associated with each  barrel of oil extracted,  plus partial recovery costs, as well as performance – based bonuses associated with productivity and cost cutting.  Currently Mexico’s constitution forbids any foreign interest from owning reserves in the country. Companies must instead earn their revenue from a payout structure tied to production. While U.S. companies have their hands full with the U.S. Eagle Ford play, opportunity may soon begin calling from across the border. It will be interesting to see if foreign companies, such as China’s CNOOC, who has partnered with Chesapeake north of the border, will get involved with Mexico’s Eagle Ford shale play.

Below is a map of shale plays in Mexico, from the EIA. It is a live link to their main map.

sources: “Results Of Pemex” http://www.ri.pemex.com/files/content/VEstenografica_i_1T11_110530.pdf March, 2011, Energy Information Administration, http://www.bnamericas.com/news/oilandgas/pemex-launches-tender-for-three-e-p-contracts-with-incentives