Mexico’s national oil company, Petroleos Mexicanos, got the go-ahead to use hydraulic fracturing for up to eight exploratory wells to tap into the country’s natural gas reserves, raising the question of whether further use of the drilling practice is on the horizon.
The government’s announcement comes after months of assurances by newly elected President Andres Manuel Lopez Obrador that Mexico would increase its production of domestic natural gas but without relying on hydraulic fracturing, a common practice north of the border.
And while the exploratory wells don’t necessarily commit the country to fracking, weaning Mexico off imported natural gas has been understood by some in the energy field to mean reliance on nontraditional drilling practices.
“It is difficult to understand any way of lessening the dependency on American gas without allowing fracking,” David Rosales, the former director general of natural gas in the Energy Ministry during the administration of Enrique Pena Nieto, told Bloomberg Environment. “For Mexico’s industrial sector, natural gas is really important in keeping up competitiveness for manufacturing.”
The wells will be drilled in four blocks—up to two wells per block—in northwest Veracruz, according to the plans published Feb. 11 by Mexico’s National Hydrocarbons Commission. The commission, a federal agency that regulates fossil fuel exploration and production, has estimated that Mexico has 545 billion cubic feet of natural gas reserves, enough to supply the country for the next 120 years.
Oil Production Expected
Nearly 60 percent of these natural gas resources are in the northern part of the country in the Burgos and Sabinas plays, just south of Texas’ Eagle Ford shale play.
Much-needed oil production could also result.
Plans for an $8-billion refinery at Paraiso, Tabasco, on the Gulf Coast rely on a lighter grade of oil than the heavy crudes that Mexico currently produces. This new source of light crude will most likely come from hydraulic fracturing, according to Dwight Dyer, a former senior energy official in the Pena Nieto administration.
Mexico has experimented with hydraulic fracturing before, but this would be the first time it would be used to access shale gas in an unconventional play.
“Without fracking there can be no Paraiso refinery,” said Dyer.
Academics close to the current administration say the decision of whether to move forward with hydraulic fracturing will depend on the results of the exploratory wells. Under Mexican law, agriculture and ranching are given a higher priority for access to public water than industrial users.
“The reality is that the government does not have a clear position,” said Luis Alvarez, the director of the Engineering Institute at the National Autonomous University of Mexico, which has close ties to officials at Conagua, Mexico’s water authority. “They say that there is a method of exploration that will use less water. They will be looking at the results.”
Access to water will prove to be one of the biggest challenges in expanding hydraulic fracturing in Mexico. Another is the infrastructure to support the drilling activity.
Texas has roads and water infrastructure to support hydraulic fracturing, Patricio Gamboa, the energy director at De Acero, a Mexican steel company, said at an S&G Global Platts energy conference in Mexico City last November.
“All of this infrastructure is what enables the gas production in the shale basins, and we don’t have that here,” Gamboa said. “We need the roads, the electricity grid, the water, and we need sponsors—people interested in making all that happen.”
But water is what generates the most concern.
Each well requires three to five million gallons of water that is mixed with chemicals and forced deep into the bore hole at high pressure to break up the shale and release the gas for extraction. Under Mexican law, agriculture and ranching are given a higher priority for access to public water than industrial users.
Conagua has estimated that hydraulic fracturing will require only a small portion of the water available for industrial purposes, or roughly five percent of the sector’s total consumption. Yet its lower priority could make access to water resources difficult to procure, especially in the drought-prone areas near the border.
The most common alternative for energy companies establishing a new project is to buy water from third parties with existing water rights, according to Daniel Gomez Ramirez, an attorney specializing in water access issues for V&A Associates, an environmental consulting firm. Yet even though the water may be coming from third parties—most likely the agricultural sector—companies would still have to show that they will protect water resources.
“You are still going to have to prove to Conagua that the process that you do is safe for the aquifer and the environment,” Gomez said. “The obvious concern about fracking is the risk of contamination in the aquifers; it is difficult to know what is going to happen with the liquids.”
The commission vows it will adhere to strict international standards to ensure the integrity of the fracking wells, including a requirement that they maintain a distance of at least 600 meters (656 yards) from any aquifers. Mexican environmental groups say they aren’t convinced.
“The question is not ‘if’ but when and where will this activity affect water sources and the people that depend on them,” said Claudia Campero of Mexico Food & Water Watch, a nonprofit opposed to fracking. “Six percent of new wells leak, but this percentage increases in time to 40 to 60 percent of wells. This is an unacceptable risk for underground and surface water.”
Water Regulatory Issues
Environmentalists are also concerned about the lack of coordination between the regulatory agencies responsible for protecting Mexico’s water.
Conagua manages the overall water resources in Mexico and is responsible for monitoring water quality and ensuring any water use permit does not conflict with other priorities.
Mexico’s Environmental Agency for the Hydrocarbons Sector, or ASEA, is responsible for approving the environmental impact assessments that companies make. Their responsibilities include ensuring that any drilling activities are a sufficient distance from water bodies and population centers, the disposal wells meet environmental standards, and that produced water is properly managed.
Adequate protection, especially in case of an emergency, would require Conagua and ASEA to work together since they both have some responsibility for managing water uses. ASEA is not currently required to ensure that the water required for energy projects does not conflict with its other uses, according to Anaid Velasco of the Mexican Center for Environmental Law.
The lack of communication is also difficult for companies trying to secure the needed water and environmental permits for energy projects, Gomez said.
“It is a little bit crazy for companies that are working on this,” Gomez said. “The challenge is to have a really clear view of what ASEA can authorize you to do and what Conagua can authorize you to do. ASEA can give you the environmental authorization for fracking, but that is not the authorization for water—you have to go through Conagua.”
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