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The Mexican Shale Gas Market

  • November 2013
  • -
  • Frost & Sullivan
  • -
  • 52 pages

Is Shale Gas the Cornerstone of Mexico’s Transition to Gas?

The energy reform, promoted by recently elected officials, will determine if the private sector is allowed to participate in oil and gas activities after a 73-year-long ban, and whether the shale gas market expands depends on the possibility of conducting profit sharing agreements with private firms. In this study, the market is strictly associated with investments for new exploration/exploitation of shale gas and analyzed according to international benchmarks. An investment forecast along with key market trends and expected scenarios are provided.

Executive Summary

• Mexico’s new administration is advancing an energy reform that focuses on the modernization of the electricity market and the hydrocarbon industry.
• Concerning the petroleum and gas industries, the energy reform consists of a limited liberalization prohibiting risk contracts borne by the state and stimulates private initiatives, which must bear the cost of failure in hydrocarbon exploration. The ownership of hydrocarbons will continue, although still reserved exclusively for the nation.
• This new framework—contingent on Congress’ assent to a constitutional amendment—will determine the future of shale gas, as Petróleos Mexicanos (PEMEX) may benefit from the opportunity to partner with private ventures and attract local and foreign investment.
• The market possesses 2 active production wells—Percutor 1 and Habano 1—that are controlled by PEMEX and currently produce X barrels per day (bpd). In 2012, PEMEX investment in the shale gas market was $X million.
• Investment is expected to increase, as other wells are in the process of completion.

CEO’s Perspective

1. Mexico is estimated to have the world’s sixth-highest shale gas reserves.
2. Whether the shale gas market expands or not depends on the possibility of conducting profit-sharing agreements with private firms.
3. The energy reform that is promoted by recently elected officials will determine if the private sector is allowed to participate in oil and gas activities after a X-year-long ban.
4. Only a policy-driven scenario that features new government legislation will foster shale gas production.
5. The construction of gas pipelines and water infrastructure will also stimulate growth in the shale gas market.

Market Overview—Scope and Segmentation

Geographic Scope
Mexico: Mexico is in North America and is bordered by the United States to the north, the Atlantic Ocean to the east, the Pacific Ocean to the west, and Central America to the south.

Market Insight Scope
This project will focus on the shale gas market.

Exchange Rate Assumption
$1 = Mexican peso (MXN) X

Timeframe
• Study Period: 2010–2017
• Base Year: 2012
• Historical Data: 2010–2011

Market Overview—Shale Gas Value Chain Analysis

After exploration and extraction, the shale gas value chain is similar to that of conventional gas and can therefore use established infrastructure.

• Exploration
- Basin assessment
- Well-pad preparation
- Exploratory drilling

• Extraction
- Well completion
- Hydro-fracking
- Gas flow to processing plants

• Processing
- Separation of gas and fracking fluid
- Removal of contaminants
- Separation of component gases
- Gas compression for transport
- Wastewater treatment and recycling

• Transportation
- Pipeline contractors
- Delivery to terminals
- Storage
- Export

• Distribution/Marketing
To vendors:
- Commercial
- Residential
- Retail receiver stations

Market Overview—Industry Structure

Consulting and engineering (C&E)
C&E firms offer consulting for engineering design and project development.

Exploration
Exploration companies provide geophysical services (studies of the various layers of rock beneath the surface). Specialized engineering companies that are involved in exploration activities provide drilling and other exploration services to project owners.

Component suppliers
Procurement companies deliver components for the fracking supply chain, such as water-treatment systems, internal-combustion gensets, and other components required in the process.

PEMEX
Major oil and gas project operator PEMEX is the only utility in Mexico authorized for hydrocarbon exploitation.
Since 1938, PEMEX has been the exclusive producer of Mexico’s oil and gas resources with a series of subsidiary entities: Pemex-Exploration and Production, Pemex-Refining, Pemex-Gas and Basic Petrochemicals, and Pemex-Petrochemicals.

Key operative wells in Mexico
• Percutor 1
• Emergente 1

Upstream operations
Upstream gas operations include transport, compression, distribution, liquefaction, commercialization for heat, power generation, and petrochemical production.

Table Of Contents

The Mexican Shale Gas Market
Table of Contents

Executive Summary 4
Market Overview 8
External Challenges: Drivers and Restraints 16
Market Analysis 26
Implications of Shale Gas Development in Mexico 35
The Last Word 41
Appendix 44
The Frost and Sullivan Story 48

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