Eagle Ford

From Global Energy Monitor

CO2 Emissions

The U.S. Energy Information Administration (EIA) estimates the "risked gas in-place" resource in the Mexican section of the Eagle Ford at 1,222 trillion cubic feet (Tcf), and the technically recoverable portion of that resource at 343 Tcf. The same study estimates the "risked oil in-place" at 106 billion barrels, and the technically recoverable portion of that resource at 6.3 billion barrels. Burning this oil would produce 2.7 billion tonnes of CO2; burning the gas would produce 18.9 billion tonnes of CO2. [1][2]

Strategic Significance

On the surface, it would seem that development of the The Eagle Ford formation, which spans the Texas-Mexico border and extends to the Texas-Louisiana border, would be a high priority for Mexico. The decline of domestic natural gas supply and rising demand requires Mexico to import 1/3 of its annual gas consumption of 2.5 trillion cubic feet (Tcf). And, Mexico's estimated resource of technically recoverable shale gas (545 Tcf) is the 6th-largest such gas resource in the world, including the shale gas resource in the Eagle Ford Shale.[3] However, other than some limited development at the southern end of the formation, analysts are skeptical that significant development of the Mexican Eagle Ford will actually occur, at least in the near term (see "Financing" below).

Companies Involved

In Mexico, PEMEX in partnership with Lewis Energy; in the United States, EOG, BHP Billiton; Marathon Oil, and several other companies.

Potential ESG Risks

Corruption

According to former Pemex chief Adrian Lajous Vargas, "Corruption is everywhere in all areas and at all levels of the hierarchy...organized crime has moved into the logistical activities of Pemex."[4]

Human Health

Living in proximity to Eagle Ford shale drilling has been linked to numerous health problems, including nausea, dizziness, and shortness of breath, especially in children.[5]

In 2017 a technical expert on the use of infrared camera equipment working for Earthworks visited Mexico and registered numerous videos that show that the national Mexican oil company, PEMEX, and other international companies are spewing toxic fumes that are dangerous to the environment and people into the atmosphere in the State of Veracruz. At every one of the nine sites visited, Earthworks’s infrared camera recorded toxic gases emanating into the air. In some cases, the fumes were in highly populated urban centers.[6]

NGO's Involved

The main alliance of anti-fracking groups in Mexico is the Alianza Mexicana Contra el Fracking, which includes more than 40 NGO's.

El Centro Mexicano de Derecho Ambiental (CEMDA) works on fracking in Mexico generally but not Eagle Ford specifically,[7] as does Centro de Derechoes Humanos y Ambiente (CHRE).[8] Earthworks has used on-the-ground videographers to demonstrate the impact of gas fumes near population centers (see Human Health).

Local Opposition

Privatization of oil has been a hot-button issue in Mexico for the past decade, and environmental issues are one of the core elements of the debate. One article noted such issues as having been at the core of the original appropriation of oil in 1938: "For local oil workers, strikes and sabotage became a way of life. Beyond the refineries and oil fields of Veracruz and Tamaulipas themselves, massive oil spills regularly threatened the livelihood of fishermen and farmers. And the horrific fires and explosions, the smoke and fumes that billowed from inside oil operations, impinged on the surrounding towns, stoking an anger and resistance that by 1938 made expropriation seem the best solution."[9]

One writer described the growing opposition as follows:[9]

The damaging hand of state-run oil and petrochemical production on this region was made abundantly clear on August 16, at a gathering I conducted at the Universidad Veracruzana in Minatitlán. There, a representative array of citizens and Pemex spokespeople shared recollections of just how deeply this industry had affected their region. Though Pemex representatives argued that its attention to the environment had much improved starting in the early 1990s, they made little effort to deny the flood of critical testimony that followed. Fisherman and biologists reported plummeting populations of fish all along the river, especially near the plants. Those living in neighborhoods near the refinery talked of regular visitations by fumes, smoke, and strange smells. Both they and doctors spoke of unusual concentrations of childhood leukemia and other deadly ailments around plants and in the region as a whole. Nevertheless, a dearth of statistics or other studies—even more sparse than in Louisiana’s “Cancer Alley”—has kept most of these claims in the realm of the “merely” anecdotal.

Project Status

Gas

PEMEX has signed a deal with San Antonio, Texas-based Lewis Energy to develop part of the Eagle Ford Shale that extends into Mexico. Petroleos Mexicanos, aka, Pemex, said under the terms of the deal Lewis will invest roughly $617 million, money to be used to develop the Olmos field in the Mexican state of Coahuila, the southern extension of the Eagle Ford. Pemex’s goal is to produce roughly 117 million cubic feet a day (MMcf/d) of natural gas from the field by 2021.[10]

Infrastructure

As of mid-2018, $3.6 billion in pipeline projects associated with the Eagle Ford formation, including the $2.1 billion Sur de Texas-Tuxpan (Marino) Gas Pipelinesponsored by TransCanada, IEnova, and Infraestructura Marina de Golfo (IMG), are under development; however the oil and gas infrastructure being developed in Mexico related to Eagle Ford, including the Sur de Texas-Tuxpan Pipeline, is oriented toward transporting shale gas developed on the Texas side of the border to the Mexican power grid, rather than transporting Mexico's own gas production from the formation, which is still in an earlier stage of development.[11]

Domestic Political Situation

Since reforms to its oil and gas industry in 2013, Mexico has secured $22.4 billion in energy investments including $10 billion for 10,000 kilometers of pipelines, $7 billion in exploration and production and $2.5 billion for new seismic maps to track oil and gas reserves.[12]

Until recently, the absence of infrastructure has made it cheaper to buy imported natural gas from the Texas portion of the Eagle Ford Shale as opposed to developing the Mexico section.[13]

In August 2018 President Lopez Obrador announced that he would move to ban fracking, but some analysts said this move would have little short-term effect: "Near-term, a ban on hydraulic fracturing in Mexico would have no impact, economically or environmentally. Unlike the United States, Mexico has substantial untapped conventional oil and gas reserves: shallow water, deep water and even onshore conventional," said Thomas Tunstall, Research Director for the University of Texas at San Antonio's Institute of Economic Development "In addition, most of the unconventional/shale opportunities lie in Northern Mexico, which lacks significant infrastructure (housing, roads, rail, skilled workforce). Best estimates are that any unconventional oil and gas production activity in Mexico is at least 5-10 years away, no matter what government policy is."[14]

Project Economics

The initial development of Mexican acreage occurs with a much larger well-spacing (leading to higher acreage acquisition cost per well), which would require 25% higher development cost as compared to Texas acreage. Consequentially, Texas wells have better net present value (NPV) and higher internal rate of return (IRR) than Mexican wells, in general.[3]

International Dynamics

State-owned PEMEX controlled nearly every aspect of the nation’s oil production and distribution since 1938, but Mexican officials decided in 2013 to end this monopoly.[13]

Financing

Despite the presence of a large natural gas resource on the Mexican side of the US/Mexico border, analysts are skeptical that significant development will occur, at least in the near term, with one writer describing Mexico's Eagle Ford as "the shale boom that will never happen." The skepticism is based on a combination of political and economic factors. On the political side, Mexico's President-elect Andres Manuel Lopez Obrador said in August 2018, with regard to fracking, "We will no longer use that method to extract petroleum." Other negative factors include the lack of infrastructure in the region, the abundance of gangs, and the lack of sufficient water supplies to support water-intensive practice of fracking. For these reasons, it likely remains cheaper for Mexico to continue importing natural gas from the U.S. rather than develop its own resource, and investment activity is currently concentrated on further expanding the pipeline network required to do so.[15]

Articles and resources

References

  1. "Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States," US EIA, June 2013
  2. Assumes .43 tonnes of CO2 per barrel for oil and NGL, 0.0550 metric tons CO2 per thousand cubic feet for natural gas.
  3. 3.0 3.1 Eagle Ford Shale play economics: U.S. versus Mexico, Journal of Natural Gas Science and Engineering, Volume 38, February 2017, Pages 345-372
  4. Ronald Buchanan, "‘Corruption is Everywhere’ Within Company, Says Former Pemex Chief," NGI, April 5, 2018
  5. Health Effects of Oil and Gas Emissions Investigated in Texas, Scientific American, Jun. 12, 2017
  6. Infrared Camara Reveals Toxic Gases at Pemex Oil and Gas Sites in Mexico, CHRE, Oct. 27, 2017
  7. Historia, CEMDA, accessed September 2018
  8. Mission, CHRE, accessed September 2018
  9. 9.0 9.1 "The Environmental Consequences of Privatizing Mexico's Oil," Dissent, 3 September 2013
  10. Mexico looks to develop its Eagle Ford Shale, Kallanish Energy, Mar. 30, 2018
  11. "Eagle Ford Shale to Benefit from $3.6B Pipeline Projects," Roseland Oil and Gas, accessed September 2018
  12. Fracking in Mexico’s Eagle Ford Could Begin Next Year, Eagle Ford Shale, Sep. 27, 2016
  13. 13.0 13.1 Natural gas makes a comeback in Eagle Ford shale fields, San Antonio Express-News, May 24, 2017
  14. Newly Elected President of Mexico to Ban Fracking, EcoWatch, Aug. 2, 2018
  15. Irina Slav, "The Shale Boom That Will Never Happen," OilPrice.com, August 8, 2018

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External resources

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