Although today’s foreign investors will inevitably face low global oil prices and certain risks that always come with investing in unfamiliar territory, foreign energy firms investing in Mexico’s Burgos Basin shale fields will face an added layer of risks. Factors above Mexican soil, including organized crime, lack of infrastructure, opposition, and corruption, rather than factors concerning the shale fields themselves, will likely pose the greatest threat.
Mexican energy reforms and global oil prices set the stage for the country’s upcoming shale auction
The Peña Nieto administration has heavily promoted foreign investment in Mexico’s energy sector, leading a bold reform effort that has revised Mexico’s constitution and opened the country up to foreign drilling firms for the first time since Mexico nationalized its oil production in the 1930s. The reform process has come with a significant public relations campaign to convince the public of the benefits of foreign investment as well as a well-meaning but poorly implemented effort to ease regulations and reduce concerns about corruption.
Unfortunately for the current administration, Mexico’s bold energy reforms have been hit head on by the global energy environment that has drastically reduced the price of oil, and therefore the interest of many firms in exploring new territory. While many anticipated Mexico could use its northern shale reserves to replicate the Unites States’s shale gas successes, the low global oil prices will likely prevent Mexico from achieving such levels of success.
The full article, by Ariel Rosen, is available in Issue 3 of Shale Gas International Magazine and can be found on page 9.