The Rush For Shale Gas: How Good Is It For The Economy?

The first extraction and discovery of shale gas can be dated back to the 1800's, but it was soon overshadowed by typical gas reservoirs and their low-cost extraction. However, with technological advancements and the reservoirs of natural gas running low, Eagle ford Shale Mexico is becoming an important agenda of several administrations around the world.

Mexico is known to possess 681 trillion cubic feet of shale reserves. There is absolutely no doubt that this can have a tremendous effect on the global energy market. Not only Mexico but its neighboring countries will be able to cut down or reduce dependence on natural gas imports and LNG, causing a drop in the prices.

But the main problem with the whole procedure is extraction, also called "Fracking". Hundreds of environmentalist from around the world agree that the procedure can pollute aquifers and the chemicals used for fracking can cause a lot of harm to wildlife and humans. It is believed that "Fracking" necessitates the use of around eighty different kind of chemicals that are inserted into the ground to liberate the shale gas. However, these gases flow back with radioactive materials and other harmful substances.

Recently in countries like UK, "fracking" was linked to minor earth tremors, low magnitude earthquakes. Hence, before beginning shale extraction, it is important that studies and regulations are developed to create a harmless and safe extraction process. Like extractions of oil, shale gas extraction must be regulated accurately to make sure that even though it is a profitable "fuel" it will not instigate more destruction than good results to the global economy and most of all to the environment. Eagle ford Shale Mexico can be extremely beneficial for the energy sector if safer and advanced procedures are developed to extract the gas without wreaking harm to life. 

Mexico Shale Gas Extraction- The Debate

After almost eight decades of monopolistic reign of Pemex, the nation’s energy sector has been transformed by concrete energy reforms that have opened up the energy sector to international investment. Supporters of these reforms hope that foreign investment can assist in expanding Mexican shale gas extraction.

The uncertainties:  

Last year, natural gas productivity in Mexico was merely 3.9 percent more than in 2006, while natural gas imports increased threefold. Even though the reforms may boost production and free Mexico off its dependence on imports, several uncertainties loom over the success of this undertaking. Apart from security concerns, other issues of land use and rights, investment risks and water shortages can obstruct the reform’s progress.

For extraction, northern Mexico’s Burgos Basin’s attraction is undeniable, but an entry of multinational gas and oil companies can spark fights over claims to the land. Situated in the states of Coahuila, gas shale tamaulipas, and Nuevo León the Burgos Basin already offers two-thirds of the production of the nation’s current natural gas. But, making use of these resources represents a certain threat for those who are afraid that extracting will mean being stripped off their own land. Minority left-wing PRD and farmers cringe at the possibility of foreign companies and government to expropriate both collectively owned and private property. 

In spite of the ongoing dilemmas, techniques to extract gas shale tamaulipas in the Burgos Basin may be legitimized due to the potential economic gains. In lieu of Mexico’s present economic status, with almost 50 percent of the population living below poverty line, the government is counting on shale to spur growth. However, the inadequate scope of Burgos Basin’s current well count, amounting less than 20, will first require investment in exploration. Apart from this, the lack of infrastructure — such as insufficient roads, pipelines and railways in the country, means that major, expensive construction has to be completed before any shale reserves can be developed fully.

Should Mexico Exploit Its Eagle Ford Riches?

The Eagle Ford is essentially a sedimentary rock formation that consists of rich, organic fossiliferous marine shale. The formation extends towards northern Mexico and is known to have an average thickness of about two hundred meters. TOC or total organic content is believed to average five percent.

This shale formation can be a game changer for the economy of Mexico. In fact, the portion of the eagle ford Nuevo Leon and eagle ford Coahuila formations can contain more than ten percent of world's recoverable shale oil reserves. Keeping this in mind, Mexico's government recently passed reforms liberalizing the country's monopoly laws that prevented private companies from exploiting oil reserves, and left Mexico's gas and oil recovery, exploration, and sale to Pemex (a government body). Unfortunately, Pemex does not have the capacity to cope with newer technologies such as hydraulic fracking.

The effect on economy:

Mexico has huge untapped shale gas and oil deposits and is estimated to hold the potential to have a drastic economic impact. The effect of eagle ford Nuevo Leon and eagle ford Coahuila shale formation on the economy of Mexico can be similar to shale’s impact on the Texas economy, including more than thousands of new jobs, sixty billion in economic development, and a couple of 2 billion as government revenue.

A lot of experts believe that the country is unlikely to tap into the Eagle Ford, because it lacks expertise, pipeline infrastructure, and because Pemex has always been more interested in investing in the oil deposits that gave higher returns. The exploitation of the resources will certainly be a major economic generator for the poor northern Mexico, also helping to suppress the criminal cartels and decreasing unlawful migration. Meanwhile, tapping in the resources will also prove to be a big boon for other gas and oil importing nations as they will have to depend less on the gulf countries for energy resources. This will certainly help reduce the monopoly of certain nations over necessary resources.