The American Interest
Analysis by Walter Russell Mead & Staff
Foreign Investors Back US Shale Boom, Ignore Mexico

Mexico_oilbarrels

America’s shale revolution is more global than you think. Twenty percent of investments in American shale energy, totaling more than $26 billion, came from joint ventures with foreign companies. As the Energy Information Administration (EIA) reports:

Both U.S. and foreign companies benefit from these deals. U.S. operators get financial support, while foreign companies gain experience in horizontal drilling and hydraulic fracturing that may be transferable to other regions. Plus, foreign companies can operate in a stable market with a sound legal system and low political risk.

The US isn’t the only country with shale reserves; many other countries are keen on replicating America’s shale boom. Mexico might be the country best poised to replicate that success. North American geology is particularly well-suited to horizontal well drilling.

Unfortunately, Mexico’s oil monopoly is making this more difficult than it should be. Energy production at the state-owned Pemex, described as one of the most inefficient oil companies in the world, has remained stagnant despite the country’s abundant natural resources.

If Mexico wants to emulate America’s shale industry, it’s going to need to open itself up to joint ventures with foreign companies. These companies can support the nascent shale energy industry in Mexico financially and give Pemex valuable experience in both fracking and horizontal well drilling. Mexico has ambitions to be the “new Middle East,” but it can’t get there on its own.

[Oil barrels image and Mexican Flag image courtesy of Shutterstock]

Published on April 8, 2013 1:56 pm
  • bigfire

    The current Mexican constitution was written to prevent foreign ownership of resources of the land. As such, that’s one strikes against attracting foreign investment into energy exploration. Having to work with the job mill (and patronage farm) Pemex is also painful.