Tayvis Dunnahoe
Exploration Editor
With conventional gas production declining in Mexico's Burgos basin, the country has opened the area for private investment to develop the region's shale resources. Petroleos Mexicanos (Pemex) will spend $51 million in the Burgos basin in 2017, down from 2012 when the state-owned company invested $657 million. During this 5-year period, natural gas production in the basin has dropped to 0.87 bcfd in 2016 from 1.2 bcfd in 2012, according to a report from the US Energy Information Administration.
Conventional status
Mexico's Burgos basin lies south of the Rio Grande River in the northern state of Coahuila encompassing 24,200 sq miles onshore and extending onto the continental shelf of the Gulf of Mexico. As the southern extension of Texas' western Gulf basin, which is home to the South Texas Eagle Ford shale play, Burgos is a prospective area for unconventional resource development.
Pemex first explored the basin in 1942, discovering some 227 fields that contain mostly gas. According to EIA, Burgos has more than 3,500 active gas wells in nonshale formations.
Burgos basin reservoirs have low permeability and high decline rates typical for tight formations, and Pemex must continually invest to maintain or increase production from the basin's historic fields.
Pemex tested its first shale gas well in March 2011 (OGJ Online, Mar. 8, 2011). Mexico's energy reforms were first introduced in 2014, and the decreasing prices for gas at that time led Pemex to focus on oil development and hydrocarbon liquids (OGJ Online, May 1, 2013). To date, there have been no commercial shale discoveries in the basin but gas demand has increased.
Round 2
Mexico's Area 1 in the northern Burgos basin contains an estimated 3.3 MMboe across some 38 sq miles, according to data from Secretaria de Energia (Sener), the country's energy ministry. The block was awarded in July to a consortium consisting of Iberoamericana de Hidrocarburos Servicios and PJP4 de Mexico.
The onshore bid round sold 21 of 24 onshore blocks offered to investors in North America and Asia, netting an eventual $2 billion in investments over the contracts' 30-year lifespan. Expectations are high for Mexico's onshore acreage under the reforms: The country expects to add 79,000 b/d of crude and 378 MMcfd by 2025. According to Mexico's National Hydrocarbons Commission (CNH), production should start coming online in 2019.
New development
This is the first time Mexico has provided access to the Burgos basin for development by nonstate entities since Pemex's formation in 1938. Sener is hopeful that private investment can stave off declining gas production and offset Pemex's investment in the region.
In 2016, Burgos production accounted for 15% of Mexico's gas output, and the basin yet contains the country's largest undeveloped shale resources. Mexico's end goal is to meet new demand from gas-fired electric power generation in the country's northeastern region without increasing its imports. There is some hope that with new investment, Burgos basin development can mirror the high production levels seen over nearly the last decade in the Eagle Ford shale.
