By: Alejandra Bueno
Cacheaux Cavazos & Newton
Mexico City, Mexico
In 2008, Petrohawk Energy Corporation announced the discovery of an oil and gas field in the Eagle Ford Shale in South Texas. A few years before that, the oil industry had considerably improved horizontal drilling and hydraulic fracturing technologies. When the drilling activity began to increase in South Texas, no one could imagine the impact this geological discovery, coupled with the use of improved technology, would have on the phenomenon known as the “shale revolution”. The production of crude oil and natural gas in this region has increased dramatically, while the industry continues to make improvements with respect to drilling technology, while reducing operating costs and time.
In February 2011, the University of Texas at San Antonio (UTSA) published initial projections as to the economic impact expected to result from exploration and extraction activities in the Eagle Ford Shale, which were outstanding not only for communities in South Texas, but also for the industry as a whole, the state of Texas and the country. The figures from the first studies quantified the economic impact and, for the first time, shed light on the magnitude and potential of such activities. The technology, on one hand, and the abundance of subsoil resources on the other, make this field one of the most important in the United States (the studies on the economic impact of the Eagle Ford Shale by UTSA are available at http://ccbr.iedtexas.org).
In light of the above, and coming on the heels of the energy reform recently approved in Mexico, it has become necessary to conduct a study on the economic impact of the new legal framework for exploration and extraction of oil and gas in northeast Mexico. This study can serve as a strategic planning tool for governments and academic institutions in the states of this region. Furthermore, the ultimate goal of this study is to allow companies to understand and apply the new rules in order to do business in the now restructured Mexican energy sector.
Consequently, the study will cover the following topics: (i) a legal analysis of the new laws and regulations applicable to the energy industry; (ii) the economic impact; (iii) a guide for doing business in the energy sector; and (iv) an online platform that will allow companies in this sector to identify themselves and connect with one another on both sides of the border. Furthermore, the study will allow participants in both the production and supply chains to be easily identified, and it will facilitate compliance with the national content requirement applicable to projects subject to exploration and extraction contracts under the new Mexican Hydrocarbons Law.
The geographic scope of the study includes the geological areas that begin at the Eagle Ford Shale in Texas and continue into Mexico through the Burgos, Burro-Picachos, Sabinas, Tampico-Misantla and Veracruz basins located in the states of Coahuila, Nuevo León, Tamaulipas and Veracruz.
The study will be conducted over the course of a nine to twelve month period, through a consortium of academic and institutional collaboration led by UTSA, in which the Universidad Autónoma de Nuevo León, the Woodrow Wilson Center and the Asociación de Empresarios Mexicanos will initially participate. Other organizations and institutions representative of the states and region covered by the study are expected to join the consortium.
The goal of this project is to replicate the experiences and methodologies applied by UTSA for the economic impact study on the Eagle Ford Shale. As was the case for Texas, the hope is that this study will contribute to a better understanding of the impact that shale hydrocarbons exploration and extraction will have under the new rules applicable to the Mexican energy sector.
For more information about Cacheaux Cavazos & Newton and their Energy Law practice, please visit the International Society of Primerus Law Firms.
November 2014
Sources of information and disclaimer: The following sources of information, among others, have been used in preparing this document: Official Journal of the Federation, presentations by the Department of Energy, and the website of the Federal Commission for Regulatory Improvement. Mexican Energy Law does not constitute legal or tax advice and should not be used for purposes other than as purely informative for the general public. For more information on Mexican Energy Law, any of the issues mentioned therein or to inquire about legal services, please contact CCN energy practice attorneys, whose data can be found at http://ccn-law.com/en/practice-areas/energy.
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