UTSA’s Institute for Economic Development (IED) plans to study shale and natural gas opportunities in Mexico through a partnership with the Universidad Autónoma de Nuevo León, the Asociación de Empresarios Mexicanos (AEM-USA). The research will focus on using available oil and natural gas resources in Mexico as well as the potential economic impacts that would follow their extraction.

The similarity of the Texan Eagle Ford area — which the UTSA Institute of Economic Development has studied previously — and the Mexican Eagle Ford area will provide a foundation that will guide UTSA and AEM-USA researchers in their efforts toward increasing the economic stability of Mexico. “We do have the experience with the Eagle Ford Shale study out in West Texas, and those will hopefully inform our efforts in (Mexico),” said Dr. Thomas Tunstall, research director for the UTSA IED.

According to Tunstall, IED’s West Texas Eagle Ford Shale study focused on the 14 counties (Atascosa, Bee, DeWitt, Dimmit, Frio, Gonzales, Karnes, La Salle, Live Oak, Maverick, McMullen, Webb, Wilson and Zavala) that were most active in the Eagle Ford Shale development area while noting significant impacts in surrounding counties (Bexar, Jim Wells, Nueces, San Patricio, Uvalde, and Victoria). The study revealed substantial economic growth of the area studied in 2012, noting that Eagle Ford Shale activity not only independently contributed $61 billion to the Texas economy, but also created 116,000 jobs.

The success of the West Texas Eagle Ford Shale study advanced several UTSA programs, one being the development of an “Oil and Gas Certificate Program” for the College of Engineering. The program is designed to help students interested in the energy industry obtain knowledge and skills necessary to solve complex mechanical engineering problems related to pump and pipeline design.

Seeking to replicate their previous success, UTSA researchers turned to Mexico. “We have been looking at the oil and gas mass in Texas and Mexico for a while now, and we know much about the geology of Mexico,” said Tunstall. “Given Mexico’s interest in energy reform recently, it seemed like the right time to start analyzing oil and gas prospects in Mexico.”

Mexico contains trillions of cubic feet of natural gas underground but still imports 650 billion cubic feet. of the resource from the U.S. every year. Mexico plans to change this situation by using their own resources, but historical precedent presents some challenges.

In 1938, President Cardenas, in response to feuds between oil companies and the Mexican government, appropriated all foreign oil companies and created Petroleus Mexicanos (Pemex). President Cardenas’ actions permitted Pemex to have complete control of the oil and gas industry, creating a monopoly.

Although Pemex was initially prosperous, laws and regulations coupled with declining oil fields led to declining revenue. Geological surveys indicated oil reserves offshore, but Pemex did not have the resources nor expertise to drill.

Furthermore, Mexican laws prevented foreign companies from obtaining production rights to assist in drilling offshore resulting in a developmental standstill. Under the proposed laws and regulations, private companies will be allowed to operate independently of the Mexican government. The option to operate independently could entice American oil manufacturers and others to invest billions in the Mexican oil and gas industry.

Due to the abundance of oil and gas resources available to Mexico, Tunstall believes the next few years present “a tremendous opportunity for Mexico’s prospects of real, fundamental energy reform and, based on our experience with the Eagle Ford, it looks like there are some real positive potential opportunities that will hopefully come to fruition.”

Tunstall concedes that the economic boon of the West Texas Eagle Ford area is not guaranteed in Mexico; however, he asserts that steps will be taken to facilitate a clean and fair entry of independent business into Mexico’s energy industry.

The proposed study will first provide a regulatory framework for private companies to do business in Mexico, which will include guidelines for private investment in the Mexican energy industry and explain how companies can cost-effectively install and maintain their pumps.

“Extraction of shale oil and gas is a very drilling-intensive approach, so you have to do a good job at managing costs,” Tunstall stated on the importance of operating independently. “If the Eagle Ford Shale, prices fluctuate, and if Mexico is going to be successful economically in bringing oil and gas out of the ground, cost-effectiveness needs to be examined.”

Tunstall is excited to begin working with AEM-USA. “I think these types of partnerships (with Mexico), either for research or student learning, are only likely to increase going forward,” Tunstall explained. “We’re so close to them, and share so many of the same issues that there is a lot we can learn from each other.”

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