Exclusive: Mexico regulator hopes for first shale auction by end 2018

MEXICO CITY (Reuters) - Mexico hopes to hold its first shale oil and gas auction by the end of 2018, the head of the country’s oil regulator told Reuters on Wednesday, potentially opening up one of the world’s top reserves of unconventional energy to foreign investors.

Juan Carlos Zepeda, head of Mexico's national hydrocarbons commission (CNH), gestures during an interview with Reuters in Mexico City, Mexico January 22, 2018. REUTERS/Carlos Jasso

The rapid rise in oil and gas pumped from shale reserves in the United States in the past decade has revolutionized the country’s energy industry, reversed declining output and contributed to a sharp reduction in global energy prices.

Many other countries hold shale reserves, but have been unable to replicate the success of the United States. Mexico’s state oil firm Pemex has done some drilling in the country’s shale reserves, but produced little.

Mexico’s National Hydrocarbons Commission is waiting for authorization from the energy ministry to hold the auction, said CNH head Juan Carlos Zepeda.

“We are waiting for the ministry of energy to establish the specific schedule,” he said. The tentative schedule “would be to award the blocks before the end of this year.”

The Burgos basin in northeastern Mexico would be one of the areas on offer, Zepeda said. Burgos is part of a large geological formation rich in oil and gas reserves that includes the massive U.S. Eagle Ford shale region.

That region has been heavily drilled and produces around 1.6 million barrels per day (bpd) of a total of 6.5 million bpd in output from the seven largest U.S. shale regions, U.S. government data shows.

The other area up for grabs in Mexico is the Tampico-Misantla basin in the Gulf Coast states of Veracruz and Tamaulipas, Zepeda said.

Idle drilling equipment could easily be moved from Eagle Ford south of the border to work on Mexico’s shale fields, once the auction takes place, Zepeda said.

Mexico liberalized its energy sector in 2014, and has since held nine auctions for oil and gas fields both onshore and offshore. None of those auctions included shale fields.

A presidential election in July may slow the pace of auctions. The leading candidate for the election, leftist Andres Manuel Lopez Obrador, has said he would review the contracts awarded since the reform.

Reporting by Marianna Parraga and David Alire Garcia; Writing by Frank Jack Daniel; Editing by Simon Webb and Matthew Lewis