The Next Energy Boom? Fracking Moves Into Mexico Michael McDonald - The Fiscal Times
go to original July 21, 2015

'Frack U., Mexico!' is a parody video on natural gas fracksploitation (Narco News TV)

Even as the fallout from the Greek debacle continues to hammer oil prices, investors need to be on the lookout for future opportunities in the industry. One country that has generated a lot of interest among energy companies and investors is Mexico. Now, as America’s southern neighbor moves to reinvigorate its energy industry, U.S technological advances seem to be moving south.

Recent reports suggest that fracking is beginning to take hold in Mexico with numerous wells being drilled. Unsurprisingly given the state of oil prices and the resources Mexico has available, thus far the fracking appears concentrated on natural gas, rather than oil. The important point though is that the use of the technology on a broad scale suggests a new opportunity for investors.

Fracking requires a very specialized set of skills and consistently significant capex given the substantial decline rates in those wells. This combined with the new infrastructure needs creates some intriguing possibilities for profits at firms in the space.

Fracking in Mexico is very controversial, just as the energy sector overhaul in the country itself is. Water scarcity in Mexico for instance may limit the country’s ability to engage in long-term fracking the way the U.S has. In many respects, these challenges create opportunities for companies like Haliburton and Schlumberger which have technical advantages over smaller operators. Similarly opportunities for fracking offshore in the Gulf of Mexico, a technologically challenging feat, offers new business opportunities for the major servicing companies as well.

The oil and gas industry in Mexico is dominated by state giant Pemex, and while the state may be giving up some control over the industry, investors should not expect that Pemex’s dominance in the market is going to evaporate overnight. Pemex appears to be very interested in fracking opportunities, but with the potential for local uproar given environmental and water concerns, the company is playing things close to the vest.

Read the rest at The Fiscal Times

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