Unlocked Shale gas: Latin-American potential. A case study of Mexico and Argentina Case Study

Abstract

Abstract Argentina and Mexico have been long-term natural gas producers, supplying most of their domestic gas demand. However, due to a decline in the production of their associated and non-associated gas fields in recent years, the gap between the production and domestic consumption of natural gas has widened. An updated EIA 2013 assessment of shale gas resources per country ranks Argentina and Mexico as the second and sixth largest in terms of technically recoverable shale gas resources with risked most likely estimates of 802 Tcf and 545 Tcf respectively. The impact of these newly identified gas resources on future supply is a key question, of particular importance is whether shale gascould bring about a reversal in the current decline in gas production over the next few decades. In view of the large resources identified, renewing the energy policies in Argentina and Mexico could serve as the main driving force for unlocking shale gas production. In order to analyse both countries, natural gas market data available for the period 2011 to present, were reviewed. To examine the current situation of both countries, the following were analysed: the hydrocarbon law (related to gas production), the structure of the both markets, price incentives and fiscal regimes. This paper concluded that the main criterion which is likely to control shale gas development in either Mexico or Argentina, is the trend of the natural gas prices at which both countries trade. Model results demonstrate how the development of shale gas is relatively unattractive in Mexico due to it adopting Henry Hub gas prices. In contrast, a model for Argentina shows how the uplift in gas prices at wellhead has spurred shale gas exploration investment in Argentina.