Mexico pivots towards fracking to lift Pemex oil and gas production

By Adriana Barrera

MEXICO CITY, Aug 7 (Reuters) - Mexico is planning to increase the use of hydraulic fracturing to tap unconventional hydrocarbon deposits and boost oil and gas production after years of declining output, marking a shift in its stance on what some say is a highly polluting practice.

The evaluation and development of unconventional resources hidden deep underground within complex geological formations is part of a 10-year plan unveiled on Tuesday to revitalize Petroleos Mexicanos, or Pemex, Mexico's deeply indebted state energy company.

Mexico had attempted to exploit unconventional oil and gas plays that required hydraulic fracturing, or fracking, following sweeping energy reform in 2014, but the bidding processes to secure contracts were unsuccessful.

Former President Andres Manuel Lopez Obrador, in office from 2018 to 2024, ruled out developing oil and gas reserves via fracking, a practice he publicly condemned and which environmentalists object to because it uses large volumes of water and contaminates groundwater.

President Claudia Sheinbaum, Lopez Obrador's successor, has signed off on the production method, however, even though she had said during her 2024 election campaign she would not allow it.

"We're going to address all the geological potential we have," said Pemex CEO Victor Rodriguez on Tuesday, when the company's revitalization plan was presented during Sheinbaum's daily morning press conference.

The plan said there is very significant potential for production in fields with "complex geology", referring to shale basins in which oil and gas are extracted using fracking technology. This includes about 64 billion barrels of crude oil-equivalent production, mainly in the basins of Tampico-Misantla, Sabinas-Burro Picachos, and Burgos.

"These types of deposits have the potential to change Mexico's declining production outlook ... if implementation plans are established that favor private investment in the exploration and exploitation of these resources," the plan said.

Pemex has been fracking for years in some onshore fields near the Gulf of Mexico coast, but does not disclose how much production is generated that way. The majority of the company's oil and gas comes from old offshore fields in shallow waters.

Pemex is seeking to stem a decline in its crude oil production, which is around 1.6 million barrels per day, down from about 3.4 million bpd in the early 2000s, and increase natural gas output.

TARGETS

Despite being a major oil and gas producer, Mexico remains highly dependent on imports from the United States, both for natural gas and refined products like gasoline and diesel.

The plan unveiled on Tuesday outlined a modest production increase of unconventional resources between 2026 and 2028, and a significant ramp-up in volumes starting in 2029. The cumulative addition to production by 2030 would be 197 million barrels of crude oil and 303 billion cubic feet of gas, according to the plan, although Pemex did not share details on how those increases would be achieved.

Pemex's plan highlighted technological advances made over the last decade in well design, drilling and completion that it said would minimize environmental impacts and preserve freshwater resources.

"Hydraulic fracturing today has nothing to do with that of 20 years ago," Fluvio Ruiz, a former independent advisor for Pemex, said in an interview, adding that both techniques and technologies have advanced since.

"One of the advantages of being late or waiting (to exploit unconventional resources) is that there are already technically very well-designed regulations; there's no need to reinvent the wheel," Ruiz said.