Aug. 14 2013
Bloomberg View

Mexican President Enrique Pena Nieto announced his government’s proposal for far-reaching energy reform two days ago, a plan that includes the shake-up of national oil company Petroleos Mexicanos and the opening of oil exploration and production to private and foreign companies after 75 years of running a state-run monopoly. That has opened an intense debate over who should have the right to exploit the nation’s oil reserves, commonly referred to as the tesoro nacional (national treasure) or oro negro (black gold).

But behind the public’s focus on oil looms another vitally important and less discussed question: what to do about Mexico’s huge natural-gas reserves. These are found in associated gas fields (alongside oil reserves) and nonassociated deposits, and, most important, in Mexico’s significant shale resources. The U.S. Energy Information Administration estimates that Mexico has the world’s sixth-largest shale-gas reserves, with 555 trillion cubic feet of recoverable reserves (plus a further 13 billion barrels of recoverable shale-oil reserves). Yet only minimal investment in shale gas has taken place in Mexico, while Pemex focuses on holding up its rapidly declining oil production from the Gulf of Mexico.