Anyone who pays the slightest attention to the oil and gas industry knows that Texas is in the middle of a major energy boom, one concentrated largely on the vast Eagle Ford Shale formation that spans several counties in South Texas. The same formation happens to extend south across the border into Mexico, where it’s known as the Burgos Basin. While Eagle Ford already has dozens of exploration sites in operation, virtually nothing is happening south of the border — nothing yet, at least. The Mexican government late last year instituted sweeping reforms on several fronts, including energy. The result is that, for the first time, companies other than PEMEX will be able to invest in energy exploration and production in Mexico.
Historically, PEMEX — Mexico’s state-owned oil company — has had a monopoly on every aspect of that country’s oil and gas industry, including exploration and production, transportation, refining, marketing, etc. But PEMEX’s production has been declining, and the company lacks the wherewithal to develop the massive shale formation under its feet. That’s why Mexico’s congress is changing its constitution to allow foreign oil and gas companies to come in. Especially in demand are Texas companies that have experience developing Eagle Ford.
J. Carlos Marron, senior investment and trade commissioner for ProMéxico, spoke with The Brownsville Herald recently about Mexico’s need for outside technology, expertise and capital in developing the Burgos Basin, and about the role the Brownsville-Matamoros region can play in terms of manufacturing, transportation and logistics, and other services. ProMéxico is the Mexican government agency in charge of promoting international investments and trade. The agency has 44 offices around the world, 14 of them in the United States.
Marron was accompanied by Mexican Consul Rodolfo Quilantán and Marco Saldivar, president of AEM Brownsville-South Padre Island. AEM is a non-profit trade association for Mexican nationals interested in doing business in the United States, though it also facilitates U.S. investment in Mexico. Marron said the next step is for Mexican lawmakers to enact secondary legislation providing a road map for implementing energy reform. “That’s like the playbook,” he said.
Lack of a skilled labor force is one area where Mexico falls short in terms of being able to exploit its oil and gas resources. “That might be the biggest challenge we’re going to have,” Marron said. Marron believes University of Texas and Texas A&M institutions can provide the solution to that problem in the form of chemical engineering and petroleum engineering education in sync with the needs of energy developers working the Mexican shale. He expressed enthusiasm for the merger between University of Texas at Brownsville and UT-Pan American.
The country’s untapped oil and gas reserves aren’t confined to the Burgos Basin, but also include significant deep-water discoveries in the Gulf of Mexico. Again, PEMEX activity in the deep-water realm is nothing compared to the deep-water exploration taking place north of the border.
A large natural gas pipeline network will also have to be created, another area where the expertise of U.S. companies is essential, Marron said. For the Brownsville-Matamoros cross-border region to capitalize on new energy activity, more local infrastructure must be developed, he said. Success in the venture in general depends to a great degree on infrastructure development, Marron said. The anticipated opening of the new Brownsville-Matamoros rail bridge in August and the addition of lanes to Veterans International Bridge at Los Tomates are a good start, he said. “But we need to see more of that, more collaboration from Washington and Mexico City, and get those infrastructure projects finalized,” Marron said. “That’s going to be key.”
He said there’s plenty of opportunity for smaller companies, not just multinationals, in the coming Mexican energy boom. However, a big part of putting U.S. money, expertise and technology to work in Mexico is showing potential U.S. investors how to proceed. That’s where groups like AEM and ProMéxico come in, Marron said.
“I think there’s right now a lot of companies from Texas in (the energy sector) that have never done business in Mexico, that haven’t turned to Mexico as an opportunity because, very understandably, in the past they didn’t think there was one,” Marron said. “Now they’re looking down into Mexico but they’re having very legitimate questions.” Saldivar is ready to field those questions from Texas firms. “If anyone has any interest in learning more or they have a business that they want to get involved in this whole process, all they have to do is call us and we’ll put them together with ProMéxico,” Saldivar said. “Or (AEM) can help them get their financing. We can help them get partnerships. There’s all kinds of things we can help them do with the network that we already have.”
Marron said the Valley most likely stands to gain in areas such as manufacturing, transportation and logistics, and other services that support the oil and gas industry. “I think for example in steel, in a lot of the different processes that are needed in order to build the different equipment for exploration, for drilling,” he said. “It’s going to be very important, but services are going to be key.” Mark Kroll, dean of UTB’s school of business, said he sees plenty of potential in general for additional manufacturing along the border. He noted that the region encompassing Brownsville, Harlingen, McAllen, Matamoros and Reynosa already has more than 200,000 manufacturing jobs — more than most major metro areas in the country. “If we can solve the human capital and security issues, that number could grow substantially—especially in the areas of advanced manufacturing,” Kroll said. “It is also no doubt true that if the reforms under consideration for PEMEX come to fruition, there will likely be considerable oil field services growth along the border.”
Carlos Marin, head of the Ambiotec Group, an infrastructure planning, engineering and management firm, and Brownsville’s leading torchbearer for a bi-national regional approach to economic development, cited several competitive advantages the Brownsville-Matamoros region has in tapping into new Mexican energy development. Among those advantages are the Port of Brownsville’s deep-water shipping capacity, with plans in the works to make the channel even deeper; existing advanced offshore oil platform engineering and construction capacity at the port; and the fact that the region is “located at the epicenter of vast onshore and offshore oil and gas reserves.”
Gil Salinas, executive vice president of the Brownsville Economic Development Council, agreed that the region’s geographic location is a plus in terms of servicing the oil and gas industry, but he warned against assuming it’s a done deal. “The biggest enemy for the Brownsville-Matamoros borderplex will be our desire to sit back and wait for this industry to happen in our backyard,” he said. “We, as a bi-national community, need to strategically and aggressively pursue it.” Saldivar noted that Mexico isn’t the first country to go through this process.
“Brazil already went through this,” he said. “Colombia already went through it, and they’re becoming powerhouses. It’s not anything that we’re reinventing. It’s just something we have to do. … But it’s coming. There’s no two ways about it.”