Water Scarcity Could Deter Energy Developers From Crossing Border Into Northern Mexico

Norma Alicia Valdez conserves water to clean her home, located in the center of Cuatro Cienegas, a farm and business hub set amid a thriving oasis in Mexico's Coahuila state.  The city now struggles with water shortages related to water extraction for large-scale farming nearby. Valdez' family used to farm 20 hectare of Alfalfa, but when the large companies moved in around them and made wells, just north of the city, near Ocampo, Valdez said her family no longer could find sufficient water. As a result, they now only farm 5 hectare.

The state of Coahuila receives little more than 300 millimeters of rain annually (12 inches). So much water is being pumped in two farm regions near Cuatro Ciénegas to irrigate crops and care for livestock that not early enough is left to supply the pools and marshes. With every passing year, the desert claims more land, more ponds, and more streams that used to be wet.Photo © Janet Jarman/Circle of Blue.

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Water Scarcity Could Deter Energy Developers From Crossing Border Into Northern Mexico

by Keith Schneider

Industry Still Exuberant

American energy companies spent an average of $US 15 billion a year to develop the Eagle Ford shale since 2008, more than $US 80 billion in total. Mexico authorities think it will take at least $US 100 billion to develop Coahuila’s shale resources.

That figure is well below the $US 662 billion to $US 1.02 trillion in capital spending that Goldman Sachs estimated would be needed to develop Mexico’s shale reserves in an analysis last year.

Some of the difference in cost estimates is the result of the quality of northern Mexico’s shale. Studies in the open geological science literature suggest that the Eagle Ford shale beneath Coahuila differs substantially in structure and carbon composition than the shale beneath Texas. Goldman Sachs researchers also noted in their study that due to the extensive investment in needed infrastructure “we would not anticipate any robust development taking place before 2018-2020.”

The global oil industry, ever audacious in its quest for hydrocarbons, is driven to tap new reserves where they exist, and never more so than during this century. From the icy depths of the Arctic to the perilous high-tech platforms of the Gulf of Mexico, from the isolation of Siberia to the narrow foothill Himalayan valleys of Sichuan, the global energy industry is exploring and tapping new reserves. It’s no surprise that the enthusiasm displayed by the oil and gas industry for northern Mexico’s shale potential is genuine, deep, and characteristically flamboyant.

During a Mexico shale oil and gas summit in San Antonio in February, for instance, business and government authorities rallied around the idea of Coahuila drilling and its role in a U.S.-Mexico-Canada oil and gas alliance capable of competing with OPEC for global leadership in hydrocarbon production.

“The possibility of a North American energy confederation is still something I would like to see on the table – for Canada, Mexico and the United States,” Chris Faulkner, chief executive of the Dallas-based Breitling Energy Corp. told the conference. “It doesn’t seem to be on anyone’s radar in Washington. But if we could strive for North American energy independence first, we would be the second largest oil producing coalition in the world next to OPEC, and would be incredibly formidable in determining world oil policy.  Mexico is in an excellent position. They know it.”

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