Will Mexican Drilling Bring Texas Profit?

Lucy Nicholson/ Reuters/ Landov

The oil and gas rich Eagle Ford Shale formation straddles both sides of the Texas Mexico border.

Today, members of the state House Energy Resources Committee met in the Rio Grande Valley town of Edinburg to discuss how a partial privatization of Mexico’s oil and gas sector could impact the Texas economy.

Until this year, drilling in Mexico was run by Pemex, a state-owned company.  A change in Mexican law has now partially opened the county to foreign business.  That could be a big opportunity for Texas companies familiar with the oil and gas rich Eagle Ford shale that straddles the border. Some estimates have already said a shale boom in Mexico could grow the Texas economy by tens of billions of dollars. Others say it’s too early to tell.

“I have seen some of those estimates, and at this point all they are are numbers on a spreadsheet,” say Tom Tunstall, director of the Center for Community and Business Research at UT San Antonio.

He says infrastructure and border security concerns could complicate investment. Then there’s uncertainty around the continued roll of Pemex.

“You know after 76 years of Pemex basically calling all the shots, it’s not clear to me how much quickly or easily it will be to coordinate this new industry structure that’s being put into place,” Tunstall says.

A shale boom in Northern Mexico could potentially slow growing natural gas exports from Texas to south of the border. But many analysts say it’s inevitable that the Mexico will produce more natural gas, so it’s best to position US companies now to benefit from the change.

Currently, US law restricts oversees natural gas exports.

“There are other markets for natural gas,” says Tunstall. “If the US wants to export natural gas I don’t think its going to be problem,”