2040: An energy vision and opportunities for Mexico

Posted in Global Energy November 2019

We recently had the opportunity to assist a presentation by ExxonMobil, in which they shared their vision and forecasts on energy supply and consumption by the year 2040, and we were struck to learn, how fossil energy sources will continue to play the leading role in the offer, at least in the next 20 years. Although the study envisions a growth in alternative energies, this growth does not have the trend it should have, considering the issue of the environmental impact associated with fossil fuels.

This study coincides with the analyzes of the IEA – International Energy Agency and also with the British oil company BP, regarding the trends for those two large sources that represent the planet’s energy support: fossil and non – fossil energies. The study – see graph – shows how coal consumption also remains. It is a fact that population growth will continue to demand more energy, of any kind, that must depend on the type of source a country may have access from wood burning, coal up to gas and oil, and also alternate energies such as Eolic, solar, biofuels or nuclear.

Undoubtedly, the advancement of technologies drives changes that can be predictable, but there are also disruptive changes as a result of innovative findings, which immediately become accessible to humans. Cell phones is a good example of this type of findings, their versions change more and more rapidly, seeking to understand the needs of the users, or simply as initiatives of the technology companies that promote these services, who control the way people and in particular young generations, – who have been the big clients of these companies, – may want to communicate.

However, population growth projections, which represents the basis for energy consumption forecasts, and the realities of the implementation and development of alternative energies, allow large companies that move the world in the energy field, to carry out these studies. And in the case of fossil energy – particularly oil and gas – the discoveries of new deposits in various regions of the world, Guyana and Brazil among others, and the extraordinary development and exploitation of unconventional deposits – mainly in the United States – are the main sources  to maintain demand, making prices more competitive, based on the abundance of supply.

These kind of projections has caused that previous well-known forecasts as the one made for the respected North American geologist M. King Hubbert, who in 1956 predicted that the maximum “peak” of hydrocarbon production would be reached in 1970. Those forecasts – by the way, similar to those made by companies and the IEA today – they were within their expectations, right up until that decade of the 1970s, when domestic production in the United States began to decline. History teaches us that after that reality, the development of the giant deposits in Saudi Arabia and Russia, together with the production of Mexico and Venezuela, were sufficient to supply the world’s energy needs, and thus managed to maintain prices in bands that today they cause stupor, or smiles of disbelief.

Ever since the United States assumed the consumption leadership, and also became the leading importer of energy, due to its industrial and technological development On the other hand, the scarce opportunities to discover new deposits forced US companies to leave their country, in search of new reserves around the world, based on the geological information they already had from various regions of the planet.

Also in those years, companies were far from the understanding of the enormous richness that were present in the subsurface of several regions of the country. After years of trials and learning experiences was probed that shales could be produced by drilling new horizontal, combined with fracking techniques to create large fractures that allow the tight hydrocarbons deposits to flow through the wellbore,

It was a geologist, – George Mitchell – in the 80s and 90s, with his knowledge and above all his persistence and tenacity, who managed to combine two existing technologies – horizontal wells and hydraulic stimulation – that made the “miracle” possible to penetrate into the heart of these rocks, and thus manage to generate the necessary spaces so that the hydrocarbons present in the rock could flow to the face of the wells, and in this way Mitchell made their commercial and economic exploitation possible.

The forecasts or projections mentioned take into account these realities, and also consider that the vocation for the exploration of more deposits around the world, continues to be the raison d’être of international companies, and also of some national companies that have understood that geological opportunities are global. Hence the renewed interest that traditionally hydrocarbon-producing provinces arouse, such as the Gulf of Mexico, Brazil, Venezuela and Colombia on this side of the hemisphere, and the Persian Gulf, West Africa and the former Soviet Union countries on the other side of the world, has for the oil business.

Mexico has also been benefited by nature, and in its geological basins there are still abundant prospective resources, more than 100 billion barrels, of which 57% are associated with unconventional formations, that is, those shale  formations, which have been exploited in the United States since the 1990s. These exploitation of unconventional formations are responsible since 2010, have caused a real revolution, attracting national and international private capital, including the large international operating companies, which also recognized the importance and technological feasibility to produce these formations in a competitive way, compared to conventional deep-water deposits, or deposits located in regions of high geopolitical risk.

Therefore, the Mexican government and the Congress of the Union, has an official role to , support Pemex Exploration & Production PEP, to develop a strategy of exploitation of these unconventional resources that are located mainly in the northern region, in the states of Tamaulipas, Nuevo León and Veracruz.

A strategy that allows PEP to advance with a Mexican model that adapts to the geography and demography of its regions, taking into account the realities of neighboring populations and their needs, to make them participants in these developments and thus allow the country to capture regional growth opportunities.

In this way, the development of these unconventional formations becomes an economic and social leverage of regional development, to help the vision of this government, to incorporate populations traditionally marginalized from the development of the country, while remaining strict in compliance of the regulations related to environmental protection and security protocols, in the operation and development of the areas under consideration.