1 [165832]

SPE 177139

Evaluation of Mexico’s Shale Oil and Gas Potential

Scott H. Stevens, SPE, and Keith D. Moodhe, SPE

Advanced Resources International, Inc.

Copyright 2015, Society of Petroleum Engineers Inc. be thick (~200 m), at prospective depth over much larger This paper was prepared for presentation at SPE Latin America and Caribbean Petroleum areas, are in the volatile oil to wet gas windows, and Engineering Conference (LACPEC) held in Quito, Equador, 18-20 November, 2015. frequently overpressured, although TOC is lower than in the This paper was selected for presentation by an SPE program committee following review of information contained in an abstract submitted by the author(s). Contents of the paper have Agua Nueva. not been reviewed by the Society of Petroleum Engineers and are subject to correction by the author(s). The material does not necessarily reflect any position of the Society of Petroleum Engineers, its officers, or members. Electronic reproduction, distribution, or storage of any part Introduction of this paper without the written consent of the Society of Petroleum Engineers is prohibited. Permission to reproduce in print is restricted to an abstract of not more than 300 words; The greater Gulf of Mexico Basin extends south from the illustrations may not be copied. The abstract must contain conspicuous acknowledgment of onshore Gulf Coast of the US into northeastern Mexico (Fig. SPE copyright. 1). Equivalent shale formations, such as the Eagle Ford and Haynesville/Bossier shale plays in the US, also are present Abstract south of the international border, where they are considered Mexico has significant oil and gas resource potential in important source rocks for conventional oil and gas deposits. Jurassic and Cretaceous age shale formations. These shale As such, Mexico offers relatively low-risk shale exploration deposits -- which correlate with productive shale plays in the targets compared with other countries, such as China and USA -- appear prospective but are still in the early stage of Australia, which have entirely different geologic histories and exploration and thus remain poorly characterized. Early shale present-day settings. exploration wells tested mostly low rates, but a recent oil well made 500 bopd while a shale gas well reached 10.9 MMcfd. Our previous scoping-level study for the US Department of Energy’s Energy Information Administration (EIA) The Mexican government plans to offer shale exploration documented that shale oil and gas resources in northeast blocks through an international auction. As part of a multi- Mexico are large and prospective (EIA/ARI, 2013). At that client study, the authors have greatly expanded the geologic time, with limited geologic data, we estimated risked, and reservoir data set we developed during an earlier scoping- technically recoverable resources in Mexico to be level study conducted for the US Energy Information approximately 13.1 BBO of oil and 545 Tcf of natural gas Administration (EIA). The additional geologic data support (104 BBOE; Table 1). Our recent more detailed work, based our initial view that Mexico has some of the largest and best on a much larger public data set that we compiled, generally quality shale potential outside the US and Canada. Risked, supports this analysis, while providing more granularity on the technically recoverable resources were estimated in the geologic variability and prospectivity of individual basins. EIA/ARI study at 13.1 BBO of oil and 545 Tcf of natural gas. Mexico’s national oil company Pemex recently published Detailed geologic mapping and analysis indicates the two its own estimates of shale oil and gas resources in Mexico, most prospective liquids-rich shale areas in Mexico occur although their methodology and assumptions have not been within onshore portions of the Burgos and Tampico-Misantla disclosed. Pemex’ most recent estimate for shale resources in basins, which have transport infrastructure and well services. Mexico is 60.2 BBOE, comprising 31.9 BBO of oil, 36.8 Tcf Significant potential also exists in the Veracruz, Macuspana, of wet natural gas, and 104.1 Tcf of dry natural gas (Pemex, Sabinas, and other onshore basins, but those areas tend to be 2014a). These estimates include both the U. Cretaceous and structurally more complex and/or are mostly in the dry gas U. Jurassic shales in the Tampico-Misantla, Burgos, Burro- window. Picachos, and other basins. The US Geological Survey independently estimated much smaller resources of 0.776 The U. Cretaceous Eagle Ford Shale (in the Burgos) and BBO, 23.474 Tcf, and 0.883 BB of natural gas liquids (mean correlative Agua Nueva Formation (in the Tampico-Misantla) estimates), but did not release its geologic maps (USGS, have high TOC and brittle carbonate-rich mineralogy, but their 2014). net prospective area is reduced due to often shallow burial depth and low thermal maturity. A better target appears to be Pemex initiated shale exploration drilling in 2010 and to the U. Jurassic Pimienta and La Casita formations, which can date has completed over 30 horizontal test wells treated with large hydraulic stimulations. A further 29 shale wells are 2 [177139] planned during 2015-2019. Drilling has been concentrated in With a total 5,000+ mapped shale geologic and reservoir the Burgos Basin south of Texas, along with several wells in data points, we had reasonably good control of thickness, the Tampico-Misantla and Sabinas basins. The initial wells depth, structure, lithology, and thermal maturity for the have tested mostly low rates but a few recent wells were more principal U. Cretaceous and U. Jurassic shale targets across productive, particularly in the Pimienta Fm of the southern northeast Mexico . Geochemical data such as TOC and HI Burgos Basin. control were less abundant. Published log and seismic images were mostly of poor quality and not suitable for petrophysical Note that these early horizontal test wells were relatively analysis, though still useful for correlation and defining shallow, targeting shale formations at depths of 1,000 to 2,500 general shale characteristics. We found limited data on m. In contrast, many shale plays in the US target deeper areas, subsurface hydrology and shale physical properties, notably such as the Bakken Shale in the Williston Basin, where mineralogy which was rarely of interest prior to the advent of horizontal development is focused at depths of about 3,300 m shale exploration. with greater reservoir pressure. Despite the slow start, it appears likely that once geologic sweet spots are defined and Our methodology for assessing Mexico’s shale resources well completion practices refined, shale resources could play a was described in further detail in EIA/ARI, 2013. We applied major role in Mexico’s plans to boost natural gas output, typical screening criteria of shale thickness, minimum and reduce gas imports from the US, and maintain or even grow its maximum depth, total organic carbon content (TOC), thermal recently declining oil output. maturity indicated by vitrinite reflectance (R o), and mineralogy. High-graded areas within the basins considered As part of Mexico’s ongoing major reforms of the prospective for shale gas and shale oil exploration were petroleum industry, the Comisión Nacional de Hidrocarburos mapped and characterized. We then estimated technically (CNH) plans to hold a series of international auction rounds of recoverable resources (TRR) from the original oil (or gas) in blocks with unconventional oil and gas potential. CNH has place (OOIP or OGIP) based on the range of actual recovery identified an estimated 21.642 BBOE of potential in 291 factors currently achieved in North American shale plays. blocks totaling 33,959 km 2 in the Burgos, Burro-Picachos, Finally, we applied risk factors commonly employed by shale Tampico-Misantla and other onshore basins (SENER, 2015). operators. However, the economic viability of the TRR was Mexico’s shale resource potential is significant, but numerous not assessed in our study. challenges remain, including security, the availability of low- cost well services, and a scarcity of geologic and reservoir The discrete steps in the EIA/ARI evaluation were: data on shale rock properties. On the other hand, the close proximity to shale services, expertise, and funding sources in 1. Translate nearly 500 mostly Spanish language technical the US and Canada gives Mexico a leg up over other countries articles and develop a GIS data base of geologic and which are seeking to jump start their shale industries. reservoir properties. 2. Characterize the geologic and reservoir properties of each Mexico’s shale service sector is gradually building the shale basin and formation. necessary capability for large-scale horizontal drilling 3. Establish the areal extent of the shale gas and shale oil combined with massive multi-stage hydraulic stimulation. formations. Only a small number of horizontal shale gas and oil wells have 4. Define and characterize the prospective area for each been tested thus far, with generally low but still encouraging shale gas and shale oil formation based on thickness, production rates. Large-scale commercial production appears depth, TOC, and thermal maturity. to be some years in the future. Considerable work is needed to 5. Estimate the risked shale gas and shale oil in-place based define the geologic “sweet spots”, develop the service sector’s on a) overall play probability of success and b) play area capacity to effectively and economically drill and stimulate probability of success. modern horizontal shale wells, and install the extensive 6. Using recovery factors from similar shales in the US surface infrastructure needed to transport product to market. estimate the technically recoverable shale gas and shale oil resource. Data Control and Methodology A significant challenge in assessing Mexico’s shale Shale Basins and Formations in Mexico resources is data availability. Much of the basic geologic and Large sedimentary basins extend across onshore northeast well data that is publicly available in other countries is Mexico, containing rich petroleum source rocks with suitable confidential in Mexico. However, a wealth of geologic data on thickness, depth, organic content, and thermal maturity for source rock shales has been published over the years in shale gas/oil exploration. The two most prospective basins various Mexican journals and university theses. We utilized appear to be the Burgos Basin, extending south of Texas, and these public sources to develop a proprietary GIS data base of the smaller Tampico-Misantla Basin further to the southeast in shale geology in Mexico, compiled from nearly 500 Spanish Veracruz and adjoining states. Other basins (Sabinas, and English language technical articles, most of which were Veracruz, Macuspana) also have shale potential, but overall written “pre-shale” and concerned conventional source rock they tend to be structurally more complex and/or in the dry gas geology. Data locations plotted on our Mexico maps provide window and are presented in less detail here. an indication of geologic control ( Fig. 2 ).

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Two principal marine-deposited shale exploration targets imports from the US, which currently exceed 2 Bcfd and are are present in northeast Mexico, each one considered an increasing quickly as major pipeline infrastructure expansions important source rock for the conventional oil and gas fields are completed, to a reported 8 Bcfd capacity by the end of which have been discovered in the region (Fig. 3). The Upper 2015 (Seelke et al., 2015). Cretaceous Eagle Ford, Agua Nueva and equivalent formations may perhaps be more familiar to US Data availability for the Burgos Basin overall was good, explorationists. This shale formation has been intensively comprising over 2,000 data points (well logs, cross-section developed in South Texas, making its direct extension into control points, outcrop samples) extracted from more than 250 northern Coahuila State an obvious target. But after data published articles and university theses, mostly in Spanish. gathering and analysis, we were surprised at how relatively Basic data on depth, thickness, thermal maturity, and other limited the Eagle Ford prospective area is in Mexico, due to shale properties were abundant for both U. Cretaceous Eagle structural trends, insufficient burial depth, and low or high Ford and U. Jurassic Pimienta formations, but the data were thermal maturity. not suitable for advanced petrophysical or seismic analysis.

The more prospective target appears to be the Upper The Burgos Basin is located south of the Rio Grande Jurassic (Tithonian) Pimienta, La Casita, and equivalent Embayment, east of the Burro Salado Arch, north of the formations. These organic-rich black shale to shaly limestone Tampico-Misantla Basin (which contains similar Mesozoic deposits, which are near time-equivalent with the Haynesville- shale targets), and northeast of the Sierra Madre Oriental Bossier Shale in Louisiana, were deposited in a broad marine thrust belt. The basin extends offshore but our shale study basin under anoxic conditions. Lithologies range from shales, was limited to onshore. It formed by extension associated argillaceous limestones, to thin-bedded lime mudstone with with salt deposition during the Jurassic to Early Cretaceous. chert layers. While the Tithonian generally has somewhat less Later on it was affected by Laramide (late Cretaceous) TOC than the U. Cretaceous (2-3% vs 4-5% in the richer compression, followed by strike slip faulting during the zones), it occurs at suitable burial depth over much larger Oligocene along the Rio Bravo left-lateral fault zone (Flotte et areas, and more often is in the optimal wet gas to volatile oil al., 2008). The Burgos contains a thick Tertiary sequence thermal maturity windows. which hosts numerous mostly small conventional and tight natural gas fields. Furthermore, additional shale targets directly underlie the Pimienta, such as the Taman, San Andres, Santiago and Closely spaced mostly normal faults associated with folds equivalent formations of Oxfordian to Kimmeridgian age. deform the Tertiary sequence and form conventional While not as laterally persistent as the Tithonian, these units hydrocarbon traps (Hernandez-Mendoza et al., 2008). can be equally or more organic-rich and offer secondary shale Fortunately, most of these faults flatten into a detachment completion zones. An analogy could be the Three Forks and surface near or above the Cretaceous-Tertiary boundary and Mid-Bakken units in the Williston Basin, now a “two-fer” do not appear to cut the shale-prospective Mesozoic section play with optionality. The Oxfordian in Mexico is about 500 (Fig. 4; Ortiz-Ubilla and Tolson, 2014). Thus the geologic m deeper than the Tithonian, giving it higher reservoir structure of the Burgos may be favorable for the deeper shale pressure and thermal maturity, although our data control was targets. weaker. Pemex began its shale exploration program targeting the Burgos Basin Eagle Ford Shale and later extended to the Pimienta Fm. The CNH plans to offer 124 blocks totaling 14,406 km 2 in the company’s first shale exploration well, the Emergente-1 well Burgos Basin under Bid Rounds 2-4, with an estimated 6.486 drilled in 2010, is located just south of the Texas border. The BBOE of unconventional resources. Stretching south from the 4,071-m well (measured depth) targeted the 175-m thick Eagle Texas border, the Burgos has been the focus of Pemex’ initial Ford Shale at subsurface depths of 2350-2525 m. Its 1300-m shale exploration activity. Two main shale targets are present: lateral was oriented due south and positioned in the organic- the U. Cretaceous Eagle Ford Shale in the north Burgos, with rich lower Eagle Ford zone, where TOC reaches 4.5%. As the a relatively small prospective area just south of the Texas first of its type the Emergente-1 took five months to drill, border; and the U. Jurassic Pimienta and La Casita formations whereas recent comparable wells in Mexico can now be in the south Burgos, extending over a much larger prospective drilled in about one month. Following a 17-stage frac area and probably with greater resource potential. Mexico’s employing 8 million gallons of slickwater and 42,563 sacks of best horizontal shale well to date, the 750-boepd Anhelido-1, quartz sand proppant, the well produced an initial gas rate of was completed here in the Pimienta Fm. 2.8 MMcfd (Zavala-Torres, 2014).

Production of natural gas from conventional sandstone The Eagle Ford Shale in the nearby Habano-1 shale test reservoirs began in the Burgos Basin as early as 1945. Gas well had micritic matrix with detrital clay, planktonic output peaked in 2010 and has since declined to the current foraminifera, sealed with calcite and authigenic clay, 1.2 Bcfd. Condensate production associated with natural gas occasional pyrite. Samples measured 54% calcite, 18% also peaked in 2010, and currently is about 18,000 bbl/d and quartz, and 19% clay (type not noted), with 9% other minerals declining (Pemex, 2014b). Shale gas development in the (Martinez Contreras, 2015). The Montañés-1 well measured Burgos could help stem the rise of, or even reduce, gas 1.95% average TOC in the upper Eagle Ford Shale, increasing 4 [177139] to 2.71% average in the lower zone. Subsequent Eagle Ford This suggests that hydraulic stimulation of shale targets in the Shale wells in the northern Burgos all tested low-moderate oil basin could be effective. and gas rates, much lower than from the Pimienta Fm in the southern Burgos, but it is not clear whether due to rock quality The very large Burgos Basin faces certain operational or perhaps fracture stimulation design. challenges compared with similar basins in the US and Canada, due to limited pipeline infrastructure and local As of mid-2014 Pemex had completed three horizontal security issues. On the other hand, hydraulic stimulation has large-frac wells targeting the more promising Pimienta Fm in been applied for some years in tight gas development, the southern Burgos Basin; three others were undergoing providing a certain degree of local well service capability. completion (Araujo et al., 2014). In 2012 the Anhelido-1 well Whereas the Burgos is an arid area compared with coastal was completed in the Pimienta Fm at a mean measured depth Tampico-Misantla, extensive ground water resources are of 2,111 m. The Pimienta here consists of marine-deposited present in the Cretaceous Agua Nueva and Cupido formations. black shale and shaly limestone containing Type II/III For example, the latter is about 200 m thick, with fresh to kerogen, divided into four intervals with varying concentration brackish conditions 380-1,350 ppm TDS at 600-700 m depth of carbonate mineralogy and TOC richness, which ranged up (Conagua, 2009). Groundwater could provide a source of to 4%. Tmax of 450-454°C indicates condensate to wet gas fluid for hydraulic stimulation in the basin. thermal maturity. XRD measured favorably brittle mineralogy: 70% calcite, 1% dolomite, 10% quartz, and 11% illite clay. Tampico-Misantla Basin Porosity was estimated at 7%. The fracture gradient was a Somewhat smaller than the Burgos Basin, but with moderate 0.92 – 1.02 psi/ft. The nearby Arbolero-1 shale well sizeable prospective liquids-rich windows, the Tampico- tested 0.55 psi/ft reservoir pressure gradient. Misantla Basin (TMB) is the primary focus of CNH’s upcoming Round 1 unconventional license auction. CNH The Anhelido-1 lateral was landed just above the peak plans to offer a total 158 license blocks covering 17,625 km 2 radioactivity zone, where clay content was lower, TOC higher, and with an estimated 17.625 BBOE of resource potential and the formation considered more brittle. They conducted a under Bid Rounds 1 through 4 (Fig. 5). This does not include 17-stage hydraulic stimulation, employing 5.1 million lbs sand Round 0 areas retained by Pemex, mostly in the southern half proppant and 12 million gallons of frac fluid. Each stage of the basin, which also may have good shale potential. utilized five 1-m long frac clusters, with 20 shots/meter that were deep penetrating and 60° phased. Formation brittleness The southern portion of the TMB hosts the well-known was homogeneous along the lateral, and the evenly spaced Chicontepec complex, a series of conventional oil fields which stages received uniform stimulation based on radioactive since discovery in 1904 have produced a cumulative 5.5 BBO tracers. This stimulation resulted in estimated 133-m propped and 7.5 Tcf from over 20,000 wells. Production is mainly fracture length and 95-m propped fracture height. from Tertiary conventional and tight sandstones and naturally fractured Cretaceous carbonates in structural traps (Fig. 6). The Anhelido-1 well was the first horizontal frac shale These conventional oil fields produce 15-35° API gravity well to produce oil from the Pimienta Fm, and achieved a crude from 1,500-2,500 m depth. Underlying Cretaceous and production rate higher than any of the Eagle Ford wells up to Jurassic shale reservoirs are likely to produce higher gravity that time. Initial production was about 500 bopd of 37° API oil. Sulfur content can be high (5%) in biodegraded shallow oil with 1.5 MMcfd of wet gas (24-hour rate). Production conventional fields but is lower (<1%) in deeper fields. dropped rapidly but stabilized at 80-90 bopd with 0.6 MMcfd Pemex estimates 18.9 Bboe of remaining conventional of gas after one year on line. Pemex reported cumulative reserves in the TMB, but notes that low permeability results in production of about 40,000 bbl of oil during the first year, poor recovery factors (~2%) and high full-cycle costs (Pemex, with estimated ultimate recovery (EUR) of over 100,000 bbl 2013). (cumulative gas was not reported). Such an early test well, while probably not economic, would be considered promising Topography within the TMB is mostly flat coastal plain to in any new shale basin. There appears to be good potential to rolling hills, considered favorable for shale development. The further increase productivity by optimizing the stratigraphic rugged Sierra Madre Oriental mountains rise rapidly in the landing zone, well and frac design, and other parameters. west, reaching 4,000 m elevation outside the basin. The largest city is Poza Rica (193,000), otherwise surface Another well, the Tangram-1 encountered 215 m thick conditions are mostly rural. The climate is tropical, with Pimienta Fm in a thermally more mature dry gas window. moderate 14-24°C temperatures and 1.2 m/yr average rainfall, The well tested 10.9 MMcfd of dry gas, the highest rate for a concentrated during June-October. shale gas well in Mexico thus far. Data availability for the TMB overall generally was good, In-situ stress data on the shale targets are not available in comprising over 2,000 data points (well logs, cross-section the Burgos, but the overlying Eocene tight sandstones have control points, outcrop samples) from more than 1,500 unique tested low stress. For example, one well measured 6,150 psi mapped locations, extracted from nearly 150 published closure stress at a depth of 3,217 m., for a favorably low 0.58 articles, mostly in Spanish. Of this total, 763 data points psi/ft frac gradient (Medina Eleno and Valenzuela, 2010). penetrated just down to the Cretaceous strata, 946 penetrated both the Cretaceous and Jurassic, and 398 points were [177139] 5 specifically on the U. Jurassic Tithonian Pimienta Fm. We NE-SW, consistent with regional tectonics, with 40-250 m recorded 211 partial well log images, of which 150 penetrated fracture length (average 130 m). Stress magnitude is uncertain the Jurassic. but fracture height growth of around 90 m in the Tertiary sandstone reservoirs indicates favorably moderate stress Initiated in the late Triassic as a pull-apart basin, the (Gutiérrez et al., 2014). NNW-SSE trending Tampico-Misantla Basin (TMB) transitioned to foreland basin by the Paleocene. The basin is The TMB differs from US shale plays in that significant bounded on the east by the Tuxpan Uplift and Caribbean relatively recent (Miocene-Quaternary) igneous activity has coastline. The west is bounded by thrusting and folding occurred, particularly in the south, which could negatively related to the Laramide-age Sierra Madre Oriental range. impact the shale potential (Ferrari et al., 2005). Fortunately, Note that we extended the basin several kilometers to the west most of this igneous activity, part of the Trans-Mexican Faja beyond the traditional Cretaceous-Tertiary boundary, where Volcanic Belt, consisted of shallow extrusive lava flows that Jurassic shale can still occur at prospective depth. Faulting followed paleotopography from elevated source areas in the inside the basin is relatively minor, mostly high-angle normal eastern Sierra Madre Orientale downhill some 90 km across faults with h<50 m. Structural dip is gentle, mostly flat lying the TMB to the coast. to about 5° ( Fig. 7; Pemex, 2012). Overall, structure appears favorable for shale development using horizontal drilling. After screening for depth, thickness, R o, and igneous intrusions and lava flows, the net high-graded prospective The Upper Cretaceous Agua Nueva Fm is an organic-rich thermal maturity windows for the U. Jurassic Pimienta Fm shaly carbonate which has produced oil in naturally fractured, that we identified in the TMB are comparable in size to those anticlinal fields within the TMB. Our mapping indicates this of the South Texas Eagle Ford Shale play (>12,000 mi 2), unit is too shallow and thermally immature for economic shale although the northern TMB region is poorly constrained. exploration in most of the basin. Instead, we regard the underlying Upper Jurassic Pimienta Formation as the primary Pemex has drilled, cored, and hydraulically fractured three shale target in the TMB: it is depositionally more widespread, horizontal wells in the southern TMB, landing in the Pimienta less eroded by the Paleochannel, deeper and at higher Formation which is 92 to 200 m thick and 2,327 to 2,920 m pressure, and thermally more mature. The Pimienta also is deep (below sea level) in these penetrations. Data on rock considered the main source rock in the TMB. properties and production have not yet been released.

The Pimienta Fm is an organic-rich black shale to shaly In 2013 Pemex estimated the TMB has 34.8 BBOE of limestone unit that ranges up to 350 m thick, averaging 150 to unconventional shale resources from both U. Cretaceous and 200 m in basinal depositional settings, 50-100 m on slope U. Jurassic formations, comprising mainly oil (30.7 BBO) settings, and thinning to zero over paleo highs. Note the with some wet gas (20.7 Tcf) but no dry gas. EIA/ARI’s 2013 Pimienta is 2-3 times thicker than the Eagle Ford Shale in estimate for the Pimienta Fm alone was 10.6 BBOE of risked, South Texas. During the Tithonian, high evaporation in technically recoverable resources, comprising a more balanced restricted basins resulted in lower clay and Type III kerogen blend of 6.5 BBO of oil and 24.7 Tcf of mainly wet natural than in the preceding Oxfordian stage. Oils generated from gas, including a small amount of dry gas. the Tithonian are subtly differentiated from the Oxfordian by C26 character (Guzman-Vega et al., 2010). In 2014 the USGS estimated a much smaller resource of 0.6 BBO and 0.4 Tcf for the TMB (mean estimate), about two- The top of the Pimienta Fm varies from 500 to 4,000 m thirds from the U. Cretaceous Agua Nueva Fm and the balance deep across the TMB. To the east the Pimienta deepens from the U. Jurassic Pimienta Fm. The USGS reported rapidly offshore to below 5 km. The Tamaulipus Arch screening out 79% of the otherwise prospective Pimienta Fm uplifted the Pimienta, bifurcating the prospective area into area based on a Pemex contour map indicating TOC of less south and north halves. Note that the underlying Taman, than 2%. However, core data we located indicates this map Santiago, and related U. Jurassic shale targets are an additional may be underestimating actual TOC. In our view the ~500 m below the Pimienta and could be secondary targets, or Pimienta’s greater depth, reservoir pressure, and thermal perhaps primary targets where the Pimienta is too shallow and maturity make it the more prospective target in the TMB, immature. despite lower overall TOC than in the Agua Nueva Fm.

We mapped well-defined black oil, volatile oil, wet gas, Other Basins and dry gas windows for the Pimienta Fm across the TMB Several other basins in Mexico have shale potential. Just based on Tmax and R o data. Thermal maturity increases west of the Burgos Basin in the Sabinas Basin, with similar U. regionally towards the Sierra Madre Oriental in the west, and Cretaceous and U. Jurassic shale targets that are entirely in the also increases gradually with depth. Much of the onshore dry gas window, but significantly folded due to thrusting from basin is in the black to volatile oil windows, with a smaller the Sierra Madre Oriental mountains as well as local salt- wet gas and tiny dry gas window in the west. withdrawal tectonics (Soegaard et al., 2003). A shale gas exploration well (Percutor-1) produced 2.17 MMcfd of dry gas Microseismic monitoring of the Tertiary at Chicontepec from the Eagle Ford Shale at a sub-surface depth of 3,330- shows that maximum principal horizontal stress is oriented 3,390 m. 6 [177139]

provided in conducting this study. Vello A. Kuuskraa In the Veracruz and Macuspana basins of southeast contributed to the resource methodology used in this Mexico, the U. Cretaceous (Turonian) Maltrata Formation is a study. significant source rock, with about 100 m of shaly marine limestone and an average 3% TOC (Type II). Thermal maturity ranges from oil-prone (R o averaging 0.85%) within Nomenclature the oil window at depths of less than 11,000 ft, to gas-prone Bcf billion (10 9) cubic feet (R o averaging 1.4%) within the gas window at average depths bopd barrels of oil per day below 11,500 ft. The dip angle is relatively steep, thus BBO billion (10 9) barrels of oil prospective area appears to be limited to a relatively long, BBOE billion (10 9) barrels of oil equivalent narrow belt. These other basins are the focus of our C centigrade continuing evaluation of Mexico’s shale oil and gas potential. CNH Comisión Nacional de Hidrocarburos g/cc grams per cubic centimeter GIS geographic information system Conclusions km kilometer 1. Our GIS-based data base of shale geologic and km 2 square kilometer reservoir properties, built with data published in m meter nearly 500 mostly Spanish language technical articles m3 cubic meters and university theses, helped us to identify and MMcfd million (10 6) cubic feet per day characterize the prospective areas within Mexico’s ppm TDS parts per million total dissolved solids shale basins. In all, over 5,000 shale data points were psi/ft pounds per square inch per foot of depth mapped, including depth, thickness, R o, and TOC. Ro vitrinite reflectance Tcf trillion (10 12 ) cubic feet 2. The new data generally confirms our earlier estimate TOC total organic carbon for EIA that Mexico has approximately 13.1 BBO TRR technically recoverable resources and 545 Tcf of risked, technically recoverable shale XRD x-ray diffraction oil and gas resources, while providing more granularity on where potential sweet spots may be located. References Araujo, O., Garza, D., Garcia, D., Ortiz, J.R., Bailon, L., and 3. The structurally simple southern flank of the Burgos Valenzuela, A., 2014. First Production Results from Pimienta Basin has large shale oil and gas resources in the U. Oil Source Rock Reservoir, A Promising Shale: Case History Jurassic Pimienta Formation. A horizontal shale well from Burgos Basin, Mexico. Society of Petroleum Engineers, here produced 500 bopd of 37° API crude and 1.5 SPE Latin America and Caribbean Petroleum Engineering MMcfd of wet gas. We mapped a large area in the Conference, Maracaibo, Venezuela, 21-23 May, 2014, SPE 169420 , 15 p. southern Burgos high-graded for thickness, depth, Ro, and structural simplicity. Armstrong-Altrin, J.S., Nagarajan, R., Madhavaraju, J., Rosalez- Hoz, L., Lee, Y.I., Balaram, V., Cruz-Martınez, A., and Avila- 4. The Tampico-Misantla Basin has liquids-rich shale Ramırez, G., 2013. Geochemistry of the Jurassic and Upper potential, particularly for the U. Jurassic Pimienta Cretaceous Shales from the Molango Region, Hidalgo, Eastern Mexico: Implications for Source-area Weathering, Provenance, Fm. High-graded areas have 100-300 m thick and Tectonic Setting. Comptes Rendus Geoscience , 345 : 185- Pimienta shale at a depth of 2 to 4 km deep, with 202. large areas in the volatile oil to wet gas thermal maturity windows (R 0.7 to 1.3%). CONAGUA (Comisión Nacional del Agua), 2009. Actualización o De La Disponibilidad Media Anual De Agua Subterránea, Acuífero (1920) Campo Papagayos, Estado De Nuevo León. 5. Other basins (Sabinas, Veracruz, Macuspana) also August 28, 22 p. may be prospective but initial review shows then to Ferrari, L., Tagami, T., Eguchi, M., Orozco-Esquivela, M.T., be structurally more complex. The Sabinas Basin is Petrone, C.M., Jacobo-Albarran, J., and Lopez-Martınez, M., entirely in the dry gas window, while the Veracruz 2005. Geology, Geochronology and Tectonic Setting of Late and Macuspana basins have exceptionally thick Cenozoic Volcanism Along the Southwestern Gulf of Mexico: source rocks of liquids-rich maturity, but also are The Eastern Alkaline Province Revisited. J. Volcanology significantly faulted. While CNH has not announced Geothermal Res. , 146 : 284-306. license blocks, these basins could have good local Flotte, N., Martinez-Reyes, J., Rangin, C., Le Pichon, X., Husson, potential and warrant further study. L., and Tardy, M., 2008. The Rio Bravo Fault, a Major Late Oligocene Left-Lateral Shear Zone. Bulletin Geological Society of France, 179 : 147-160. Acknowledgments Gutiérrez, G., García, J.G., Medina, E., and Salguero, J., 2014. Uso The authors wish to thank the Energy Information de Monitoreo Microsísmico Para Optimizar Fracturamientos Administration, Chesapeake Energy, ConocoPhillips, and Hidráulicos en Chicontepec. Ingeniería Petrolera , May, 54 : 267- eight other oil company clients for financial support 281. [177139] 7

Guzmán-Vega, M.A., Clara-Valdez, L., Maldonado-Villalón, R., Martínez-Pontvianne, G., Villanueva-Rodríguez, L., Caballero- García, E., Lara-Rodríguez, J., Medrano-Morales, L., Pacheco- Muñoz, J. and Vázquez-Covarrubias, E., 2010. El Origen de los Aceites Pesados en México: Biodegradación vs Madurez. Boletín de la Asociación Mexicana de Geólogos Petroleros, 55: 2-8. Hernandez-Mendoza, J.J., DeAngelo, M.V., Wawrzyniec, T.F., and Hentz, T.F., 2008. Major Structural Elements of the Miocene Section, Burgos Basin, Northeastern Mexico. American Association of Petroleum Geologists, 92 : 1479-1499. Martinez Contreras, J.F., 2015. Estudio Estratigrafico-Geoquimico en Petroleo y gas de Lutitas de la Formacion Eagle Ford, Noroeste de Villa Hidalgo, Estado de Coahuila, Noreste de Mexico. Universidad Nacional Autonoma Mexico (UNAM), Masters Thesis, 152 p. Medina Eleno, L. and Valenzuela, A., 2010. Refracturamientos Hidráulicos Para Incrementar la Producción en el Activo Integral Burgos Reynosa. Ingeniería Petrolera , March, 12 p. Ortiz-Ubilla, A. and Tolson, G., 2004. Interpretación Estructural de Una Sección Sísmica en la Región Arcabuz–Culebra de la Cuenca de Burgos, NE de México. Revista Mexicana de Ciencias Geologicas , 21 : 226-235. Pemex, 2012. Aceite y Gas en Lutitas. Presentation dated June 21, 2012, 54 p. Pemex, 2013. Tercera Ronda de Licitaciones en PEP Contratos Integrales de Exploración y Producción Aceite Terciario del Golfo. January 22, 105 p. Pemex, 2014a. Informe Anual 2013 de Petróleos Mexicanos (Annual Report), February 13, 2014, 662 p. Pemex, 2014b. Presente y Futuro del Proyecto Burgos. May, 38 p. Sanchez-Gonzalez, R. and Zauco-Martinez, T.A., 2014. Análisis De Las Alternativas De Explotación Del Sector 6 Agua Fría-Coapechaca. Thesis, Universidad Nacional Autónoma De México, 165 p. Seelke, C.R. Ratner, M., Villarreal, M.A., and Brown, P., 2015. Mexico’s Oil and Gas Sector: Background, Reform Efforts, and Implications for the United States. Congressional Research Service, July 30, 26 p. SENER, 2015. Plan Quinquenal de Licitaciones para la Exploración y Extracción de Hidrocarburos 2015 – 2019. Secretaría de Energía, Mexico, 139 p. Soegaard, K., Ye, H., Halik, N., Daniels, A.T., Arney, J., and Garrick, S., 2003. Stratigraphic Evolution of Latest Cretaceous to Early Tertiary Difunta Foreland Basin in Northeast Mexico: Influence of Salt Withdrawal on Tectonically Induced Subsidence by the Sierra Madre Oriental Fold and Thrust Belt. In C. Bartolini, R. T. Buffler, and J. Blickwede, eds., The Circum-Gulf of Mexico and the Caribbean: Hydrocarbon Habitats, Basin Formation, and Plate Tectonics, American Association of Petroleum Geologists, Memoir 79, p. 364–394. US Geological Survey, Assessment of Unconventional Oil and Gas Resources in Northeast Mexico. August, 2014, 4 p.

8 [165832]

Figure 1: Shale Basins in Northeast Mexico, Showing Unconventional Exploration Blocks Scheduled for Rounds 1-4. [177139] 9

545 Total 2,233 um % .7 Gas 70.0 ) 2 13 275 Total Marine Maltrata Veracruz (9,030 (9,030 mi U. Cretaceous ) 2 0 - 0 12,000 10,000 - 12,500 Veracruz (9,030 mi (9,030 000 560 400 .90% 0.85% 1.40% ) 2 Tuxpan (2,810 mi (2,810 00 8,500 11,000 11,500 ) 2 Marine Marine Tamaulipas Pimienta

L. M.- Cretaceous Jurassic Tuxpan l Normal Normal (2,810 (2,810 mi Normal Normal Normal Normal Normal Marine Marine Marine Tamaulipas Pimienta Maltrata s in Mexico in s L. M.- Cretaceous Jurassic U. Cretaceous ) 2 - - 8,500 7,000 - 9,000 - 6,000 9,500 6,60010,000 - 9,80 00 6,000 9,500- 6,600 10,000- 9,800 12,000 - Marine Jurassic Pimienta Tampico (26,900 mi (26,900 ) 2 Gas Wet Gas Dry Gas Assoc. Gas Assoc. Gas Assoc. Gas Dry Tampico (26,900 mi (26,900 ) 2 Sabinas (35,700 mi (35,700 ) 2 ,400 5,000 12,500- 9,800 13,100- - 3,300 8,500 4,000 Marine Marine Burgos Marine Marine Marine (24,200 mi (24,200 U. Jurassic M. - U. Cretaceous U. Jurassic Tithonian ShalesTithonian Ford Shale Eagle La Casita Tithonian M. U.- Cretaceous Jurassic Highly Highly Overpress. Underpress. Underpress. Normal Normal Oil Condensate Oil Condensate Oil Oil Oil 600200160 10,000 200 160 9,000 500 3,050 200 500 1,000 200 300 1,000 210 560 500 200 300 150 15.80.95 89.8 5.39 119.4 4.78 18.5 0.74 12.7 0.51 11.5 0.46 6.9 0.28 Low43.9 Low 15.0 Low 37.9 Low 17.3 Low 36.4 Low 33.0 Low/Medium 23.5 Table 1: Estimated Shale Gas and Shale Oil Resource Oil Shale and Gas Shale Estimated Table 1: 5.0% 5.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3,500 7,500 5,500 6,200 7,900 8,500 11,000 0.85% 1.15% 0.85% 1.15% 0.85% 0.90% 0.85% 3,300 - 3,300 4,000- 4,000 16,400- 3,300 8,500- 4,000 8,5- ) Highly Overpress.Highly Overpress. Highly Normal Normal Norma 2 ) 2 Burgos (24,200 mi (24,200 Marine ) 2 M. U.- Cretaceous Organically Rich Organically Net Interval Average 7.80.9 446.4 111.6 767.5 230.2 201.6 50.4 501.0 100.2 118.1 23.6 58.5 4.7 47.7 9.5 45.0 9.0 8.9 0.7 9.5 0.8 6.6 0.5 14 2.9 600 10,000 6,700 6,700 9,500 9,500 9,000 3,050 1,550 1,000 1, 200160 200 160 300 210 500 200 500 400 800 240 500 200 500 200 500 200 300 210 500 200 300 150 300 150 Low Low Low Low Low Low Low Low Low Low Low Low/Medium Low/Medi 21.7 74.4 190.9 100.3 131.9 69.1 18.6 44.7 83.0 25.5 27.2 22.4 5.0% 5.0% 5.0% 3.0% 4.0% 2.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0 3,500 7,500 10,500 11,500 9,000 11,500 5,500 6,200 8,000 7,9 0.85% 1.15% 1.60% 1.70% 1.50% 2.50% 0.85% 1.15% 1.40% 0.85% 0 Geologic Age Geologic Assoc. Assoc. Gas Wet Gas Dry Gas Dry Gas Dry Gas Dry Gas Assoc. 3,300 - 4,000 4,000 - 16,400 6,500 - 16,400 7,500 - 16 Shale FormationShale Ford Shale Eagle Pimienta Basin/Gross Area Basin/Gross Highly Highly Overpress. Overpress. Highly Overpress. Highly Depositional Environment Depositional Prospective Area (mi Area Prospective Pressure Reservoir TOC %) (wt. Average (% Ro) Maturity Thermal Content Clay Phase Oil (MMbbl/mi Concentration OIP Risked OIP (B bbl) Risked bbl) (B Recoverable Risked Thickness (ft) Thickness (ft) Depth

)

2 Properties

Basic Data Basic Resource

Physical Extent Physical ) 2 Reservoir Reservoir Organically Rich Organically Net Net Interval Average Geologic Age Geologic Shale FormationShale Ford Shale Eagle Basin/Gross Area Basin/Gross Depositional Environment Depositional

Thickness (ft) Thickness Depth (ft) Prospective Area (mi Area Prospective Pressure Reservoir TOC (wt. %) Average (% Ro) Maturity Thermal Clay Content Gas Phase (Bcf/mi GIP Concentration Risked GIP Risked (Tcf) (Tcf) Recoverable Risked

operties p ro P

i ta a D sic a B t n xte E l sica y h P rce u so e R R e servo ir ir servo e R

10 [177139]

Figure 2: The Shale Trend in Northeast Mexico is Significantly Larger than the South Texas Eagle Ford Shale Play; Data Locations for Study are Indicated [177139] 11

Figure 3: Stratigraphy of the Burgos Basin Showing U. Cretaceous Agua Nueva (Eagle Ford) Fm and U. Jurassic Pimienta (La Casita) Fm. Note Listric Normal Faults Cutting Tertiary Section Flatten into Detachment Surface and Don’t Affect Mesozoic Section.

Figure 4: West-East Cross Section of Burgos Basin Showing Tertiary Detachment Faults Underlain by Less Deformed Mesozoic Shales 12 [177139]

Figure 5: Unconventional Oil and Gas Exploration Blocks Planned for the Tampico-Misantla Basin (CNH)

Figure 6: Stratigraphy of Source Rock Shale Targets in the Tampico-Misantla Basin Include the U. Cretaceous

[177139] 13

U JURASSIC PIMIENTA FM

Figure 7: Seismic Time Section Showing Generally Simple Structure of the U. Jurassic Pimienta Fm in the Tampico-Misantla Basin