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.