A shale-oil boom beckons in some of Mexico's most violent areas

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BATIAL-1 WELL, Mexico -- The geological marvel known to Texas oilmen as the Eagle Ford Shale Play is buried deep underground, but at night you can see its outline from space in a twinkling arc that sweeps south of San Antonio toward the Rio Grande.

The light radiates from thousands of surface-level gas flares and drilling rigs. It is the glow of one of the most extravagant oil bonanzas in American history, the result of the drilling technique known as hydraulic fracturing, or fracking.

Curving south and west, the lights suddenly go black at Mexico's border, as if there were nothing on the other side.

This is a reflection of politics, not geology. The Eagle Ford shale formation is believed to continue hundreds of miles into Mexico, where it is known as the Burgos Basin. But while more than 5,400 wells have been sunk on the Texas side since 2008, Mexico has attempted fewer than 25.

A landmark energy bill approved by Mexico's Congress in December is aimed at correcting this disparity. It has opened the country's oil industry to private and foreign investment for the first time in 75 years, with the goal of bringing in new technology, expertise and a risk-taking culture long missing at the state oil monopoly, Pemex.

Lawmakers will be hashing out the nuts and bolts of the law over the coming weeks, but expectations are that U.S. and other global companies will be able to bid on oil and gas projects by the end of this year, beckoning the fracking crews across the border -- into some of Mexico's most violent areas.

"The United States and Canada are exploiting their shale resources on a massive scale, and we're still in the prospecting stage," Gustavo Hernandez, the director of exploration and production at Pemex, said in an interview. "But we believe the volumes we have are enormous."

Pemex estimates that Mexico's shale formations hold the energy equivalent of 60 billion barrels of oil, an amount exceeding the entire volume the country has pumped out by conventional means since 1904.

Natural gas is thought to be especially plentiful. In a 2013 survey, the U.S. Energy Information Administration ranked Mexico's reserves of shale gas as the world's sixth-largest after China, Argentina, Algeria, the United States and Canada.

Despite Mexico's abundant resources, the country's soaring demand for electricity and meager pipeline infrastructure have left it dependent on imported gas to cover roughly a third of its needs. In some parts of the country, natural gas prices are four times as high as those in the United States.

It is one reason Mexican officials say the shale reserves are crucial to the country's economic and energy development, while advancing the broader goal of "North American energy independence" -- making the entire free-trade zone self-sufficient for its fuel needs.

The biggest interest in Mexico's energy overhaul is expected to come from large global companies such as Exxon Mobil and Shell that have the capital and equipment to hunt the most lucrative prize: huge oil fields deep under the Gulf of Mexico.

But the willingness of foreign companies to test their fortunes in the wilds of its northern borderlands remains unknown. The region is almost totally lacking in the infrastructure that spread across south Texas, and Mexico's shale beds sit beneath some of the most lawless parts of the country.



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