Pimienta and Eagle Ford formations to become Mexico's first tight oil and gas plays, Wood Mackenzie says

Following Mexico’s government and the Pemex Strategic Plan 2025-2035 presented recently, Wood Mackenzie published "PEMEX revives unconventional ambitions with 'complex geology' development program. "The analysts consider the Pimienta and Eagle Ford formations the most likely candidates for initial development, citing their established geology and potential to supply both oil and natural gas.   

“The strategy needs major capital investment and international operators working under profitable contract terms. However, it’s encouraging that the government and Pemex leadership are tackling natural gas production challenges by promoting development of the nation's extensive unexploited unconventional reserves,” said Ismael Hernandez, Research Associate at Wood Mackenzie.  

Mexico holds vast unconventional prospective resources that represent substantial energy potential, far exceeding its current confirmed reserves and opening important prospects for future sector development. “In the past, PEMEX's unconventional exploration and production activities achieved only partial success. Collaboration with international operators can significantly enhance horizontal drilling, multi-stage fracturing, field development optimization and environmental management” added Marcos Bernabe, Research Associate at Wood Mackenzie.  

Challenges ahead 

In the analysis “Pemex strategic plan maintains government backing while expanding private partnerships”, Wood Mackenzie establishes that success will depend on Mexico's new association model, which involves 21 announced projects structured as mixed contracts where Pemex maintains at least 40% participation while partnering with private operators. However, no projects have been initiated under this scheme yet, and the absence of competitive bidding rounds raises transparency concerns about the selection process. “Our analysis suggests that to optimize production, most of these projects must either initiate production or launch secondary recovery programs without delay” said Sergio de la Cruz, Research Associate at Wood Mackenzie. 

Pemex sets forth highly ambitious production goals, targeting substantial increases in both oil and natural gas output. The gas objective emerges as particularly challenging, requiring Mexico to achieve an extraordinary transformation of its production capacity—essentially doubling output within a  three-year timeline. 

According to the analysis, there's a pressing need for the government to tackle the operational and financial crisis that Pemex is currently experiencing through direct financial support. However, this aid will likely stop within two years, and the main focus will be on short-term debt. “Additionally, a US$13 billion trust fund has been established for 2025 projects, though over US$22 billion in outstanding contractor debt could constrain available capital for new initiatives,” said Carolina Zepeda, Research Associate at Wood Mackenzie. 

A Wood Mackenzie analysis published earlier this year points out that the Pimienta and Eagle Ford formations have the potential to significantly contribute to achieving the Pemex production targets. However, unconventional production is still in its initial pilot phase. Reaching commercial viability will take years to develop the required specialized supply networks and recruit experienced unconventional operators.