Gas security in the land of insecurity: governance challenges of shale gas development in Mexico

Abstract

This article identifies the governance challenges of shale gas development. Mexico has vast shale gas reserves and production and exploration of natural gas were liberalised after the energy reform was adopted into law in 2014. This reform established the governing system that will rule the upstream oil and gas sectors. This governing system consists of a regulatory setting composed of federal institutions that lack human resources specialising in shale development. In early 2018, the first competitive bidding process for shale fields will be conducted. The local communities have not yet been consulted and cannot fully oppose shale development in their land. The production of shale gas on a commercial scale could help Mexico achieve security of gas supply under increasing demand for gas in oil and electricity production and increasing gas imported from the United States. However, some of the largest shale reserves are located within states characterised by high levels of violent crime and increasing returns of criminal practices of state governments. These conditions make environmental impacts more likely and commercially viable shale gas development less likely.