April 26, 2011 / 6:04 PM / in 7 years

Mexico eyes shale gas boost for petrochemical sector

MEXICO CITY, April 26 (Reuters) - Mexico is considering ramping up shale gas production to support its petrochemicals sector which has traditionally used feedstocks based on crude oil, the country’s energy minister said on Tuesday.

Although the prolific shales of Texas are believed to extend across the border into northern Mexico, little has been done to develop the deposits due to the state-controlled industry’s focus on producing crude oil.

“It’s on the agenda ... (Shale gas) changes the way we should be thinking about our hydrocarbons sector going forward,” Energy Minister Jose Antonio Meade told reporters.

State oil monopoly Pemex [PEMX.UL] completed its first shale gas well in March, tapping into the Eagle Ford formation in Coahuila state near the Texas border. However the company has been slow to get into the gas business due to low returns compared with oil drilling, forcing Mexico to import gas from the United States and in the form of liquefied natural gas.

Shale gas has radically altered the North American natural gas industry, dramatically boosting U.S. gas reserves and putting off the need for large scale imports from outside of North America for decades.

U.S. President Barak Obama embraced shale gas in his March energy policy statement despite the objections of environmental groups who say the production methods used by shale gas producers contaminate ground water. The technology is currently under review by the U.S. Environmental Protection Agency.

However, shale gas has revitalized the continent’s petrochemicals sector, once thought doomed due to competition from Middle Eastern producers with access to cheap oil, by boosting production of cheap, gas-based feedstocks.

Dow Chemical Co DOW.N announced plans last week to boost ethylene and propylene production in the United States due to plentiful shale gas feedstocks. [ID:nL3E7FL2XP]

Pemex’s petrochemicals arm, long starved of investment, has been slowly turned around in recent years. (Reporting by Robert Campbell; editing by Jim Marshall)

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