25 years of experience leading oil & gas and related companies, both public and private, from LatAm to Vietnam. Led oilfield services group from startup through to $250 million USD/year in revenues and 2,500 employees in 7 countries.
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Warren Levy, CEO of Jaguar E&P – Mexico’s largest private onshore operator – believes the country’s approach to natural gas must change if it is to reap the economic rewards of its production and successfully transition toward renewable energy.
Levy told Mexico Oil & Gas Review 2020 that at the moment, Mexico imports the vast majority of its natural gas from the US natural gas market, the cheapest source of natural gas in the world. US gas offers low prices but guarantees Mexico’s dependence on the US and means the country loses out on the revenue that a strong natural gas sector would generate.
“Just 9 percent of the money spent on a unit of natural gas stays in Mexico when importing from the US. If the same gas is produced in Mexico, 100 percent of that value stays in the country, supporting service and local companies. At the moment, roughly US$4 billion a year leaves Mexico due to imports,” Levy said.
Jaguar E&P is the only operator significantly focusing on natural gas in Mexico, according to Levy. The company won a total of 11 blocks in Round 2.2 and 2.3 and controls 3,152km2 in acreage. Its 11 blocks are split between four basins: five in the Burgos basin, one in Tampico-Misantla, three in Sureste and two in Veracruz that presently produce 321b/d of liquids and 6.4MMcfd/d of gas. The vast scale of the company’s onshore assets grants it abilities to best optimize its investments, he said.
“Our acreage is comparable to most of the offshore players in Mexico. Having a portfolio that is very diverse and spread across the four basins gives us the opportunity to maximize the dollars spent on exploration and look for the best opportunities for ourselves and the country,” he said.
Echoing comments from CNH last year, Levy believes that Mexico is missing a trick in not reconsidering its relationship with natural gas. At the moment, the country is heavily dependent on US imports, a country that has a consolidated natural gas market. While the national demand for natural gas will rise from 4.3Bcf/d in 2020 to 7.4Bcf/d in 2032, Mexican levels of natural gas production will barely rise to 2.0Bcf/d by 2032.
Environmental concerns are another factor why Levy believes natural gas should have a greater role in Mexico’s energy mix. A global shift toward renewable energies is undeniable but with some renewable resources not yet ready to take the weight of energy demands, a transition fuel is needed.
“Many renewables like wind power have issues with continuity of service, while geothermal has limited viability in terms of where power can be generated. What we need in the meantime is some type of transition. Natural gas is that transition. We have abundant supplies in Mexico,” Levy said.
He believes that Jaguar E&P is well placed to deliver natural gas ahead of the growing demand and need for a transition fuel in Mexico. “Jaguar has a very small percentage of natural gas resources compared to what is still available in Mexico. Nevertheless, our 12.5Bcf reserves represent 50 years of all residential consumption in Mexico. If we are successful in only a small percentage of our exploration portfolio, we will be able to support a very large portion of Mexican families to make sure their consumption is as clean as possible,” he said.