Mexico’s Drug Cartels Are Standing in the Way of a Fracking Bonanza

US President Barack Obama (L), Mexican President Enrique Pena Nieto and Canadian Prime Minister Stephen Harper (R) shake hands after a joint press conference following their trilateral North American Leaders summit at the Palacio de Gobierno in Toluca, Mexico, on February 19, 2014. The three leaders joined for the summit of North American Leadersfor talks focusing on 'a range of issues important to the daily lives of all of North America's people, including economic competitiveness, entrepreneurship, trade and investment, and citizen security.' AFP PHOTO/Jewel Samad
National Journal
Steve Levine, Quartz
Add to Briefcase
See more stories about...
Steve LeVine, Quartz
Feb. 20, 2014, 7:42 a.m.

MEX­ICO CITY — If all goes well, drillers re­spons­ible for a shale-oil bon­anza in Texas will soon cross the south­ern U.S. bor­der and ex­tend the hy­draul­ic frac­tur­ing boom to Mex­ico. But first, the Mex­ic­an gov­ern­ment, for­eign oil com­pan­ies or some com­bin­a­tion of the two will have to neut­ral­ize some of the most sav­age gang­sters in the world.

Oil and gas were a key sub­text of yes­ter­day’s North Amer­ic­an sum­mit between Ca­na­dian Prime Min­is­ter Steph­en Harp­er, Mex­ic­an Pres­id­ent En­rique Peña Ni­eto and Pres­id­ent Obama. Hop­ing to join the U.S. and Ca­na­dian en­ergy boom and in­vig­or­ate the lag­gard Mex­ic­an eco­nomy, Peña has pushed through a dra­mat­ic re­versal of his coun­try’s sev­en-dec­ade-old ban on private oil and gas drilling. His goal is to lure com­pan­ies that are drilling in the deep­wa­ter Gulf of Mex­ico and the Texas shale patch to lead the de­vel­op­ment of Mex­ico’s po­ten­tial 42 bil­lion bar­rels of oil.

Trade rules will have to be re­laxed to al­low the U.S. com­pan­ies to quickly move labor and spe­cial equip­ment back and forth across the bor­der when needed, ex­perts here say. But more im­port­ant, Peña has to deal with the Zetas and the Gulf Car­tel, two vi­cious drug- and gun-run­ning gangs whose turf over­laps Mex­ico’s shale de­pos­it. Nab­bings, ex­tor­tion, murder, and oil theft by the gangs have made U.S. drillers — tra­di­tion­ally cava­lier about vi­ol­ence in the areas where they work — wary of ven­tur­ing in­to the shale-rich states of Tamaul­i­pas, Coahuila, and Nuevo Le­on.

“Tamaul­i­pas is not in gov­ern­ment con­trol. There is not a single busi­ness there that in some way does not pay off the or­gan­ized-crime groups,” said Louie Palu, an Amer­ic­an war pho­to­graph­er who re­por­ted in the gang-run states from 2011 to 2013.

Peña has set a tar­get of rais­ing Mex­ico’s oil pro­duc­tion to 3 mil­lion bar­rels a day by 2018, a 25 per­cent in­crease from 2.4 mil­lion bar­rels a day now. But in shale oil, Mex­ico is es­sen­tially start­ing from scratch. State oil com­pany Pe­mex, un­til now a mono­poly, has drilled only a hand­ful of shale wells. Mean­while, just across the bor­der in south­ern Texas, 11,000 well per­mits have been is­sued for the Eagle Ford shale form­a­tion. The wells have been drilled by wild­cat­ters such as Apache, Devon, and Pet­ro­hawk, which have helped to re­sur­rect Texas as a glob­al oil power­house.

Eagle Ford alone pro­duces some 1.2 mil­lion bar­rels of oil a day, and half of the 38,000 square-mile field lies with­in Mex­ico. While no oth­er na­tion has man­aged to du­plic­ate U.S. and Ca­na­dian suc­cess in hy­draul­ic frac­tur­ing — the meth­od used to drill shale oil and gas, pop­ularly known as frack­ing — Mex­ico has per­haps the best shot be­cause it can ac­cess the Eagle Ford.

“It will be a game-changer if we are suc­cess­ful in bring­ing down the suc­cess­ful shale op­er­at­ors from the U.S.,” in­dustry con­sult­ant Lu­is Miguel Lab­ardini told Quartz.

But busi­nesses op­er­at­ing in the Mex­ic­an states bor­der­ing shale-rich Texas and the Gulf of Mex­ico have been es­pe­cially vul­ner­able to gang ex­tor­tion. Pe­mex, op­er­at­ing con­ven­tion­al fields in the re­gion, has also suffered from theft, of­ten as­sisted by oil work­ers in ca­hoots with the gangs. Last year, Pe­mex found 539 si­phons along its pipelines in Tamaul­i­pas.

The Zetas and the Gulf Car­tel are some­what weakened after a gov­ern­ment crack­down dur­ing the past two years — Zetas king­pin Miguel An­gel Trevino Mor­ales was ar­res­ted last year in Tamaul­i­pas, and Peña last month un­veiled a new na­tion­al agency to strike at the gangs. Yet kid­nap­ping was up by 20 per­cent last year, car­ried out by sur­viv­ing fac­tions and rem­nants. Kid­nap­pers have ten­ded to tar­get Mex­ic­ans and not for­eign­ers, but that will be slender con­sol­a­tion, giv­en that most of the em­ploy­ees work­ing the fields will be loc­als.

“They’re very vi­ol­ent, these drug deal­ers,” said Mont­ser­rat Ramiro of the Mex­ic­an In­sti­tute for Com­pet­it­ive­ness. “You have to be vi­gil­ant of your em­ploy­ees so they don’t get kid­napped. If you don’t have a beefed-up se­cur­ity strategy, you can be ex­tor­ted.”

What We're Following See More »
LOFTY GOALS
White House Proposes New Tax Plan
14 hours ago
BREAKING

The White House on Wednesday laid out its plan for tax reform, with Treasury Secretary Steven Mnuchin saying it would be "the biggest tax cut and the largest tax reform in the history of our country." The tax code would be broken down into just three tax brackets, with the highest personal income tax rate cut from 39.6 percent to 35 percent. The plan would also slash the tax rate on corporations and small businesses from 35 percent to 15 percent. "The White House plan is a set of principles with few details, but it’s designed to be the starting point of a major push to urge Congress to pass a comprehensive tax reform package this year," said National Economic Council Director Gary Cohn.

Source:
EMERGING BUDGET FRAMEWORK?
Dems Proposes Obamacare-for-Defense Deal
1 days ago
THE LATEST

"An emerging government funding deal would see Democrats agree to $15 billion in additional military funding in exchange for the GOP agreeing to fund healthcare subsidies, according to two congressional officials briefed on the talks. Facing a Friday deadline to pass a spending bill and avert a shutdown, Democrats are willing to go halfway to President Trump’s initial request of $30 billion in supplemental military funding."

Source:
WHITE HOUSE BLOCKING DOC REQUEST
Michael Flynn Remains A Russian-Sized Problem
1 days ago
BREAKING

The Michael Flynn story is not going away for the White House as it tries to refocus its attention. The White House has denied requests from the House Oversight Committee for information and documents regarding payments that the former national security adviser received from Russian state television station RT and Russian firms. House Oversight Chairman Jason Chaffetz and ranking member Elijah Cummings also said that Flynn failed to report these payments on his security clearance application. White House legislative director Marc Short argued that the documents requested are either not in the possession of the White House or contain sensitive information he believes is not applicable to the committee's stated investigation.

Source:
SENATE JUDICIARY HEARING
Sally Yates to Testify on May 8
1 days ago
THE LATEST
MESSAGE TO PUTIN
U.S. To Conduct Exercises In Estonia
1 days ago
THE DETAILS

The U.S. deployed "F-35 joint strike fighters" to Estonia on Tuesday. The "jets will stay in Estonia for several weeks and will be a part of training flights with U.S. and other NATO air forces." The move comes at a time of high tension between the U.S. and Estonia's neighbor, Russia. The two nations have been at odds over a number of issues recently, most of all being Vladimir Putin's support of Syrian President Bashar al-Assad in light of Assad's chemical weapons attack on his own people in the midst of a civil war.

Source:
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login