The future of shale development in Latin America

Latin America is positioned to be the next frontier for unconventional oil and gas resources. The region boasts some of the world's largest shale volumes: 56Tm3 of recoverable gas and 73Bboe of liquids, according to the latest estimates by the US Energy Information Administration (EIA).

Argentina holds the world's second largest recoverable shale gas reserves, with Mexico coming in at sixth place and Brazil 10th. In terms of recoverable shale oil and condensates, Argentina boasts the world's fourth largest reserves, Venezuela ranks sixth and Mexico seventh.

BNamericas spoke with BBC Mundo's shale expert Luis Fajardo to get his take on future development of unconventional plays in Latin America.

BNamericas: What is your outlook on Vaca Muerta, Argentina's main shale play, for 2014?

Fajardo: There will be continued opposition to the further development of Vaca Muerta. However, there will also be a large effort by Argentina's federal government to facilitate the takeoff of this project.

Argentina seems to be facing strong pressures on the foreign exchange front, and will likely be very keen to open up a large source of foreign investment, and eventually, of exports, through Vaca Muerta.

BNamericas: Aside from Vaca Muerta in Argentina, where do you expect to see unconventional production happening?

Fajardo: I would not be surprised if Mexico becomes a much larger player in the unconventional production sector in the relatively short term. Pemex has already started drilling wells in the north of the country.

Brazil has also shown interest in developing its shale resources, but I would expect the regulatory environment there to be more complex than in Mexico.

There are also some early explorations in places like Colombia, which held its first auction of shale blocks in 2012 but with relatively little interest.

BNamericas: There has been extensive media coverage of social opposition to fracking in the US. Given the existing social environment in LatAm, how do you see social opposition to fracking playing out?

Fajardo: I think there will be substantial social opposition to fracking across Latin America.

The year 2014 is likely to see protests targeting fracking in Neuquén province as the Vaca Muerta project starts to move forward.

There have also been reports of protests against fracking plans in Paraná state in Brazil, and in northern Mexico.

Additionally, opposition to these projects from largely urban environmentalist groups and grass-roots groups representing peasant and indigenous groups will likely converge with other forms of political activism against the presence of multinationals developing natural resources.

BNamericas: What other foreign players do you expect to be involved in the nascent LatAm industry?

Fajardo: Press reports have talked about Argentina's YPF seeking deals with companies partly owned by China's CNOOC and Britain's BP. France is also a likely player through Total.

I would expect the US to become much more involved in Mexico once foreign investment starts pouring in, with Canada also playing a growing role.

I also think there will be cross-border activity by big local players such as Pemex, as this is sometimes a politically more palatable form of foreign investment in these countries than receiving capital from US or European multinationals.

BNamericas: What is Latin America's next shale boomtown?

Fajardo: I would guess somewhere in northern Mexico, such as in Piedras Negras or other cities in Coahuila state, as the Eagle Ford Shale near the border with the US is developed.

In the longer term, if the Magdalena Medio fields are successfully developed in Colombia, Barrancabermeja, which is already a conventional hydrocarbons hub, could also play a strong part.