SHALE GAS MEXICAN PERSPECTIVE Felipe de Jesús Cantú Rodríguez September 2012

Natural Gas Demand In the period , the domestic natural gas production grew at an average annual rate of 4.8% and domestic demand was 6.0%. The prospective natural gas by the Government in 2010, estimated a 2.4% annual growth in demand for this hydrocarbon. Based on this prospective, in 15 years the country will require at least 5,000 mmcfd* additional to those currently consumes. In 2009, Mexico imported about 1,258 mmcfd of gas. *Millions of cubic feet per day (of gas).

Demand Projection Estimated demand for natural 2025: 11,063 mmcfd Additional supply of natural gas required: 5,000 mmcfd Natural gas production observed 2010: 5,916 mmcfd

Estimates of Shale Gas in Mexico The deposits are located to the northeast and east-central Mexico, along the land portion of the Gulf of Mexico. The deposits have similar geological age to producers in the U.S. (Eagle Ford, Haynesville, Bossier and Pearsall). Preliminary estimates of the volume in place (at risk) of the 5 watersheds analyzed resources located in mmmmcf*. The technically recoverable amount is estimated at 681 mmmmcf (at risk). The structural complexity (faults and folds), too deep (> 5,000 m) and minimum deposits thickness, restrict the evaluation of resources. *Trillions of cubic feet.

Considerations Shale Gas in Mexico Economic considerations: Extraction cost: Depends on the type of deposit and volume, range of 2-5 USD / mcf Price: 4-5 USD / mcf Location of exploration Pemex drilled a test well in Coahuila (Emergent 1). Plans to invest $ 15 million in study and 3 wells by The scope of this investment would assess the feasibility of a project than 4,000 wells, U.S. $ 8 billion in investment and production of up to 1,000 mmcfd. Requirements: Geological and petro-physical, environmental impact assessment and social Infrastructure and implementation capacity; application of new and existing technology. Contracts with companies specialized

Regulation Taxation applies to oil and gas exerted on the total value of production of hydrocarbons. There are slight distinctions in deductions for gas: Additional US$0.50 for each MFC non-associated natural gas extracted, extracting additional volume to register for For costs, expenses and investments of non-associated gas extracted, not exceed the value of 2.70 USD for each MFC is not associated with the total volume in the year in question. 5% of the original amount of the investment in pipelines, terminals, transportation or storage tanks. Possible modifications Given the saturation of the National Pipeline System (NPS), the regimen should be more lax in a matter of deductions for pipelines, terminals, transportation or storage tanks. Because of shale gas production is capital intensive, the tax must create the necessary incentives for the industry to be able to exploit. The production costs of shale gas are higher than conventional gas currently produced (not even including deepwater), the regime could increase the maximum of 2.70 USD / Mfc.

National Pipeline System PEMEX km pipeline. Private km pipeline in development (21 permits) NPS Private NPS saturated In process Pre-bid Analysis Planned NGL Terminals

Opportunities New regulation for non-associated gas. Investment in development pipelines. Supply chain development Creation of new jobs and regional development

SHALE GAS MEXICAN PERSPECTIVE Felipe de Jesús Cantú Rodríguez September 2012