Opening up Mexico’s energy sector to private investment could kick start the development of its shale plays, providing the country with much-needed natural gas, a Mexican official said Tuesday.

Mexico’s national oil company, Petroleos Mexicanos, or Pemex, is focusing its capital investment on less risky shallow-water projects, leaving opportunities for shale development untapped because of  higher costs,  said Hector Moreira Rodriguez, an independent member of the Pemex board.

Moreira Rodriguez was among speakers  at the Fourth World Shale Oil and Gas Summit & Exhibition at the Hilton Americas hotel in Houston.

Mexico has more than 680 trillion cubic feet of natural gas, according to government estimates, making it the sixth-largest potential supplier in the world. But developing that potential, including shale plays, would require thousands of wells and about $70 billion annually in capital expenditures, while Pemex’s annual capital investment budget is about $25 billion.

Its investment decisions have led to the underdevelopment of its natural gas resources, leaving Mexico to instead import natural gas from the United States, while its own resources remain relatively untapped.

The lack of lower-priced domestic natural gas to generate power has forced electricity prices up, dampening the country’s manufacturing sector, Moreira Rodriguez said.

“We need to supply energy at cheaper prices to encourage industry,” Moreira Rodriguez said, noting that Germany, France and the United States all pay less for industrial electricity than Mexico.

The Mexican congress is considering a proposed amendment to Mexico’s constitution that would permit international investment in the energy sector. That would allow companies with the needed expertise and capital to develop the shale resources.

If  Mexico developed 2,500 wells per year, it could become self-sufficient in natural gas by 2020, Moreira Rodriguez said,  since its natural gas shortfall stems from insufficient production, not a lack of resources.

At 5,000 wells per year, the country could double its current natural gas production and become a key exporter in the region, he said, particularly for Central American neighbors that mostly lack domestic natural gas resources.

Sourced from Fuel FIx