Mexico's Drug Cartels Scare Oil and Gas Investors

Oil and gas drillers in Texas have to contend with environmental opposition and soaring costs. A few miles south in Ciudad Mier, a town in Mexico’s Tamaulipas state, Angel Torrez and co-workers duck gunfire from drug traffickers. When gunmen pulled up to the Hotel Asya in a makeshift tank in April and sprayed it with bullets, Torrez dropped to the floor. After the attack, the 21-year-old machine operator for oil and gas company Weatherford International and his crew of about 30 left town under police escort. In Tamaulipas, oil workers have been caught in the crossfire of cartels feuding for control of the U.S. drug market, according to Alejandro Hope, a former government intelligence officer and now a security analyst at the Mexican Competitiveness Institute.

Lawmakers in Mexico City are preparing rules that will allow foreign companies to drill in the country for the first time since 1938. But the violence may keep wildcatters away from the area, which is rich in oil and gas deposits. “Shale will not take off in Mexico like it did in Texas in the near future,” says Dwight Dyer, a Mexico City-based senior analyst for consulting firm Control Risks. “Unless the security situation along the northeastern border improves significantly, smaller companies will probably take their time before jumping in.”