Climate Volatility Complicates Mexico’s Energy Demand Forecasts

Mexico’s natural gas demand has slowed sharply during the 2025 summer season as weather patterns tied to climate change make energy demand harder to project. Higher-than-expected rainfall, cooler temperatures, and increased hydropower output have reduced gas-fired power generation, underscoring the vulnerability of the country’s energy market to extreme weather.

In July, US pipeline gas exports to Mexico averaged just under 6.9Bcf/d, a 2% drop from June and down from the record 7.3Bcf/d in May, according to Wood Mackenzie. South Texas and West Texas flows, which account for nearly 90% of total exports, fell by 2% and 9%, respectively, outweighing growth from Arizona and California demand.

Mexico’s Gulf Corridor, heavily reliant on South Texas supply, has seen demand eroded by rainfall levels exceeding the 1991–2020 climate average by more than 150%. Cooler weather has cut air conditioning demand, while full reservoirs have boosted hydropower generation, reducing the need for gas-fired output from combined-cycle and turbogas plants.

Maintenance and quality issues have further pressured supply and exports. The Altamira FLNG1 terminal, which had been drawing 0.2Bcf/d in the first half of the year, experienced three feedgas shutdowns between June and early August. CENAGAS also reported a compressor failure downstream of the NET Mexico–Los Ramones interconnect in mid-July, disrupting flows to customers on the RAMONES metering point.

Gas quality issues resurfaced in mid-July at the Playuela and Papan production assets, though total dry gas output has risen 2% for three consecutive months to just over 2.2Bcf/d after a sharp 10% drop in May. CENAGAS has warned it may reject volumes or shut valves to protect the SISTRANGAS network if off-spec gas persists, a move that could trigger a rebound in US exports to Mexico.

Despite the midyear dip, Mexico continues to expand its power generation fleet. In 1H25, the Salamanca (927MW), El Sauz II (246.2MW), and Villa de Reyes (437MW) combined-cycle plants began operations. Additional capacity totaling 1,260.7MW from the Lerdo, Manzanillo III, and Mérida projects is scheduled online later this year.

Looking ahead, extreme heat could reverse current trends by straining hydro generation and increasing demand for gas-fired peaker plants. However, structural economic challenges may weigh on industrial gas demand. Mexico’s economy slowed sharply at the end of 2024, with total investment falling to 23% of GDP in 1Q25, including a 24.4% year-on-year drop in public investment, the steepest in over 30 years.

Industrial gas consumption, which closely tracks GDP, could remain subdued if growth stays weak. External pressures are also building, as new US tariffs under the Trump Administration disrupt manufacturing and trade flows, dampening key drivers of Mexico’s industrial output.

According to Wood Mackenzie, the interplay between climate-driven weather volatility, infrastructure readiness, and macroeconomic conditions will determine Mexico’s gas demand trajectory in the coming months.