EIA Reports Increased Natural Gas Exports to MexicoBy Cinthya Alaniz Salazar | Tue, 08/03/2021 - 12:25
The US Energy Information Administration (EIA) reports natural gas pipeline exports to Mexico surpassed seven billion cubic feet per day on multiple days throughout June, a new monthly record. According to the agency, increased power demand, high temperatures, and greater industrial demand are driving these record-high export flows which are expected to continue through the summer.
Demand for natural gas has steadily increased over the last few years as Mexico has expanded its natural gas pipeline infrastructure which relies heavily on imports from the US. Subsequently, natural gas prices have surged, Henry Hub reporting another bullish week after prices crested at US$4.05 MMBtu.
In June of 2015, US pipeline exports only accounted for 40 percent of Mexico’s total natural gas supply. Comparatively, last month it represented 76 percent, a 36 percent jump in six years mainly due to reduced domestic production. Notably, natural gas exports were up 25 percent for a daily average of 6.8 Bcf/d, a 25 percent growth in just one year.
This steadily growing inflow progression mirrors continued investment in natural gas pipeline infrastructure and thus capacity. The Sur de Texas – Tuxpan marine pipeline reported a carrying capacity of 1.339 Bcf/d last month for an increase of 167.8 percent since they began operations in September 2019. While it still lagged behind the 855 km-long Ramones I pipeline, sustained demand coupled with the inauguration of the Tula-Villa de Reyes pipeline (886 MMcf/d) —which goes into service later this year—it is sure to make it the country’s main natural gas import terminal. This is assumption is based on a 0.8 Bcf/d inflow increase seen at the Wahalajara pipeline system after the Villa de Reyes pipeline entered into service on October 2020. This trend is expected to grow until Mexico pivots to natural gas production.
Gas for August delivery settled at US$4.05 MMbtu, the highest since December's debacle which pushed the price to US$4.11/ MMBtu. Although Mexico’s is partially at blame for these price increases, its mainly borne out North American producer concerns about low supply as record setting temperatures are driving up domestic demand amid flat production. Given the inability to switch from gas-to-coal during the peak summer months, struggle to inject inventory on top of renewed concerns over extreme weather conditions Henry Hub and AECO worry about shortages tempting them to grow production capabilities. However, since S&P forecasts Canadian gas production will swell another 600 MMcf/d they may be ambivalent to move forward.