Gas Shortages, Blackouts Force Government to Act

Texas wants to stop all-natural gas exports to nearby states and other countries to meet its own demand first. This ban occurs after the state got hit by a rare cold snap that disrupted supply and caused major blackouts. For Mexico, this situation poses a direct problem: government data shows that its 65 percent of the energy mix depends on natural gas, most of which is imported from the US. As a result, the government asked citizens to ration their energy use, Reuters Reported. CFE is planning ahead to deal with elevated gas prices and examines storage possibilities.

Last Thursday, natural gas imports dropped 75 percent and President López Obrador has asked its citizens to consume less electricity and turn off the lights whenever possible “to be totally sure that our electricity system is maintained and that we do not suffer from blackouts.” The president stressed that even though Mexico was making diplomatic efforts to restore the natural gas supply, no further steps would be considered. “I want to make this clear, there is no reprisal. This is a difficult circumstance for them (Texas), and they believe that by closing they are protecting their state,” he said.

Nevertheless, Mexico is feeling the shortage’s full impact: millions of people are suffering from blackouts. Important automotive OEMS such Ford, General Motors, Nissan, Kia, Toyota, Volkswagen and Audi have halted their operations as well. For state utility CFE, which uses a substantial amount of natural gas for its power production, sharply elevated gas prices could cost approximately US$1 billion, according to Forbes. “The electricity rate will not be affected because of the applied distribution strategy, given these high gas costs,” a CFE official clarified.

To meet demand, Mexico is actively looking toward alternatives for US gas imports. The country received two liquefied natural gas (LNG) shipments, which arrived yesterday. Furthermore, PEMEX is delivering more fuel oil and diesel to CFE. CFE is planning greenlight initiatives that would increase the country’s fuel storage capacity, which experts say is still severely lacking. The government abandoned plans to build 45Bcf of commercial storage capacity by 2026, financed by the private sector. Instead, it aimed for CENAGAS to oversee construction of 3Bcf of storage in a Veracruz salt cavern and a further 3Bcf at the Altamira LNG terminal. The details of these new initiatives are still unclear, reported Argus Media.