Mexico Could Take Advantage of Low Gas Prices in Texas

Juan Arellanes, Coordinator, the Anahuac Interdisciplinary Center for Energy and Sustainability (AICES), said that Mexico could benefit from the low natural gas prices in West Texas.

The price drop occurred due to scheduled maintenance for Gulf Coast Express and El Paso Natural Gas pipeline systems by Kinder Morgan. The excess in gas production and the lack of infrastructure for its storage in the area has caused prices of natural gas in the Permian basin of western Texas to plunge, going into the negative for the first time in two years on October 25. According to local reports, energy producers are paying to unload gas from the pipelines, something they have not done since the start of the pandemic.

The insufficient storage capacity in West Texas has been a problem for years. Bottlenecks worsen when pipeline operators are required to perform repairs and preventive maintenance work that temporarily reduces pressure or stops the gas flow. "The limitations of the Permian pipeline have never been eased, making the region more susceptible to sudden excesses and price volatility,” said Campbell Faulkner, Chief data analyst, OTC Global Holdings LP.

On Monday, natural gas at the Waha hub was traded at prices between US$0.20/MMBtu and US$0.70/MMBtu. Just a week ago, prices were around US$$5.20/MMBtu.

Mexico could take advantage of the situation to gain cheaper power production, said Arellanes. "If we have a period of low prices, we have to use it to generate electricity. The problem is that we do not have the infrastructure to store it, and prices are likely to rise for winter," he said at an energy forum.

Other countries might be able to benefit as well. European gas prices in the face of its energy crisis remain around US$28/MMBtu. In this context, “People can be very concerned about climate change, but when the energy crisis hits their pockets in the form of higher electricity bills, or shortages of gasoline and diesel at service stations, concern about climate change can be set aside," Arellanes said. Therefore, if the energy crisis is not resolved, the high price of fossil fuels will be a greater concern than the fight against climate change, according to Arellanes.