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News Article

Mexico Reliance on US Gas Set to Increase After Record Year

By Cas Biekmann | Fri, 01/07/2022 - 16:08

Never in Mexico’s history has the country imported as much natural gas as it did in 2021. The benefits of this import structure are many but not entirely without risk. In 2022, Mexico’s dependency on US natural gas is only set to increase.

Information from the US Energy Information Administration (EIA) shows that US gas imports contributed 76 percent of Mexico’s total supply used for power production. Most of this gas arrived through US pipeline interconnections. Compared to 2015, the percentage point increased by 36. US exports to Mexico averaged 6Bcf/d in the period between January and August 2021, an increase of 12 percent compared to the same period in 2020. 2021’s record daily import was achieved in June 2021with a peak of 7.4Bcf/d.

Other factors that increase Mexico’s dependance on pipeline imports are the country’s dropping internal gas production, as well as its lower liquefied natural gas (LNG) imports from other areas. State oil company PEMEX produced 4.6Bcf/d in October 2021, around 4 percent less than in 2020. PEMEX aims to produce significantly more in 2022, up to 5.25 Bcf/d, which will not cover Mexico’s demand. “14 Bcf/d of pipeline interconnectivity is operational between the US and Mexico, with a supply and demand imbalance in which Mexico imports 70 to 80 percent for natural gas not used by PEMEX. This situation is unlikely to change due to the nature of exploration and production cycles in hydrocarbons,” said Geoff Street, Director of Natural Gas Origination, Tenaska Marketing Ventures, in a 2021 interview for MBN.

President López Obrador’s plans to push through a constitutional energy reform in 2022 weigh heavy on the sector. Nevertheless, analysts do not think the reform would diminish Mexico’s demand for natural gas. CFE, the state-owned utility, would be placed at the head of the energy sector if the reform goes through. The company is planning to construct six gas-fired combined cycle power plants, issuing tenders in late 2021. Although the power plants were initially well-received by private companies, the tenders are now facing delays as a result of a lack of bids: potential investors showed concern about the overly sharp deadlines of the projects. Despite the hiccup, CFE’s plans are still on the table, as are other power plants that would use natural gas. Mexico’s manufacturing is increasingly turning to natural gas as a fuel, too.

Playing into this demand, Mexico’s natural gas infrastructure with connections to the US continues to grow. Examples include TC Energy’s Baja California gas pipeline expansion plans and the Whistler pipeline in Texas.

Amid a global supply crunch, industry insiders are concerned about the prices of gas, especially regarding imports. While it is true that prices have increased sharply, the costs have not yet skyrocketed as disruptively as they have in Europe and Asia.

The data used in this article was sourced from:  
Argus Media, MBN
Cas Biekmann Cas Biekmann Journalist and Industry Analyst