Mexico Seeks Gas Storage Options

In 2021, Mexico faced turbulent times due to natural gas shortages on the back of a winter storm in Texas. The high demand for US gas from Europe significantly increased the cost of gas in 2022. Therefore, Mexico continues to look for gas storage options in the US, aiming to create an energy reserve for emergencies. Lacking storage has long since been pointed out as a weak spot in the country’s mission to become energy-independent.

The US supplies around 80 percent of the natural gas consumed in Mexico. “Mexico has two terminals with the capacity to store the equivalent of four shipments of liquefied natural gas (LNG), but that is a small fraction of the 6Bcf/d that the country imports,” reported La Jornada. This leaves Mexico exposed to crises such as the Texas freeze. 

According to Aniel Altamirano, Deputy Director General, CFE International, CFE was capable of producing electricity because it relied on other fuels such as coal and because CFE could obtain two LNG shipments delivered by Trafigura. This year, CFE has already imported an LNG shipment that it stored at the Altamira terminal. The state utility is expecting another to be stored in Manzanillo. Altamirano also said that the optimal solution to confront another crisis is to develop further storage capability.

Mexico’s insufficient storage capabilities tie into other issues, including the country’s plans to export LNG. According to experts, some of Mexico’s main challenges in making this venture a success are a dependence on the US and the lack of options for diversification. “The issue is that Mexico does not have diversification options. To the south we do not have a neighbor who could support us in complementary imports. The real options that Mexico has are domestic production, exploiting the reserves of our subsoil, importing from the US and exporting by sea,” said Eduardo Prud’homme, Co-Partner, Gadex Energy Intelligence. Another obstacle is uncertainty, as Mexico’s policy on fracking has driven away investor interest surrounding natural gas.

CNH has previously highlighted the opportunities in producing more gas from unconventional plays. Experts agree that greater investment in the unconventional and deepwater industries is needed. Mexico has great potential in terms of prospective resources, with an estimated 112.9Mboe, most of which comes from unconventional reserves of shale gas.

Mexico is working on building its LNG hubs. This week, New Fortress Energy announced it expects to sign a commercial agreement with Mexico’s government for the development of an offshore LNG production plant. Although the agreement anticipates exporting two-thirds of the production. New Fortress’ exportation strategy also includes another project with CFE in Altamira, Tabasco, though this project is still subject to speculation as both parties lack experience in the deepwater environment. Nevertheless, Mexico still needs to enhance its infrastructure to ensure it can develop its LNG hubs. LNG projects have grown in importance in the face of skyrocketing gas prices and growing demand from the European and Asian markets. This also contributed to the shortage challenges that Mexico faced in 2021.