News Article

Mexico’s Future Is Tied to That of Natural Gas

By Pedro Alcalá | Thu, 03/11/2021 - 11:58

You can watch the video of this presentation here.

The gasification of Mexico’s energy value chains will prove essential to the country’s future competitiveness. This was the theme that characterized the opening presentation of Mexico Energy Forum 2021 on Thursday, Mar. 11, titled “The Vision of CNH Regarding Mexico's Gas Sector Development.” CNH Commissioner Héctor Moreira began his presentation by stating he wished to present a thorough reexamination of the importance of natural gas, while also making it clear that his views would not represent those of CNH.

Moreira presented an overview of the natural gas production process derived from oil and gas exploitation. The reason why he went over this process was to connect that extraction process to the different kinds of natural gas commodities that can reach the market and how they are valued, depending on their relative humidity: the more humid the gas, the more valuable it is due to the larger variety of uses it can find in a larger portfolio of industries. Moreira said the natural gas Mexico imports from the US is dry gas and that by relying too much on US imports, Mexico is also adding lower quality gas to its national inventories. “The US sells us dry gas, which has none of the expensive liquid condensates that are beneficial for various industries associated with natural gas.”  

Moreira later explained the gaps that exist between natural gas production and consumption, this with the intention of illustrating Mexico’s overreliance on US natural gas imports. “PEMEX consumes an important part of the gas it produces. As a result, 67 percent of dry gas needs to be imported from the US, around 5.57Bcfd in 2019. This makes us very dependent.” 

Moreira also addressed the recent weather events in Texas. “If Texas sneezes, Mexico gets pneumonia; 58 percent of all electricity in Mexico is generated through the constant flow of Texas’ natural gas.” Moreira highlighted this dependence as a unique situation. “Mexico might be the country that depends on another country the most and not because we import too much natural gas. Some countries, like Japan or South Korea, import 100 percent of the natural gas they consume. However, they purchase this gas from different countries and sources.”  

The presentation continued with a breakdown of the advantages of natural gas, while also pointing out some of its disadvantages. For example, transportation of natural gas is a much more complicated logistical and infrastructural affair when compared to oil, particularly given the need for specialized vessels and port facilities. The investment needed for this type of infrastructure in Mexico is a matter of great concern, said Moreira. However, natural gas is the cheapest fuel in the world and electricity made from natural gas is the cheapest in the world, as well. Moreira highlighted Trump’s administration efforts to restart the US coal industry to illustrate that even this dirt cheap fossil fuel was more expensive than natural gas. The only thing that made coal marginally cheaper in specific situations was the presence of existing, but very old plants (meaning no new construction or development was necessary) and government support. Moreira also compared natural gas to renewable energy, noting that while renewable energy presented little transportation or production costs, it also had a real storage and backup problem. He also noted that renewable energy was not necessarily cleaner than natural gas. “Renewable energies are not completely free of emissions, either. Producing a solar panel has an environmental impact. Therefore, one needs to make balanced choices.”

As a CNH Commissioner, Moreira provided information on Mexico’s abundant natural gas resources. “Mexico is not an oil country; it is a gas country. Our resources are the sixth largest in the world.” Moreira concluded by offering a historical perspective, noting that natural gas is likely to play a role in the 21st century, just like oil played in the 20th and coal played in the 19th century. “Natural gas and renewable energy will keep growing in the coming years, while gasoline will slowly lose relevance.”

Pedro Alcalá Pedro Alcalá Senior Journalist & Industry Analyst