Natural Gas Access: Engine for Economic Development

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Natural gas is nowadays seen as one of the main and most relevant energy sources. Its high power efficiency for both domestic and industrial use, as well as its environmental performance, have positioned it as a transition source towards decarbonization. However, the challenges to increase access to this fuel and the lack of awareness of its benefits continue to be a stumbling block to reaching its full potential.

In Mexico, natural gas consumption has increased considerably in recent years. According to the Ministry of Energy (SENER), it is estimated that by 2031 the demand for natural gas in the country will increase by 30 percent compared to 2016. While it is true that Mexico has important natural gas reserves in states like Tabasco, Tamaulipas, Veracruz and Nuevo Leon and in territorial waters, it is also a reality that the US, without having the largest reserves of natural gas, has positioned itself as the largest producer of this resource worldwide with a production close to 25 percent of what the whole world consumes. “This makes it clear that natural gas is the most abundant, reliable and secure energy source available to leverage Mexico's development,” said Malvin Delgado, International Energy Business Director of Picarro. 

Areli Covarrubias, Commercial Director of IEnova, says the key to seize the advantages of natural gas is to keep in mind its role as a driver of economic development. “Where natural gas is available, industry, jobs and indirect economic spillover arise naturally,” she says. “The greater the presence of natural gas, the lower the levels of poverty.” In Nuevo Leon, one of the entities with the highest demand for natural gas, GDP is expected to increase from 3.4 percent to 5.2 percent by the end of 2021, Nuevo Leon's Chamber of the Transformation Industry (CAINTRA) said in April. By comparison, Mexico City would have to show an average annual GDP growth of more than 4 percent over the next three years to reach pre-pandemic levels.

Targeting regions that do not yet have as much demand for natural gas as others is also an important step toward creating greater access and economic benefits for more than just a few parts of the country. “Unfortunately there are still many places where families use wood or coal to generate energy,” says Rafael Mercado, Commercial Director at Naturgy Mexico, a multinational pioneer in natural gas distribution founded in 1990. 

Bringing this resource to every corner of the country and meeting the growing demand in the coming years poses major challenges, however. While private sector investments will continue to be necessary, the technical know-how to optimize infrastructure and make it safer and more accessible will be one of the main obstacles toward reaching natural gas’ full potential. “Coherent policies supportive of the development of the natural gas sector in the country must also be implemented,” Delgado said.

Licensing is one of the biggest challenges in developing a pipeline transportation system or any other energy infrastructure project, explains Covarrubias, adding that while this has always been a huge hurdle, companies knew that if they met the requirements and established mitigation plans focused on taking care of the environment and communities, infrastructure could be built. Now, however, this is not enough. According to Covarrubias, the rules of the game have changed and today it is necessary to demonstrate that construction brings value to the area where the project is being built. “This has to be demonstrated not only in front of government agencies but now, more than ever, in front of society.”

“In Mexico, we need society to ask for this infrastructure. Communities must know what the long-term benefits of these projects will be; they accept them and embrace them as their own,” she says. Non-standardized requirements for each municipality and region of the country pose a challenge for companies in the natural gas sector, nevertheless, says Alvaro Corona, COO of Gas Transportation and Distribution at ENGIE Mexico. A common front needs to be formed among companies to raise awareness of what natural gas projects mean for communities and their development, adds Corona. In addition, public policies that encourage the use and deployment of this infrastructure are crucial. 

Despite the challenges, companies in the sector have not neglected technological innovation to generate accurate and reliable information for the safe operation of their projects, says Gustavo Nunez, Managing Director Sector for Mexico and Central America of ROSEN. “There are already solutions that can identify faults and threats as small as 3mm up to very critical threats such as fissures,” he explains. AI, Big Data and machine learning are already bearing fruit in the industry through corrective and predictive maintenance of pipelines to avoid greater environmental impacts.