Natural Gas, Mexico’s Potential Future Asset

The crash in oil prices can hardly be seen as a positive development for Mexico. Not long after President López Obrador made his bet on oil as the engine for the country’s development, the international market saw oil prices crash in the wake of Russia and Saudi Arabia’s oil price war. But there are always new avenues that could bring in business, such is the case of natural gas.

Earlier this week, Natural Gas Intel (NGI) reported that natural gas operators in the US were regaining control of the market predicted price to move “sustainably” above US$3 per Mcf. This is directly related to dwindling oil supplies in the US. Tudor, Pickering, Holt & Co. and Goldman Sachs Commodities Research both predicted a moderately positive outlook for natural gas in the US. Patrick Rau, director of strategy and research at NGI, predicted a rise in prices in Mexico as well. This is because Mexico imports a lot of natural gas straight from the US. Although Mexico has no shortages of natural gas on its own turf, cheap prices per Mcf of gas in the US have thus far proven to be too attractive to miss out on. This leaves room for optimism: if the prices in the US stay at acceptable levels for Mexico, imports will continue. Once they rise above this level, Mexico has plenty of opportunity to stand on its own feet.

In an interview with Energíahoy, David Madero, Acclaim Energy’s Director of Energy Solutions, defined natural gas as a great opportunity for Mexico as well. He argued that energy spending is one of the top five costs that any business has to invest in. Natural gas can be used in thermal power plants, for instance, to generate cheap energy without taking a heavy toll on the environment. With government and private parties working separately but in harmony regarding pipelines and storage, natural gas will become more and more of a driving factor in the Mexican industry. There is room for improvement on technologies to enhance reliability, as well as in the pipeline reach toward states such as Oaxaca and Chiapas.

Madero further discusses opportunity for horizontal drilling and hydraulic fracturing. If approaches can be found that are both safe and sustainable, Mexico can easily start producing its own gas due to the competitive prices it would be able to offer. If Mexico’s government works hand in hand with the country’s private sector, gas can indeed become the fuel for the engine to propel the country forward.