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What Role Has Natural Gas Played in Mexican Economic Development?

By Ana Laura Ludlow - Engie Mexico
VP Chief Government Affairs & Sustainability


Ana Laura Ludlow By Ana Laura Ludlow | VP Chief Government Affairs & Sustainability Officer - Mon, 01/23/2023 - 15:00

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The relevance of natural gas goes beyond energy production: the fuel is key for many industrial and petrochemical processes.


Mexico’s demand for natural gas has not been impacted by the ongoing price surge. Natural gas accounts for 60 percent of power generation. The remainder of this demand is due to industrial consumption by PEMEX (chemical and petrochemical) and industrial manufacturers as well as domestic consumption.

As a fuel, dry gas is the cheapest on the market in Mexico. For generating electricity, dry gas is almost six times cheaper than petroleum, while creating less than half the emissions. 

As shown on  the graph above summarizing statistics from CENAGAS, in Mexico, natural gas is half the price of heavy fuel and more than four times cheaper than diesel. This economic advantage as well as its  environmental benefit and efficiency make it the preferred fuel for the industry.


Today, the country has 65 open access transportation permits with a length of more than 20,472km. There are four  storage permits, one underground that was never built while the other three are liquefied natural gas terminals.

Although Mexico’s natural gas infrastructure has significantly grown in the past few years, there is still a lack of storage terminals around the country. We only have the capacity for two days of storage while other countries have between 58 and 98 days. 

On the distribution side, the Regulatory Energy Commission reports 31 permits, all of which are in operation, and 63 marketing permits, of which 36 are in operation. Only 7 percent of the population is granted access to natural gas. By comparison, according to data from the United Nations Economic Commission for Latin American and the Caribbean, in Argentina in 2016, 60 percent of households had access to gas networks. 

Gas is only available in 26 of Mexico’s 32 states. Eighty-six percent of the infrastructure is located in the north of the country and 14 percent in the south, which generates two very different realities for Mexico’s regions.

There are areas of opportunity to enhance the connectivity of Mexico’s pipeline network in order to distribute gas more equally around the country. 

Demand Growth The pandemic and the geopolitical context have encouraged a significant questioning of globalization across many industrial sectors.

According to the new Minister of Economy, Raquel Buenrostro, more than 400 companies want to relocate to Mexico through nearshoring. Buenrostro has emphasized the importance of Mexico’s relationship with the US, as they are two large economies that complement each other.

Mexico’s proximity to the US is a significant advantage that has positioned the country as the top nearshoring destination driven by the manufacturing industry, with exports from  this industry growing by 7 percent, which is equivalent to US$8 billion per year in addition to the amount that this industry usually produces. 

Industries with nearshoring potential include automotive, chemicals, textiles, electrical manufacturing, pharmaceuticals, renewable energy, healthcare and transportation.

According to analyses conducted by El Financiero, the lack of infrastructure remains a pending issue. Additionally, there is no certainty of having a reliable energy supply in the medium term.

Data from the Mexican Association of Private Industrial Parks (AMPIP) show that in 2021, the occupancy of industrial parks in Mexico tripled as a result of the arrival of US and Asian companies, representing 41 percent and 8 percent, respectively, while Mexican companies registered demand totaling 14%.

According to a recent report by JP Morgan, the country could increase the value of its manufacturing exports to the US in the next five years by US$130 billion, but if it addresses issues that are essential for investors, the figure could rise to US$170 billion.

AMPIP reported that the cities with the highest demand and occupancy of industrial parks are Tijuana, Ciudad Juarez, Mexico City and Monterrey, which account for 60 percent of the national occupancy, which makes great sense considering that these are the areas with access to natural gas but already with some restrictions in terms of electricity.

Studies and analyses from the Mexican Natural Gas Association have identified that areas with natural gas infrastructure are more successful in attracting investment, which promotes economic development.

Promoting the widespread use of natural gas at all levels of consumption would benefit the state on several fronts. In addition to promoting economic benefits for Mexican families as well as for the productive industry, it would contribute to improving the quality of the environment because it is  less polluting.

At the large consumption level, natural gas is a favored energy source for electricity generation and industry due to its price competitiveness as well as its technical efficiencies and environmental benefits. Therefore, regionally, there is a causal relationship between economic development in the different states of the country and the existence of natural gas supply.

Where natural gas is present, GDP is 50 percent higher than in those where there is none. The northeast and the Bajio regions of the country have been clear examples of industrial development.

Transportation pipelines are key to the natural gas supply. But as granting access to the industrial, commercial and residential sectors depends on the development of the distribution systems, the growth of the latter will be key. 

At the regional level, the states with natural gas supply experience greater economic development, which leads to infrastructure development and boosts industrial activity, thus generating more jobs and greater contributions to national GDP. 

A success story has been the economic and industrial development of the Bajío with the arrival of natural gas and access to competitive gas with the importation of the fuel and the development of infrastructure like Ramones. GDP in some states has even doubled. 

However, there is another part of the country where natural gas is still far away. It is desirable for governments seeking to improve the conditions within their  territories but far from having a concrete solution to supply the fuel. 

It is necessary to supply the Yucatan Peninsula with the necessary natural gas and to expand the pipelines to the states that have not been benefiting from this fuel, such as Guerrero, Campeche, Tabasco, Oaxaca and Chiapas, and that need the opportunity to use natural gas to foster economic development. 

Future Opportunities 

Natural gas will play a pivotal role in the energy transition. It will become the most relevant factor for Mexico’s energy transition and competitiveness. An agile market will be required to respond quickly to the demand, and it will be necessary to bring infrastructure to all regions of the country to ensure balanced  economic development d. The participation of the private sector will be critical to achieve this.

The gap in development and opportunities between the areas that seek access to natural gas and those that have it has had influence in attracting new investments and competitiveness in different regions for Mexican industry.

Undoubtedly, despite the great development that has been achieved over the years, there are still issues to be resolved, such as the dependence on natural gas imports, the undeniable need for storage exposed through episodes like the Texas winter storm of 2021 and the country’s LNG export potential, among others.

We need to promote infrastructure projects that facilitate access to natural gas, share information about its benefits, and seek collaboration between the private sector and the government to provide access to affordable, safe and environmentally friendly energy across the entire country. 

Photo by:   Ana Laura Ludlow

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