Image credits: Martin Adams
News Article

Mexico Will Still Depend On US Natural Gas

By Paloma Duran | Tue, 12/08/2020 - 12:20

The Mexican government seeks to reduce its dependency on US natural gas imports by implementing national projects like the underground storage venture in Caverna Salinas. This type of storage seeks to increase the country’s energy security in the short and long term. However, President López Obrador says it will take a long time before Mexico produces enough energy to become self-sufficient.

According to the US government, Mexico is the US’ largest natural gas importer since 2015. In 2020, Mexico natural gas consumption decreased due to the COVID-19 pandemic and in May, the country had the lowest monthly import volume since December 2016. However, in August, consumption recovered and surpassed last year’s monthly records.

Natural gas is the main fuel used for electricity generation in Mexico. In 2019, 61 percent of the national electricity was generated using natural gas. In 2020, this was reduced due to the pandemic. However, it is now constantly increasing. Moreover, it has compensated the lower generation levels of other energy sources as fuel oil and coal, reported the US Energy Information Administration.

According to SENER’s Five-Year Expansion Plan for the Natural Gas Transportation and Storage System 2020-2024, Mexico imports 80 percent of its natural gas and 90 percent of all imports come from the US. For the 2021-2024 period, natural gas demand will be met with national supply, US imports and new natural gas projects, like the one in Caverna Salinas.

In addition, it is estimated that the natural gas deficit will be of 3.6Bcf/d in 2020, 3.9Bcf/d in 2021, 3.8Bcf/d in 2022, 4.7Bcf/d in 2023 and 4.3Bcf/d in 2024, reported El Universal.

López Obrador’s government is expected to continue importing natural gas to supply the national demand. The natural gas recovered from Lakach and Papan will not be enough to reduce national imports, reported El Universal.

James Fowler, Senior Energy Analyst for the Americas at ICIS, said Mexico is an important outlet for exports, especially due to the oversupply in states like Texas. In October, Mexico reached an agreement with Mirage Energy Corporation to import what is considered to be the world’s cheapest natural gas. Horacio Zárate, President of National Council for Energy and Petrchemistry said the gas imported from Texas will be used by CFE to generate 65 percent of the electricity used in industries, reported MBN.

Warren Levy, CEO of Jaguar E&P, said to MBN that the US’ low gas prices increase Mexico's dependence on US exports. Levy said that currently only 9 percent of the money spent on natural gas stays in Mexico, which means every year Mexico loses approximately US$4 billion due to imports. Levy added that if the country wants to increase its profits and have a successful transition to renewable energies, Mexico must produce its own natural gas.

The Caverna Salinas project aims to decrease this US dependency and strengthen Mexico’s energy security. The project will start operating by 2022-2023 with an investment totaling US$481.3 million. The project includes an underground natural gas deposit system in the Salinas Caves 207, 208 and 209 located in Ixhuatlan, Veracruz. In addition, the storage is located 150km from the main natural gas production centers, which provides operational and commercial flexibility to the national production in case there is a disruption at gas processing centers.

The data used in this article was sourced from:  
MBN, El Universal, Reuters, Gobierno de México, EIA
Photo by:   Martin Adams
Paloma Duran Paloma Duran Journalist and Industry Analyst