Natural Gas Prices on the Rise as Mexico Continues Imports
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Natural Gas Prices on the Rise as Mexico Continues Imports

Photo by:   Zoya Loonohod
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By Kristelle Gutiérrez | Junior Journalist & Industry Analyst - Fri, 05/13/2022 - 08:30

Over the past few weeks, North American natural gas prices have reached a new peak. Between Feb. 24 and May 5, prices rose 89 percent to US$8.74/Mcf, the highest level since the beginning of the financial crisis of 2008. Despite this price hike, Mexico’s natural gas demand is growing amid higher power caused by warmer weather. Some experts fear that at a time of overwhelming inflation such as the present, Mexico may be too dependent on foreign supply.


According to NatGasWeather, some of the main factors that have led to the rampant increase in prices are the underwhelming US production, tight US supplies and overall warmer weather conditions, which have led to the overwhelmingly high demand for natural gas as air conditioning costs vast amounts of energy.


Several industry analysts expect that this phenomenon will keep on affecting the Mexican consumption of natural gas since the country is not a significant producer of natural gas. Bloomberg reports that of the 8.309bcf/d that were consumed in 2021, only 28 percent came from local production, while the remaining 72 percent was mostly imported from the US. Accordingly, PEMEX’s production of natural gas only provides for 3 percent of the national demand and is mainly used for self-supply.


In Mexico, however, increasing prices have not kept consumers from changing their gas consumption habits. “Everything is the same despite the higher prices. We have seen some clients lower their consumption a little bit, but [they are more] motivated by the lack of other raw materials in their processes and not because of the price of gas,” a gas shipper told NGI. In turn, this trend can be noted across NGI’s natural gas spots in the country. In Monterrey, the Mier-Monterrey system saw a rise of 42.4 cents to MX$8.58/Mcf, and in Tuxpan spot prices rose 43.2 cents to $9.32/Mcf. Furthermore,  prices were up 43.6 cents to $10.02/Mcf in Yucatán.


Experts fear the general instability of energy prices for a country as dependent on foreign supply as Mexico, especially since it is not long ago that the country experienced a severe price crisis. In Feb. 2021, a snowstorm that hit Texas, Mexico’s main supplier, brought production to a standstill, which prompted prices to increase by 5,000 percent. At the time, CFE had to acquire liquefied natural gas (LNG) shipments and resort to using more polluting technologies such as diesel, carbon, and fuel oil. In that same year, according to Oil and Gas Magazine, power production amounted to 64.7 percent of the national demand for natural gas.

Photo by:   Zoya Loonohod

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