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Rekindling Plan for the Energy Transition

By José García Sanleandro - Mexican Association of Natural Gas (AMGN)


By José García Sanleandro | President - Tue, 06/06/2023 - 14:00

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Regarding the public agenda for the North American region, and particularly in Mexico, we are due to prioritize the discussion regarding the role that natural gas plays in the energy transition.

The price overview has significantly reduced short- and mid-term concerns for the time being, which allows the players in our industry to focus on the prospects of greater reach.

According to the International Energy Agency (IEA), mild winter weather in the first quarter of 2023 resulted in natural gas inventories from November to March being 19% higher than the average for the last five years.

The IEA forecasts that the price of natural gas by 2023 will be less than US$3 per million British term unit (MBtu); that is, a reduction of more than 50% compared to the previous year.

Natural gas — of which Mexico imports 70% of its consumption — is highly volatile, but the predictions show that during the upcoming months, it may remain stable.

Additionally, the speculation generated by the shortage in Europe, which could be a strong incentive for LNG exports toward that region, has not driven forward any solid plans to modify the available supply in North America. Through this, the fears derived from the conflict between Russia and Ukraine, which increased the price of natural gas in Europe and threatened to expand the volatility toward other regions, have decreased, for the time being. 

In short, we have a positive scenario on the price side and less severe volatility. It is the best time to refocus our discussion.

Today, it is necessary to discuss the importance of natural gas in the energy transition, given its low carbon emissions and since together with renewable energies, it is the key player in combating climate change.

Natural gas is characterized not only by its low emission of pollutants but also by the fact that it attracts  significant sums of both public and private investment in the distribution and transportation network in North America toward the interior of Mexico, mainly at industrial sites.

This overview is complemented by government plans to connect the south of the country to current transportation infrastructure. 

No other fossil energy that is considered less harmful to the environment has these credentials.

These elements and other conclusions that have been derived from multiple studies should be the basis for the healthy discussion we should have in the medium and long term. 

Here are some other elements.

As part of a comprehensive analysis, the IEA investigated the effects of the most extensive use of natural gas in the US, Europe, China, and India, as well as its role in reducing pollutants. The findings yielded significant conclusions that serve as a catalyst to further the discussion.

It detailed that between 2010 and 2019, the change between carbon and gas saved approximately 500 million tons of CO2, which the IEA highlights as the equivalent of putting 200 million electric vehicles to work, without eliminating the carbon emissions, of course.

“It is clear that switching between unabated consumption of fossil fuels, on its own, does not provide a long-term answer to climate change, but there can nonetheless be significant CO2 and air quality benefits, in specific countries, sectors and timeframes, from using less emissions-intensive fuels,” said IEA’s analysis.

Another element that must be studied by decision-makers in public policy is the support that natural gas usage represents in the generation of electricity. Natural gas is the backup energy before the use of renewable energy. That is, it guarantees the generation of electrical energy.

Building infrastructure for renewable energy, such as wind or solar, is positive, but it takes time and, without a doubt, its operation can be affected by the effects of climate change. At that point, natural gas represents an important asset that stops the disruption of the energy cycle and prevents damage to the economy.

We must take into account the growth in energy demand for the coming years in Mexico, which will be driven by the country's industrial development needs, and by the urgency to take advantage of the economic moment to attract foreign investment through nearshoring.

The safe and reliable supply of natural gas is a factor that is being evaluated by global companies that are seeking to relocate their businesses, to which is added the strength of the North American region with the USMCA trade agreement between Mexico, the US and Canada.

Today, Mexico has a competitive advantage that must be taken advantage of to boost economic growth.

The decision will be in the hands of the current and future government administration, but we must provide the necessary elements for its discussion.

Photo by:   José García Sanleandro

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