UPDATED 1 Sept: The EI library in London is temporarily closed to the public, as a precautionary measure in light of the ongoing COVID-19 situation. The Knowledge Service will still be answering email queries via email , or via live chats during working hours (09:15-17:00 GMT). Our e-library is always open for members here: eLibrary , for full-text access to over 200 e-books and millions of articles. Thank you for your patience.
Mexico to remain highly dependent on natural gas imports from the US
Even during the current COVID-19 crisis of lower economic activity, natural gas imports from Mexico have remained at levels of around 5,300mn cf/d during 1Q2020, according to GlobalData. The US is the primary exporter of natural gas to Mexico, with volumes reaching an all-time high of 6.2bn cf/d in July 2019. Mexico is expected to remain highly dependent on natural gas imports from the US in the future, reports the market analyst.
Over the next decade, Mexico’s dependency on natural gas will continue to grow as the national oil company (NOC) Pemex focuses on crude oil production and the US continues to have an excess in natural gas supply. Indeed, the price differentials between the US natural gas price and Mexico’s incentivise the trade, claims GlobalData. Furthermore, since the end of June 2020, Wahalajara’s pipeline system connecting Waha hub gas with the central-west part of Mexico is in full operation. This pipeline will encourage more export volume from the Texas Permian Basin to Mexico of up to 0.89bn cf/d and the permanent demand from Mexico should continue supporting the already narrower differential of Waha hub prices with respect to other US natural gas hubs.
Adrian Lara, Senior Oil & Gas Analyst at GlobalData, comments: ‘In the short term, there are no planned assets in Mexico that can significantly increase domestic natural gas production. There is potential for undeveloped resources in the onshore region of Burgos on the north-eastern part of the country, across the same geological basin continuing from south-east Texas. However, on average, the required breakeven price for full development of such reserves is higher than the price of imported natural gas, challenging the viability of potential new projects.’
He continues: ‘As for deepwater and unconventional resources for these types of developments, Pemex would have to partner with another operator to share risk and capital investment. Given the more technical and capital-intensive nature of such projects, it has long been established this is a most effective manner for the NOC to exploit these resources. However, Mexico’s current government policy is to favour and support Pemex and this means stopping all bidding rounds that can bring new participants to the sector.’
Lara concludes: ‘The reality is that, at present, there are practically no new natural gas resources to be developed in Pemex’s portfolio that can reverse the decline in production. For that reason, imports from the US to satisfy an increasing demand for natural gas in power generation and industrial use will continue to be more than necessary over the current decade.’
