Mexico’s 2013 energy reforms are based on bringing in more competition for the two state-owned monopolies that had become too stagnant, Pemex (oil and gas) and CFE (electricity). One of the key areas with huge upside for foreign firms is the very expensive process of natural gas storage, which is critical for Mexico as it moves to replace overused fuel oil and reduce GHG emissions to meet climate change goals.
Despite rapidly declining production, Mexico is one of the most natural gas dependent nations on Earth. Gas now supplies 45 percent of all energy and 60 percent of electricity. Mexico has been forced to increasingly depend on cheaper piped imports from the U.S., which at 4.5 Bcf/d now account for about 55 percent of Mexico’s total gas usage. Much more gas will be required. Per capita, Mexico’s 130 million citizens consume just a third of the electricity that other OECD nations do. Additionally, there is a manufacturing boom in Mexico, namely in the automotive industry that will use increasing amounts of natural gas.
Source: Mexico’s Natural Gas Dilemma | OilPrice.com
Increased flow, transportation and electricity projects continue to make a more robust North American natural gas market place. Less imports from Canada and more exports to Mexico mean that the U.S. will become a net exporter of natural gas this year or next.U.S. piped gas to Mexico has more than tripled since 2010 to about 3 Bcf/day. By 2019, 15 new pipelines will more than double capacity to Mexico to around 15 Bcf/day. This is far more than anticipated imports, but extra pipeline access that would help Mexico meet peak demand.This is important because there’s basically no storage available in Mexico, lacking mature fields, aquifers, and saline domes to store natural gas. Mexico has liquefied gas storage of about 3 days, far lower than the average storage capacity for OECD countries of nearly 85 days. Since 2010, Mexico’s gas consumption is up 22%, but its production is down 11%.
Source: The U.S. Natural Gas Export Boom Means Pipelines and LNG – Forbes
There’s no denying that the United States is currently experiencing a shale gas glut.Gas fields – such as the Marcellus – are the gifts that keep on giving. Last year, overall U.S. production levels hit 74 billion cubic feet per day.On top of that, the warm U.S. winter created a dynamic that’s left 2.5 trillion cubic feet of natural gas sitting in storage facilities. That’s the largest amount ever left over at the end of the heating season. It’s even prompted talk about a serious lack of storage capacity by the start of the next heating season.Between the shale surplus and limited storage, the scenario seems bleak. And the single glimmer of hope for the U.S. gas industry is quickly being snuffed out.The demand for liquefied natural gas (LNG) in Asia has taken a dramatic swan-dive off a cliff. With its descent has come an equally shocking decline in value, as well. Prices for LNG in Asia have fallen more than 35% since the start of 2016 – even as prices reached $4.40 per million British thermal units (BTUs), which is a record low for this time of year.And, as I revealed in an earlier article, Russia’s natural gas giant Gazprom (OGZPY) is prepared to launch an all-out war on U.S. LNG in Europe to defend its territory. And, just like Saudi Arabia before them, the Russians are prepared to jack up supplies and lower prices to ensure continued sales in Europe.
Demand Soars South of the Border
There is, however, one remaining viable option to bail out the U.S. natural gas industry – the demand for our natural gas is soaring just south of our borders, in Mexico.Mexico is transforming itself into a global manufacturing powerhouse. Many electronics, including aerospace parts and flat screen TVs, are produced there.However, Mexico’s auto manufacturing industry is leading the way.In 2013, Mexico surpassed China as No. 1 in foreign direct investment by global automakers.An estimated five million cars will be built in Mexico within the next five years!The one item that was holding back Mexican manufacturing was high energy costs. Electricity costs were 47% higher in Mexico than the U.S. in 2014.Last year, that gap closed to 29% thanks to the ongoing move away from fuel oil and other sources, to the use of U.S. natural gas.Goldman Sachs reports that natural gas now accounts for 60% of Mexico’s electric power generation.In 2015, Mexico imported 2.9 billion cubic feet of natural gas per day. This number will only continue to climb in the years ahead.According to consultants at IHS Energy, that natural gas import figure will rise to 4.4 billion cubic feet per day by 2020. Other estimates are even more optimistic than the IHS forecast.
Source: The Future of U.S. Shale Gas Hinges on Our Southern Border