Mexico's Thirst for Natural Gas Continues to Increase

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Researched by Industrial Info Resources (Sugar Land, Texas)--According to data from the U.S. Energy Information Administration (EIA), Mexico's natural gas imports of 2.1 billion cubic feet per day (Bcf/d) in 2012 represented a 21% increase from 2011 imports. The majority of the country's natural gas imports are from the U.S., which delivered approximately 1.7 Bcf/d of natural gas in 2012, accounting for about 80% of the country's gas imports.

The remaining 20% of Mexico's natural gas imports comes in the form of LNG delivered to the country's three import and regasification terminals, the first of which began operating in 2006. LNG commands a much higher price than U.S. imports, which remain bottlenecked by a lack of existing infrastructure.

In March, Pemex, the country's state-run oil and gas monopoly, paid $19.45 per million British thermal units (mmBtu) for a spot LNG cargo, compared to U.S. import prices of about $4.40 per mmBtu. The country paid a more reasonable $15.85 per mmBtu for a spot cargo in April, and this month Comision Federal de Electricidad, Mexico's state-run utility, has signed contracts for 27 LNG cargos for delivery in 2013-14.

An initial 18 cargos were purchased from Trafigura (Lucerne, Switzerland) for $15.84 per mmBtu, and about week later one more cargo was purchased from Trafigura, along with eight cargos from BP (NYSE:BP). The average volume of each cargo will be 110 million cubic feet per day. CFE will soon consider the purchase of an additional two cargos. The LNG will be delivered to Mexico's Manzanillo LNG import facility, which has a regasification capacity of 3.8 million metric tons per year and began operating in May of last year.

According the EIA, most of Mexico's LNG is sourced from Nigeria, Qatar and Peru. While LNG imports accounted for 38% of the country's gas imports in 2010, this number has declined to 20% as pipeline infrastructure from the U.S. has increased. Average year-to-date volumes of U.S. imports to Mexico are up 29% from the corresponding period of 2012.

As Mexico continues to develop its gas pipelines, Industrial Info is tracking $2.5 billion of transmission (pipelines and compressors) projects in the country. The first leg of an ambitious project to move natural gas from the U.S. into the interior of Mexico is the 230-mile grassroot El Paso-Chihuahua pipeline, which will move up to 850 million standard cubic feet per day of gas from El Paso to just outside the city of Chihuahua, Mexico. Construction of the estimated $440 million pipeline kicked off early last year and is expected to be completed this summer.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.