According to the Energy Information Administration (EIA), natural gas pipeline capacity from the United States to Mexico will likely double over the next three years, further increasing the U.S. capability to export natural gas to that country. Currently, the United States-to-Mexico pipeline capacity is 7.3 billion cubic feet per day, serving primarily the northeast and central parts of Mexico.[i]
U.S. pipeline exports of natural gas have doubled since 2009 and are expected to continue to increase. Natural gas exports to Mexico accounted for over half of all U.S. natural gas exports since April 2015. The United States exported 4.2 billion cubic feet per day of natural gas to Mexico in August—higher than the 3.6 billion cubic feet per day that was the average for the first eight months of this year. U.S. natural gas exports to Mexico this year are 85 percent higher than the five-year average between 2011 and 2015.[ii]
The increase in U.S. exports of natural gas to Mexico and the need for additional pipeline capacity is due to Mexico’s increased use of natural gas for power generation, its declining domestic production and the lower cost of U.S. pipeline gas compared with the alternative of importing liquefied natural gas (LNG).
Source: EIA, http://www.eia.gov/todayinenergy/detail.php?id=28972
Natural Gas Pipelines to Mexico
U.S. pipeline exports to Mexico are displacing Mexico’s LNG imports or fueling new electric generation facilities. The Los Ramones Phase I pipeline (capacity of 2.1 billion cubic feet per day) completed in 2014, displaced LNG imports at the Altamira terminal in Central Mexico with U.S. shale gas from the Eagle Ford play in Southern Texas. LNG imports at Altamira were 50 percent lower through October of this year than they were in 2015. The completion of Phase II South of the Los Ramones pipeline (capacity of 1.4 billion cubic feet per day) is expected to displace LNG imports at the Manzanillo terminal in the Central region of Mexico, which has been experiencing natural gas shortages and has had to purchase additional LNG.
Four U.S. pipeline projects currently under construction—Roadrunner (Phase II), Comanche Trail, Presidio Crossing (also called Trans-Pecos), and Nueva Era—will supply natural gas to new natural gas-fired power plants in the states of Chihuahua, Nuevo Leon, Sonora, and Sinaloa in 2017. Those projects will provide an additional capacity of 3.5 billion cubic feet per day. Two additional pipelines—KM Mier-Monterrey and Neuces-Brownsville—are expected to begin exporting natural gas to Mexico’s Northeast and Central regions in 2018. They will provide an additional capacity of 3.3 billion cubic feet per day.
Source: EIA, http://www.eia.gov/todayinenergy/detail.php?id=28972
Mexico is also expanding its domestic natural gas pipeline capacity with 12 additional pipelines having a total capacity of 9.7 billion cubic feet per day and adding over 3,200 miles of new pipeline throughout Mexico. These pipelines are part of Mexico’s energy ministry’s (SENER) five-year plan for expansion of its natural gas pipeline infrastructure. According to SENER’s July 2016 update, contracts have been awarded for seven of the 12 projects. SENER expects a widening gap between domestic gas production and natural gas demand through the end of the decade, making room for additional U.S. imports of natural gas.[iii]
Conclusion
Mexico needs to import natural gas to supplement its own domestic gas production and to meet its electric sector demand. Since natural gas pipeline imports from the United States are less expensive than LNG, Mexico is also displacing some of its LNG imports with U.S. natural gas. Beginning in April 2015, Mexico became the largest importer of U.S. natural gas, replacing Canada, whose imports of U.S. natural gas have been declining since 2012.
[i] Energy Information Administration, New U.S. border-crossing pipelines bring shale gas to more regions in Mexico, December 1, 2016, http://www.eia.gov/todayinenergy/detail.php?id=28972
[ii] NGI, U.S.-to-Mexico NatGas Pipeline Capacity to Nearly Double, December 5, 2016, http://www.naturalgasintel.com/articles/108623-us-to-mexico-natgas-pipeline-capacity-to-ne%20arly-double
[iii] Kallanish Energy, U.S. natural gas exports to Mexico continue growing, November 30, 2016, https://www.kallanishenergy.com/2016/11/30/u-s-natural-gas-exports-mexico-continue-growing/
