NGI The Weekly Gas Market Report / NGI All News Access

Power Generator Feeling Mexico NatGas Exports

Large natural gas end-users, consumer advocates and environmentalists have raised a cry about exporting U.S. liquefied natural gas (LNG) to Asian and European markets, but one power generator executive wonders why no one is questioning increasing pipeline exports of gas to Mexico.

"There's a lot of passionate debate about whether we as a country should liquefy our natural gas and send it overseas...From my perspective, I'm not sure how you can have that debate without looking at what's going out the back door, so to speak," Jay Dibble, director of natural gas regulatory affairs for independent power producer Calpine, said last Thursday at an Energy Bar Association luncheon in Houston.

Mexico is importing increasing amounts of natural gas from the United States as efforts to develop its own resources are largely focused on oil and demand for gas increases, particularly from power generators. This has been good for pipelines and producers, particularly those in Texas.

"In South Texas the last couple years we've seen just this dramatic turn of events where we're having huge volumes of gas that used to be traditionally going into pipelines going north," Dibble said. "Those pipelines are now full and that gas is going south, specifically it's going across the border into Mexico."

Exports of U.S. gas to Mexico set a record last year, according to the Energy Information Administration (EIA), growing by 24% to 1.69 Bcf/d. Imports now account for more than 30% of Mexico's gas supply, and the country's gas usage is at its highest level ever, EIA said (see NGI, March 18).

"Calpine does have significant power plants in this area [of Texas], so obviously we're concerned about this," Dibble said. "It's changed the way we thought about procuring fuel supply for our plants. To me, we don't have a political stake in this, but it's just a very interesting dialogue to have."

Dibble said U.S. gas is being bought by Mexico's state-run Petroleos Mexicanos (Pemex) or affiliates, which one day, if some export predictions hold true -- 5-10 Bcf/d in the near term, according to Dibble -- could surpass Calpine as a buyer of U.S. gas and could become the largest single user of U.S. natural gas in the next five years, Dibble said. "Think about that for a minute."

Analysts expect exports of U.S. gas to Mexico to continue climbing. "We expect U.S. exports to Mexico to continue growing strongly in the medium term and average 2.0 Bcf/d in 2013 and 2.2 Bcf/d in 2014," wrote Barclays Capital analyst Biliana Pehlivanova in May. "The pace of growth is likely to increase beyond 2014, as more cross-border and Mexican pipeline capacity is scheduled to come into operation [see NGI, May 27]."

©Copyright 2013 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

Comments powered by Disqus