Mexico President Andrés Manuel López Obrador said a natural gas pipeline connecting the Atlantic and Pacific coasts is set to go ahead. The 320 MMcf/d Jaltipán-Salina Cruz pipeline would cross the Isthmus of Tehuantepec, the narrowest strip of land in Mexico, between the two coasts.

salina cruz

“A gas pipeline in the isthmus is planned to transport gas,” Lopéz Obrador, aka AMLO, said during a press conference last week. “We need to do this because we have excess natural gas that is 40% more than we need.” 

The president was referring to the controversy over natural contracts signed under the previous administration of Enrique Peña Nieto between pipeline developers and Mexican utility Comisión Federal de Electricidad (CFE). 

AMLO said the natural gas would be for industrial projects but “we haven’t ruled out the possibility of natural gas for residential use. It just needs installations. We want to reach agreements with people in the countryside and cities…to get natural gas to their homes. This would benefit many consumers.”

During another press conference on Tuesday, government officials said acquiring lands for the project was ongoing. Public consultations were taking place in Ciudad Ixtepec, San Blas Atempa and Santa María Mixtequilla in Oaxaca, along with informational workshops with indigenous populations.

The government’s stated aim is to bolster industrial economic growth in Oaxaca and Veracruz by establishing 10 industrial parks. The project includes expanding and modernizing road, railway, natural gas, telecommunications and electricity infrastructure.

The corridor project would link the deepwater ports of Coatzacoalcos and Salina Cruz on either side of the 77-mile isthmus. It also would include a liquefied natural gas (LNG) export facility proposed for Salina Cruz.

The pipeline is estimated to cost about $434.8 million and be developed by CFE, which holds most of the natural gas capacity in the country. U.S. producers would be the principal suppliers.

The news comes as imports of natural gas from the United States continue to boom in Mexico. Pipeline imports averaged 6.8 Bcf/d in June, up 25% from June 2020. The pipeline imports also were up 44% from the previous five-year (2016-2020) monthly average, according to U.S. Energy Information Administration (EIA) analysts.

[Trusted Transparency: Mexican buyers and sellers are basing their natural gas prices off of NGI’s Mexico Gas Price Index. Read the analysis of our fifth survey of active players in Mexico, showcasing market-driven insights now.]

Demand for U.S. liquefied natural gas has also been robust in Europe and Asia, leading to prices that have exceeded $4.00/MMBtu this summer. On Monday, the EIA forecast that U.S. gas exports would exceed imports by an average of 11.0 Bcf/d in 2021, a nearly 50% jump from the 2020 average of 7.5 Bcf/d. 

“We forecast total U.S. natural gas exports to continue to grow throughout 2021 and 2022, exceeding the record of 14.4 Bcf/d set in 2020,” EIA researchers said.

U.S. gas pipeline exports, principally to Mexico, began exceeding imports on an annual basis in 2019. “In 2020, U.S. pipeline exports exceeded imports by 1.1 Bcf/d, and we expect this difference to increase to 1.7 Bcf/d in 2021 and 2.5 Bcf/d 2022,” EIA said.

In its latest Short Term Energy Outlook, the EIA tacked on 20 cents to its expected 2021 average Henry Hub spot price. The EIA sees Henry Hub averaging $3.42/MMBtu in 2021, up from $3.21 predicted last month. The updated forecast includes an average Henry Hub price of $3.71 for the third quarter.