Private sector shippers are starting to make their presence felt in the Mexican natural gas market, according to the second survey of natural gas buyers and sellers in Mexico conducted by NGI’s Mexico GPI.
In response to the question, “With Whom Do You Transact Mexico Natural Gas Trades?” Mexican state entities Comisión Federal de Electricidad (CFE) and Petróleos Mexicanos (Pemex) led the list, but independent marketers featured in some way in 42% of total responses, tied with CFE and second only to Pemex.
“CFE, Pemex, and independent marketers basically came in a tie for first place,” said NGI’s Patrick Rau, director of strategy and research. “This is a statistical sampling and may not necessarily represent the actual population. As such, we believe CFE and Pemex are still the market share leaders in Mexico. Still, it's positive to see marketing companies rank among the state-controlled entities.”
The survey, conducted in August, received 26 responses from buyers and sellers in Mexico, compared with 29 in the first version undertaken in April.
Monthly transactions were considered the most common natural gas delivery length in Mexico, as was the case in the first survey, and continued to represent slightly under one-half of all deals conducted.
However, daily transactions comprised a larger percentage of the overall total in the latest survey, rising to 28% from 12% in April.
Unlike in the first survey, the volume of transactions was taken into consideration, and 20 of 26 responders reported volumes. When weighted by volume, the daily figure rose to 38%.
“However, these data are probably skewed a bit, since summer is the peak demand season for natural gas demand in Mexico,” Rau said. “As a result, more buyers and sellers are probably in the daily market to help balance their flows.”
There was no real change to the percentage of respondents who said they transacted through negotiated fixed price deals on a simple average basis. When weighted by volumes, however, they rose to 58%, albeit from a smaller data sample size.
Rau suggested that the high-demand summer months may tilt the results in favor of negotiated fixed price transactions, as companies "are more likely to scramble to buy and sell gas to balance the pipeline system.”
The percentage of gas negotiated as a first of the month basis differential nearly doubled, from 9% in April to 17% in August. However, gas purchased as a difference to a daily or monthly U.S. index and Pemex First Hand Sales (VPM) both declined noticeably to 23% from 34% for differences to the index. There was an even bigger drop in VPM to 6% from 23%. Part of this could also be the result of the time of year, Rau said.
Several parties indicated they were using the IPGN monthly gas price index as a de facto index within Mexico, but on a volume weighted basis, those deals represented only 1% of the total. The Comisión Reguladora de Energía (CRE) began publishing the index in July 2017.
“IPGN as an index is probably appropriate only for smaller end-users or retail type of buyers, as we believe that pricing indicator includes charges over and above the pure wholesale price of gas,” Rau said.
Using a simple average basis, U.S. indexes either directly or indirectly contributed to 46% of all the gas bought and sold in Mexico, down from 59% in April. The average of the two surveys is 52-53%, “so it’s probably reasonable to conclude once again that more than half the natural gas transacted in Mexico is tied to U.S. based pricing,” Rau said.
On the flip side, it appeared physical market players in Mexico who don’t already buy or sell gas on a negotiated fixed price basis may be a bit less likely to do so than they were in April. The weighted average likelihood of such buyers one day entering into direct fixed price negotiations was 72% in April, but it fell to 55% in August.
In terms of where respondents trade gas in Mexico, South Texas points dominated border transactions, while the industrial centers of Bajio and Monterrey paced activity in Mexico.