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The 17th Q&A in the series is with Verónica Irastorza, Associate Director at NERA Economic Consulting, a global firm dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges.
NGI: In your opinion, what are the biggest strengths of the Mexican natural gas market?
Irastorza: Mexico has one of the oldest and most extensive gas systems in the world and proximity to the United States is as an important strength for the Mexican gas market. The U.S. is by far the largest gas market in terms of supply, infrastructure and number of trades, and it experiences comparatively lower prices than other countries due to developed regulation and new technology. Mexico is already taking advantage of this easy to access and cheap supply that is not available to other countries due to geographical conditions.
Mexico has considerable gas reserves. According to Mexico’s National Hydrocarbons Commission (CNH), there are 324 Tcf proved, probable and possible, or 3P reserves. To put this figure into context, there are enough reserves to satisfy 12 years of national consumption, and there are still many areas that haven’t been explored. The Permian Basin (in Texas), which is one of the largest in the world, has gas reserves of approximately 281 Tcf.
NGI: What are the biggest weaknesses in the Mexican natural gas market?
Irastorza: Gas production has been decreasing since 2010. In 2010 Mexico produced 7 Bcf/d and now it is producing only 4.8 Bcf/d, while demand continues to grow. A large part of that gas doesn’t go to the market, it is used by Pemex itself. In addition, the infrastructure is limited and many states do not get gas or not in the quantities needed. The north of the country enjoys cheap supply and availability from the U.S. However, there are regions like Baja California Sur and the southeast of the country where there is not a reliable supply due to a lack of transport infrastructure. As a result, we have seen natural gas-fired electric plants running with diesel that is much more expensive than gas.
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