Natural gas prices in Mexico surpassed $3.00/MMBtu in September for the first time since May, tracking the movement of prices in the United States, according to the IPGN monthly natural gas price index published by the Comisión Reguladora de Energía (CRE).

Prices in Mexico averaged $3.24/MMBtu in September, down from $4.33/MMBtu in the same month a year ago.

The IPGN compiles transaction information reported by marketers and is meant to serve as a reference until the Mexican market attains enough liquidity and transparency for third-party indexes to emerge.

The September price was up 13.7% sequentially from $2.85/MMBtu in August.

NGI surveys of natural gas buyers and sellers in Mexico indicate that more than half of natural gas transacted in Mexico is tied to U.S. pricing, with Mexico’s nascent gas market relying heavily on U.S. imports.

“Henry Hub and Houston Ship Channel prices were up slightly in September versus August, but the main increase in U.S. feed gas came from Waha prices,” said NGI’s Patrick Rau, director of strategy and research, referring to the Waha trading hub in West Texas.

Rau said NGI’s Waha Bidweek Index for September was $1.19, a 44% increase from August, driven largely by the ramp-up of Kinder Morgan Inc.’s Gulf Coast Express (GCX) pipeline.

“Those higher prices in turn drove IPGN region 1 and 2 prices up 31% and 35%, respectively,” Rau said.

The IPGN divides Mexico into six trading regions. Region 1 includes the northwestern states of Baja California, Sonora, and Sinaloa, while Region 2 covers the north-central states of Chihuahua, Coahuila, and Durango.

With GCX now running at or near full capacity, and with the in-service date of Kinder’s Permian Highway Pipeline (PHP) now delayed to early 2021, the takeaway constraints that have plagued the Permian are once again putting downward pressure on Waha futures.

The November IPGN will likely mirror these lower prices, said Rau, who noted that Waha gas primarily feeds regions 1 and 2, which together make up less than 20% of the total reported volume used to calculate the IPGN.

However, “Houston Ship Channel and Henry Hub prices are down in October as well, and since regions fed by those prices are closer to 80% of the total IPGN volume, those prices don’t have to fall nearly as much to have a comparable impact on the overall IPGN average as a swoon in Permian priced gas,” Rau said.

“The overall September IPGN price also received a boost from higher prices in the Yucatán Peninsula, as evidenced by the 17% increase in the region 6 index,” Rau said. “So it wasn’t just Waha prices at work here.”

Transacted volumes in Mexico totaled 7.63 Bcf/d in September, down from 8.07 Bcf/d in August. The September IPGN included 282 transactions reported by 25 marketers.

Imports accounted for 70% of Mexico’s natural gas supply in August, up from 68% in August 2018, according to data from energy ministry Sener. Excluding gas consumed by state oil company Petróleos Mexicanos (Pemex), imports accounted for 91% of supply from 87% in the year-ago period.

The recent start of operations on the 2.6 Bcf/d Sur de Texas-Tuxpan pipeline drove piped gas imports from the United States to hit a daily record high of 5.9 Bcf earlier in October, according to RBN Energy LLC’S Jason Ferguson.

The next major outlet in Mexico will be Fermaca’s Waha-to-Guadalajara system, once construction of its final sections has been completed. These sections comprise the La Laguna-Aguascalientes and Villa de Reyes-Aguascalientes-Guadalajara pipelines.

“While these Fermaca pipelines had been expected to be completed in May 2019, construction delays have pushed that timeframe out to late this year or early next year,” Ferguson said.

The project’s impact on pricing on each side of the border will depend on timing, and on how much gas flows on the new pipeline, Ferguson told NGI’s Mexico GPI.

The growth in imports has been driven in part by declining gas output from Pemex since 2008.

The state-owned company reported gas production of 3.81 Bcf/d in September, up from 3.76 Bcf/d in August, but down from 3.88 Bcf/d in the same month a year ago.

Countrywide production of natural gas averaged 3.973 Bcf/d in September, up from 3.71 Bcf/d in September 2018, according to data from upstream regulator Comisión Nacional de Hidrocarburos (CNH).