Mexico is emerging as an outlet for North America's abundant shale gas production, according to a Canadian survey of North American "continental market" prospects.
Barring another Mexican revolution, a 72-year-old constitutional barricade against foreign investment is bound to keep the country's own gas supply well below growing demand, says the report by the Fraser Institute, an economic think tank with Calgary and Vancouver branches.
"Mexico could require annual net gas imports of 2.5 Tcf [about as much as Canada has ever exported to the United States] in 2030 compared with only 0.4 Tcf in 2009, says the study, which is titled "North American Natural Gas: Reducing Investment Barriers." The study found that gas investment is hindered elsewhere in North America (see Daily GPI, Nov. 24).
The projection grows out of a watch that Canadians have kept on Mexico since the 1980s onset of gas deregulation and energy free trade amid supply gluts. At the time it was widely feared that an economic reform-minded government might worsen the surpluses and accelerate competition for exports by opening access to Mexican resources for foreign and investor-owned corporations.
The new study's author, Gerry Angevine, is a prominent veteran of the deregulation policy development period and was president of the industry- and government-supported Canadian Energy Research Institute in 1979-1999.
While Mexico's resource ownership structure stands still, the country's needs are gradually but surely changing, Angevine observes.
"Gas consumption has been growing more rapidly in Mexico than in Canada or the U.S. In fact, Mexican gas use has increased at a remarkable compound annual growth rate of 6.5% from 1999 to 2009. This growth was primarily from gas requirements arising from new gas-fired electric generation plants," Angevine's Fraser Institute study says.
"During the 1999-2009 period Mexico's share of continental gas requirements increased by 3.7 percentage points to 8.6%."
With no end in sight to electric power development in response to popular demand in the under-served country, Angevine says even a conservative forecast anticipates annual average growth of 3.2% in Mexico's gas consumption to 4.6 Tcf per year as of 2030 from its current 2.46 Tcf.
Almost all Mexican gas output is associated with the oil that has been virtually the sole target of state-owned Petroleos Mexicanos since it was created in 1938 to own and control all the country's fossil fuel wealth. With gas production standing still or declining as old oilfields are depleted, Mexican imports multiplied 25-fold to 435 Bcf in 2009 from 17 Bcf in 1989.
The supply sources are a variable mixture of pipeline deliveries from the U.S. and tanker cargoes of liquefied natural gas (LNG) from overseas. With new terminals in service, Mexican LNG imports shot up in 2009 to 125 Bcf from less than 1 Bcf previously. But thanks to rising demand, Mexican imports from the U.S. only dropped from 397 Bcf in 2004 to 310 Bcf in 2009 -- a volume still up strongly from 1990s levels that were well below 100 Bcf.
The Mexican government has recognized and tried to take action on domestic gas supply development and employment opportunities created by the country's requirements by calling the international industry's attention to unexplored and untapped resources. But only mild, ineffective changes of details have been made to practical polices in the face of the last revolution's overwhelming legacy of popular faith in social or state resource ownership.
Angevine observes, "Reforms that Mexico made in 2008 will allow foreign companies to explore for oil and gas as subcontractors of state-owned Pemex. However, because the companies cannot own, and therefore have commercial control over, the natural gas that they discover, they are unlikely to shift their attention from more rewarding opportunities elsewhere."
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