U.S. natural gas exports to Mexico, most of which cross the border via pipeline, have continued to increase in 2020, according to the U.S. Energy Information Agency (EIA).

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Mexico imports of liquefied natural gas (LNG), meanwhile, have declined every month since March, according to EIA, as pipeline infrastructure comes online offering cheaper alternatives.

In early October, Mexico’s state power utility Comisión Federal de Electricidad (CFE) announced the long-awaited start of commercial operations on Fermaca’s 886 MMcf/d Villa de Reyes-Aguascalientes-Guadalajara (VAG) pipeline system.

VAG is the final leg of Fermaca’s larger Waha-to-Guadalajara or “Wahalajara” system, which transports gas from the Permian Basin in West Texas to the industrial center of Guadalajara in the Bajío region of central-western Mexico.

The system allows CFE’s natural gas-fired power plants at the Manzanillo complex on Mexico’s Pacific coast to substitute LNG imports with cheaper pipeline gas sourced from the Permian, saving CFE an estimated $154 million annually.

Gas reportedly started flowing on the system in June. U.S natural gas exports by pipeline to Mexico rose to 5.9 Bcf/d from July through September, an increase of 0.8 Bcf/d compared with the 2019 average, EIA analysts led by Victoria Zaretskaya said.

Mexico has been the leading destination for U.S. gas exports since surpassing Canada in 2015.

The industrial and electric power sectors accounted for all of the natural gas consumption in Mexico in 2019, with industrial accounting for 54% and electric power 46% of the total. Gas demand in both sectors declined earlier this year because of the measures taken to contain the spread of the coronavirus pandemic, but it subsequently came back.

Mexico’s total gas consumption fell to 7.5 Bcf/d in May, the lowest monthly volume since December 2016, according to Genscape Inc.. However, by August Mexico’s gas consumption started to recover and surpassed last year’s values.

In August, the industrial sector in Mexico consumed 4.9 Bcf/d, 10% more than in August 2019. The power sector consumed 5% more.

Gas is the main fuel used for electricity generation in Mexico. In 2019, 61% of the country’s electricity was generated using gas, EIA said, citing data from power sector operator Cenace.

This year, even as overall electricity generation has dipped on 2019 levels, Mexico’s gas-fired generation of electricity has increased slightly, offsetting lower generation from other sources such as fuel oil and coal.

U.S. gas pipeline exports to Mexico averaged 5.1 Bcf/d and accounted for 61% of the country’s supply in 2019.

As a sign of increasing demand for U.S. gas in Mexico, midstream company Kinder Morgan Inc. executives during a third quarter conference call Wednesday said they had received “significant” customer commitments through a recent open season and were moving forward with the Mier-Monterrey Pipeline system expansion project serving Mexico.

The $22 million project, expected to be in service in 3Q2021, involves expanding the system’s existing capacity by 35 MMcf/d and is supported by long-term take-or-pay contracts.

There are also a series of major pipelines in Mexico that remain delayed and are set to come online by next year.

Grupo Carso SAB de CV’s 472 MMcf/d Samalayuca-Sasabe pipeline had been expected to come online late this year, executives said earlier this year before the coronavirus reached Mexico.

Meanwhile, TC Energy Corp. expects the phased entrance into service of the 886 MMcf/d Tula-Villa de Reyes pipeline in Mexico to occur in the first half of 2021. Executives said in July the delayed pipeline has been further held back this year by coronavirus contingency measures, which have impeded granting work authorizations because of administrative closures.