Natural gas pipeline flows from the United States to Mexico averaged 5.3 Bcf/d in February, roughly 380 MMcf/d lower month/month (m/m) and 100 MMcf/d higher year/year (y/y), according to preliminary figures from Wood Mackenzie. 

IPGN

Liquified natural gas (LNG) sendout from Mexico’s Altamira, Manzanillo and Energía Costa Azul import terminals averaged 263 MMcf/d, about 240 MMcf/d higher than in January, Wood Mackenzie’s Ricardo Falcón, natural gas analyst, told NGI’s Mexico GPI. 

Mexico turned to LNG imports to make up temporary natural gas shortfalls in the United States amid the frigid temperatures that gripped Texas from Feb. 13-19.

All told, the preliminary Wood Mackenzie data indicate that pipeline flows and LNG sendout combined to average about 5.56 Bcf/d in February, down from 5.7 Bcf/d in January

Falcón noted that the February 2021 figures still are subject to change, as “the winter-driven supply shock caused unprecedented anomalies in natural gas systems’ reporting of flows that, in many cases, have led to backward revisions.”

Mexico natural gas prices, meanwhile, averaged $3.39/MMBtu in January, down from $3.64/MMBtu in February, according to the latest IPGN monthly natural gas price index published by the Comisión Reguladora de Energía (CRE).

The January price is up from the January 2020 average of $2.92/MMBtu.

CRE used 217 transactions reported by 27 marketers to calculate the latest index, which is meant to serve as a proxy for Mexico pricing until the market attains enough liquidity for third-party indexes to take over.

These figures compare with 261 transactions from 24 marketers in the year-ago index. Total marketed volumes averaged 5.68 Bcf/d in January 2021, down from 6.09 Bcf/d in January 2020.

Mexico’s natural gas production, for its part, averaged 3.77 Bcf/d in January, down from 3.91 Bcf/d in December and 3.89 Bcf/d in January 2020, according to data from upstream regulator Comisión Nacional de Hidrocarburos (CNH).

State oil company Petróleos Mexicanos (Pemex) supplied 3.56 Bcf/d of the total, while private sector operators produced 211.2 MMcf/d. These figures compare to 3.66 Bcf/d and 228.9 MMcf/d, respectively, in the year-ago month.

U.S. Reliance

Mexico’s reliance on U.S. gas imports has grown in recent years amid stagnant domestic production of the molecule. 

As a result, gas transacted in Mexico is typically indexed to U.S. trading locations such as Henry Hub, Houston Ship Channel or Waha.

The U.S. Energy Information Administration said in its most recent Short-Term Energy Outlook that it expects Henry Hub spot prices to average $2.95/MMBtu in 2021 and $3.27 in 2022, up from the 2020 average of $2.03. The forecast is driven by expectations that LNG and nonpower sector domestic demand will continue to grow as production remains relatively flat.

While having access to abundant and cheap gas supplies from the United States is “without doubt an advantage” for Mexico, it must also develop “a more diversified basket” of gas supplies, said economist Meney de la Peza in the latest edition of the Corto Circuito energy webcast series last week.

De la Peza, who served previously as the head of CRE’s natural gas unit, noted the cancellation by President Andrés Manuel López Obrador of bid rounds 3.2 and 3.3, which would have awarded exploration and production contracts for conventional and unconventional gas. She also said Mexico would benefit by having more marketers to supply gas at competitive prices from diverse supply points to demand centers throughout the country.

She shared the virtual stage with Gadex consultancy founder Eduardo Prud’homme, who expressed a similar view. He noted that Mexico has 24 pipeline interconnection points with the United States with a combined capacity of 13.7 Bcf, and with access to multiple U.S. basins.

The problem, he said, is that Pemex and state power utility Comisión Federal de Electricidad control effectively all of this capacity, limiting the ability of Mexico’s market to diversify its gas suppliers.