Mexico’s natural gas market is importing more U.S. supply as the country’s economy and its weather heat up for summer and peak demand.

US exports to Mexico

A single day U.S.-to-Mexico record was broken on April 14 when exports reached 7.1 Bcf/d, prompting analysts to adjust their import models upward.

Wood Mackenzie revised higher its summer forecast made in February by 400 MMcf/d, setting pipeline imports from the United States at an average of 6.7 Bcf/d for April-October. Gelber & Associates Inc. senior market analyst Dan Myers said Thursday he sees current flows to Mexico from the United States at around 6.5-7 Bcf/d.

On Mexico’s natural gas pipeline system Sistrangas, the five-day line-pack average was 6.993 Bcf on Wednesday (April 21), according to the Gadex consultancy in Mexico City.

The ideal line pack for Sistrangas is 6.86-7.29 Bcf/d to guarantee sufficient pressure in the pipeline system, with levels below 6.6 Bcf/d “undesirable,” according to Gadex energy consultant Eduardo Prud’homme.

Demand on the Sistrangas was 4.826 Bcf on Wednesday, compared to 4.813 Bcf on Tuesday.

Mexico gas production fed into the Sistrangas hit 1.228 Bcf on Wednesday, with the processing centers at Nuevo Pemex (322 MMcf), Burgos (313 MMcf) and Cactus (322 MMcf) in the southeastern part of Mexico the leading injection points.

Domestic production from processing plants is down about 400 MMcf/d since last September.

Analysts at Wood Mackenzie attributed the decline to technical failures and maintenance events reported at the Ciudad Pemex, Nuevo Pemex and La Venta gas processing complexes, as well as high gas flaring and venting. Petróleos Mexicanos (Pemex) flared 513 MMcf/d of production in 2020, versus 305 MMcf/d in 2019.

According to Gadex calculations, pipeline imports from the United States into the Sistrangas were 3.701 Bcf on Wednesday. Liquefied natural gas (LNG) imports were a mere 10 MMcf.

Maintenance on Kinder Morgan Inc.’s Alamo Compression Station from Thursday to Saturday (April 22-24) could impact imports on the Tennessee Gas Pipeline, according to Gadex, with “alternative import points” suggested.

A gas buyer in Mexico City told NGI’s Mexico GPI that demand is driving greater imports as the Mexican economy rebounds from the doldrums of 2020. He said capacity limitations at the Ogilby, CA, border is resulting in higher gas prices there for the summer months.

Mexico Prices

At U.S. locations key to Mexico, the Henry Hub May contract settled at $2.692/MMBtu on Wednesday, down 3.5 cents. Agua Dulce closed at $2.770, down 4.2 cents, and Waha dipped 4.7 cents to $2.536.

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In Mexico, natural gas spot prices were down in the industrial northeast, with Los Ramones down 8.2 cents at close on Wednesday to $3.028. Monterrey was off 8.1 cents to $2.944.

The NGI Los Ramones price is estimated using the price at Alamo, TX, and adding pipeline transportation costs to Los Ramones via Sistrangas Zone 3. The Monterrey price is estimated using the price at Roma, TX, and adding pipeline transportation costs to Monterrey via the Kinder Morgan Mexico pipeline.

Tuxpan in Veracruz saw the spot price drop 8.1 cents on Wednesday, to $3.548. In the West, the Guadalajara price fell 4.5 cents to $3.625.

The NGI Tuxpan price is estimated using the price at Brownsville, TX, and adding pipeline transportation costs to Tuxpan via the Sur de Texas-Tuxpan pipeline. The Guadalajara price is estimated using the price at Aguascalientes and adding pipeline transportation costs to Guadalajara via the Villa de Reyes-Aguascalientes-Guadalajara (VAG) pipeline.

On the Yucatán Peninsula, the cash price at Mérida closed at $4.220 on Wednesday, down 8.1 cents.

A major gas buyer in southeastern Mexico told NGI’s Mexico GPI that gas conditions have stabilized in the south, although there remains a lack of clarity around some of the final works to be completed at the Cempoala compressor station.

The Merida price is estimated using the price at Cactus and adding pipeline transportation costs to Merida via the Mayakan pipeline. 

In the United States overall, NGI’s Spot Gas National Avg. was up 4.0 cents on Wednesday to $2.690.

Light Storage

On Thursday, the U.S. Energy Information Administration (EIA) reported a smaller-than-expected 38 Bcf injection into natural gas storage facilities for the week ending April 16.

Myers at Gelber & Associates Inc. attributed the smaller build to chilly April weather, strong exports and some tightness that may have been masked in the prior EIA report because of the Easter holiday.

Mexico storage exists only in the form of LNG import facilities, primarily the 500 MMcf/d Manzanillo import facility on the West Coast and the 500 MMcf/d Altamira facility in southern Tamaulipas along the Gulf of Mexico.

In addition, Mexico can tap into storage gas in the United States, mainly in the South Central region. For the week ended April 16, total working gas in the South Central region stood at 810 Bcf, up 12 Bcf from the same time one year ago, but 39 Bcf lower than the average 849 Bcf in storage for the same day between 2017-2021.

Texas is a key driver behind total South Central underground storage capacity, and it is the main exporting state to Mexico.

Regulatory Happenings

On the regulatory front in Mexico, antitrust watchdog Comisión Federal de Competencia Económica (Cofece) this week filed a legal challenge with the Supreme Court against modifications to a law that gives power dispatch priority to state utility Comisión Federal de Electricidad.  

Cofece has proven to be an important countermeasure to moves by Mexico’s government to ‘strengthen’ Pemex and Comisión Federal de Electricidad (CFE). This has included filing legal challenges that have so far halted some proposed changes. 

Meanwhile, Mexico’s transport ministry Secretaría de Communicaciones y Transportes (SCT) reportedly informed Infraestructura Marina del Golfo (IMG) that it lacked the correct permits for use of coastal zones on its 2.6 Bcf/d Sur de Texas-Tuxpan pipeline.

Gadex’s Prud’homme said the pipeline’s anchor customer CFE depended on the pipeline to keep the nation’s electricity firing, and that the threat was unlikely more than “just noise.” The marine pipeline is the biggest cross border pipeline serving Mexico from the United States.