The Mexican government expects domestic demand for natural gas to reach 8.32 Bcf/d in 2018 and hit 9.66 Bcf/d over the 15-year period from 2016, which works out to a compound annual growth rate of 1.6% a year, according to Mexico GPI calculations.

“In 2031, natural gas demand is forecast to increase 26.8% compared to 2016,” according to the Energy Ministry (Sener). “This growth is related to the expansion of natural gas infrastructure as well as the startup of various combined-cycle power plants.”

Mexico also should continue to depend on imported gas via pipeline and liquefied natural gas (LNG) to meet local demand, although its reliance is expected to soften toward the end of the forecast period.

Sener released the 15-year natural gas outlook at the end of December. The report, which is updated annually, contains demand figures for 2016 and an annual growth forecast up to 2031.

Mexican gas demand was 7.62 Bcf/d in 2016 and averaged 7.99 Bcf/d between January and October 2017, according to the most recent ministry data. Sener is forecasting full-year 2017 demand to average 8.02 Bcf/d.

In the long-term outlook, natural gas usage in Mexico peaks at 9.87 Bcf/d in 2028 and then sheds about 210 MMcf/d by 2031.

The industrialized northeast, which includes the business hub Monterrey, is expected to remain the top gas-consuming region. Northeast demand is seen reaching 3.17 Bcf/d by 2031, from 2.5 Bcf/d in 2016, followed by the south/southeast region at 2.81 Bcf/d, from 2.42 Bcf/d, according to Sener.

Monterrey, the capital of Nuevo Leon state, is one the leading candidates for Mexico’s first natural gas trading hub.

Demand in northwest Mexico, currently the least gas-intensive region at 608 Bcf/d, is due to more than double to 1.32 Bcf/d by 2031 on the startup of several combined-cycle gas turbines (CGGT) sponsored by the federal power utility, the Comision Federal de Electricidad (CFE).

Private developers are building out a network of pipelines to supply the CCGT plants in the northwest, although some are facing potential delays over conflicts with indigenous communities.

As in the United States, Mexico’s power sector is expected to remain the main driver of gas demand over the coming years. Mexican power plants are forecast to consume 5.95 Bcf/d by 2031, or nearly 62% of national demand, compared to 52% at present. Current power sector demand is slightly under 4 Bcf/d.

CFE is converting its older oil-burning power plants to natural gas and has tendered seven of eight planned CCGT projects. By 2031, natural gas is expected to account for 82% of the fuel consumed in the Mexican power sector.

The power grid should add 18,500 MW of combined-cycle generating capacity by 2031, according to Sener’s 15-year electricity sector outlook. This year, three CCGT plants are due to come in service — Valle de Mexico II (615 MW) outside of Mexico City, Empalme II (791 MW) in Sonora state and Noreste (857 MW) in Nuevo Leon.

The energy ministry expects industrial natural gas consumers to become Mexico’s second-largest demand segment by 2031, replacing the oil and gas industry. Industrial demand, driven by the chemical and base metal sectors, is to reach 1.96 Bcf/d by 2031, up from 1.48 Bcf/d in 2016.

Demand for natural gas in the oil industry, in turn, is forecast to drop to 1.55 Bcf/d from 2.03 Bcf/d. State oil company Petroleos Mexicanos (Pemex) uses most of its gas production for reinjections and other upstream activities.

The residential sector, with an estimated 133 MMcf/d of demand in 2031, and the services sector with an estimated 63 MMcf/d, would remain relatively minor items in the forecast. Sener is expecting each sector to grow as more consumers switch to natural gas, but liquefied petroleum gas should remain the fuel of choice in Mexican households over the coming years.

The ministry is working on a public policy to promote the gas distribution sector, with a draft expected later this year. The energy regulator, the Comision Reguladora de Energia, is also implementing a regulatory overhaul to boost competition in the local distribution business.

Gas Imports

Mexican dependence on gas imports is set to peak at 6.08 Bcf/d in 2020 before tapering off to 4.61 Bcf/d by 2031, or 48% of national demand by then.

Cross-border pipelines and three LNG terminals currently supply about 4.9 Bcf/d, or around 60% of the country’s usage. Excluding the gas used by Pemex, imports account for close to 85% of the gas marketed in Mexico.

The domestic supply of marketable dry gas should bottom out this year at 3.02 Bcf/d before gradually rising to 5.05 Bcf/d by 2031, according to Sener.

The ministry’s outlook also includes two standalone forecasts for domestic gas production — “minimum” and “maximum” scenarios, each based on wellhead output.

The minimum forecast is a business-as-usual scenario with production bottoming out over the next few years and then gradually returning to near-current levels at 4.05 Bcf/d by 2031. Associated gas from offshore fields would remain the main supply source in this scenario.

In the maximum forecast, however, non-associated gas from onshore exploration would drive up production to 6.24 Bcf/d by 2031. The winners of blocks in Mexico’s licensing rounds contribute a growing share of output in this scenario. By 2031, private and foreign operators would produce 2.98 Bcf/d, or nearly 48% of total production, versus almost no participation today.