North American natural gas prices lost more than three dollars in June after an explosion at the Freeport liquefied natural gas (LNG) plant early in the month knocked the facility offline.

Mexico prices

August took over as the front month contract for New York Mercantile Exchange futures this week and prices continued to be pressured downwards. On Thursday around midday, after a larger than expected injection into U.S. natural gas stocks was reported for the prior week, August prices dipped below the $6.00/MMBtu threshold.

With prices easing and additional supply now available in Texas, Mexico imports of natural gas have been robust. Het Shah of Analytix.ai said 7.1 Bcf of gas was reportedly flowing into Mexico on Wednesday. According to BTU Analytics, so far in 2022, Texas has been responsible for over 91% of natural gas exports to Mexico, followed by Arizona at 6% and California at 3%

The Mexico market meanwhile continued to be laser-focused on potential changes to the rules of the game in the transport sector. It now seems likely that natural gas marketers in Mexico will need to source their imported supplies through capacity held by state companies Comisión Federal de Electricidad (CFE) or Petróleos Mexicanos (Pemex).

A trader in Mexico City told NGI’s Mexico GPI that “there’s so much uncertainty right now.” He said he thinks “various companies are going to challenge this in courts, just as we saw in the power sector.”

Companies have until Tuesday, July 5 to challenge the changes, he said. 

Cenagas issued a document this week saying that companies using Sistrangas have until August 13 to meet Sener requirements. Cenagas said that companies shipping gas on the Sistrangas would have to provide a letter from Pemex or CFE or their affiliates proving they sourced their gas from a state company or that the upstream transport was through a state agency.

Infrastructure

Local press in Mexico reported this week that a Mexican engineering firm had won a construction contract for the 320 MMcf/d Jaltipán-Salina Cruz pipeline. The pipeline would cross the Isthmus of Tehuantepec, the narrowest strip of land in Mexico, between the two coasts.

The corridor project would link the deepwater ports of Coatzacoalcos and Salina Cruz on either side of the 77-mile isthmus. It also could include an LNG export facility proposed for Salina Cruz.

Also this week, the 340,000 Olmeca refinery in Dos Bocas, Tabasco, was set to begin operations.

Sistrangas

Mexico’s Sistrangas five-day line pack average inched up this week, hitting 6.544 Bcf on Wednesday (June 29). The line pack is below the optimal range of 6.86-7.29 Bcf needed to guarantee sufficient pressure in the system. Line pack has been a persistent problem all year on the Sistrangas.

Demand on the Sistrangas on Wednesday was 4.636 Bcf, up from 4.526 Bcf a day earlier. Mexico gas production fed into the system was 1.277 Bcf. Southeast production dominated the total, with 716 MMcf from the region injected into the pipeline system.

According to calculations from Gadex, pipeline imports from the United States into the Sistrangas were 3.327 Bcf on Wednesday, versus 3.332 Bcf a week earlier. LNG imports into the Sistrangas were 18 MMcf.

In related news, TC Energía is carrying out maintenance works on the Manzanillo-Guadalajara line through July 3.

Mexico Cash Prices

In Mexico, NGI natural gas cash prices rose slightly this week. On Wednesday, Los Ramones rose 13.1 cents day/day to $7.079. Monterrey via the Mier-Monterrey system was up by 13.1 cents to $6.852.

Tuxpan in Veracruz via Cenagas saw the spot price rise 12.2 cents to $7.611. 

In the West, the Guadalajara price rose 16.5 cents to $7.558. Farther north in El Encino, prices via Tarahumara were $6.895, 20.8 cents higher than the previous day. On the Yucatán Peninsula, the cash price at Mérida was $8.318 on Wednesday, up 12.2 cents.

U.S. Gas Storage

On Thursday, the U.S. Energy Information Administration (EIA) reported a larger-than-expected 82 Bcf injection into natural gas storage inventories for the week ending June 24.

The South Central region added a net 11 Bcf into storage, which included a 16 Bcf injection into nonsalt facilities and a 6 Bcf withdrawal from salts, according to EIA. Until Mexico develops storage capability, this is the storage system most readily available to the country.

For the week ended June 24, total working gas in the South Central region stood at 886 Bcf, down from 1,003 Bcf for the same time one year ago. The figure was also 134 Bcf lower than the average 1,020 Bcf in storage for the same day between 2018-2022, EIA said.