Market players and the government each have roles to play in creating a more liquid, transparent natural gas market in Mexico, according to Eduardo Prud’homme, cofounder of the Gadex energy consultancy.

Monterrey map

Prud’homme assessed the state of play in Mexico in the latest episode of NGI’s Hub and Flow podcast.

Buyers and sellers of natural gas can contribute to a more transparent market by reporting transaction data to price reporting agencies such as NGI, Prud’homme said. 

The industrial hub of Monterrey is the logical choice for the first authentically Mexican pricing hub, he explained, citing the convergence of multiple pipeline systems in the area bringing in gas sourced from the United States.

These include Kinder Morgan Inc.’s Mier-Monterrey pipeline, Grupa Clisa and Howard Energy Partners’ Nueva Era Pipeline LLC, and Mexico’s Sistrangas national pipeline grid.

The area also connects to the networks of local distribution companies Naturgy and Compañia Mexicana de Gas, aka CMG.

Prud’homme explained that Monterrey “is the main consumption area in the country with a long tradition of being natural gas users…So in my opinion Monterrey is ideal to be the first place to have a hub and develop an index.”

Most natural gas contracts in Mexico are written based on U.S. prices plus the cost of transport into Mexico, according to NGI’s latest survey of the Mexican market.

[Get in the know. Access to pipelines, processing plants and LNG facilities is imperative to success in the Mexico natural gas market. Buy NGI’s 2022 Mexico map today.]

“It’s important that we promote this culture of transparency to convince all the stakeholders that it’s good for everybody to reveal [a] certain level of information,” Prud’homme said. 

While some shippers may want to keep prices secret for their own commercial purposes, this ultimately “will create a very reduced and narrow-minded market,” Prud’homme said. “I think in the long-term we need to appreciate that transparency is an asset for everybody.”

Meanwhile, government entities – namely Sistrangas operator Centro Nacional de Control del Gas Natural (Cenagas), state power utility Comisión Federal de Electricidad (CFE), and energy regulator Comisión Reguladora de Energía – all should do their part to promote development of a secondary firm capacity market

This would promote liquidity and help mitigate imbalances caused by the inevitable disparities that occur between nominations, injections and withdrawals, Prud’homme explained.

The problem, he said, is that the various government entities in the energy space have been reluctant to advance the secondary firm market under President Andrés Manuel López Obrador, creating inflexible conditions for shippers.

A more liquid and transparent natural gas market could help mitigate supply shocks such as the one caused by Winter Storm Uri in February, Prud’homme said. 

He said that many natural gas marketers in Mexico “would love to extend their services and have better coverage” in areas where the gas market is less developed. The problem, however, is a lack of certainty in acquiring capacity.

“You go with Cenagas and they simply say, ‘I have no capacity,’” Prud’homme said. Pipelines owned by the private sector, meanwhile, were designed to meet the power generation needs of CFE.

“So I don’t see any spare capacity from a contractual point of view, but from an operational point of view we have plenty of capacity,” Prud’homme said. 

To be sure, he said, Mexico has made substantial progress in liberalizing its gas market under the constitutional energy reform of 2013 and subsequent secondary legislation.

“Now we have more transactions, we have more shippers, and obviously more companies dedicated to [delivering] gas in Mexico,” Prud’homme said. 

He also highlighted as a crucial “first step” the massive buildout of natural gas pipelines anchored by CFE.

“However, once you have these pipelines developed and they are now operating, the most efficient scenario for everybody, for the market as a whole, is to have transactions to reallocate that capacity in short or long terms.”

[Contribute to Transparency: Are you an active market participant in Mexico? We encourage you to connect with our Mexico team to discuss the development of the market, price methodology and the index in the country. Email NGI’s Mexico Gas Price Index team at]