Mexico’s lack of available natural gas storage, which puts the country’s electricity supply at risk in the event of aberrational climate and geopolitical events, could be strengthened with government and private investment in underground cavern development, industry members said recently.

Speaking at the 8th Mexico Infrastructure Projects Forum in Monterrey in late January, Raul Puente, General Director of Underground Storage from Grupo Cydsa, explained that the United States and Europe began developing underground storage for hydrocarbons in the 1950s. Puente said that most of the 31 members of the International Energy Agency (IEA), which Mexico joined in 2018, use abandoned oilfields that have been previously explored for underground storage, as well as empty salt mines, aquifers or large tanks that have been embedded into the subsoil. 

These techniques safeguard the electricity supply of these countries, such as the United States, Canada, Japan and several European nations, from unforeseen events that disrupt supply. Examples include the ongoing Ukraine conflict, Hurricane Harvey and Winter Storm Uri. 

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Puente explained that the United States has between 2,000-4,000 Bcf of storage available, enough to supply the country’s natural gas needs for 30 to 45 days, while Japan, a country that relies entirely on LNG, has enough reserves to meet its power needs for 90 days.  

The case in Mexico, however, is quite different, as the country currently has only about two days’ worth of natural gas storage available and, in the event of a disruption, relies heavily on U.S. gas to supply its needs. The previous government published a policy stating that the country should have 45 Bcf of natural gas storage capacity by 2026, an amount which would increase available supply to more than five days. The goal could be achieved through investment in underground cavern development, according to experts.

“There are abandoned fields that were explored in the past, such as the Brasil, Jaf, Saramako and Acuyo fields, as well as other alternatives that could be utilized,” Puente said. 

“As a country, we have been talking about this topic for 20 years,” he added. “Subterranean storage projects require big investments that, including in developed countries, are anchored by the federal government. I think here in Mexico…there is interest in the private sector. I don’t think the government can do it alone and what is required is a union of the efforts — by the government and private sector.”

Grupo Cydsa, which is the producer of a salt known as Sal La Fina, signed a contract in 2014 with state oil company Petroleos Mexicanos (Pemex) to process and store hydrocarbons, including up to 1.8 million barrels of liquefied petroleum gas, at a subterranean salt cavern in the state of Veracruz. Puente said Cydsa, as well as other members of the private industry, are interested in developing more large-scale storage options for hydrocarbons with Pemex and state power company Comisión Federal de Electricidad (CFE). 

CFE Storage Plans

Miguel Reyes, the CEO of CFE International and CFEnergía, speaking on the same panel, also acknowledged Mexico’s needs to develop further natural gas storage options, and mentioned some of the state company’s considerations for future projects. 

“CFE is looking for strategic storage in South Texas or on the border of Mexico with the United States to be available in the event of an unforeseen climatic event to be able to guarantee supply,” he said. “What we would do is work with our trading desk on how to get the most potential out of that storage.” 

Reyes reiterated that CFE’s primary objective is to guarantee Mexico’s energy security, and that the company must assure profitability in investment opportunities in the event it seeks to develop more storage options. He added that the state company “is not obligated to guarantee the storage for the country; we are obligated to guarantee energy security,” and that further regulation must be prepared by the Energy Regulatory Commission, CRE.

Reyes said the CFE is considering adding a clause into supply contracts that would provide better protection for Mexico in the event of future disruptions. 

“The CFE is considering adding a clause in supply contracts that would require companies to develop storage to assure supply in the case of an extraordinary event,” he said.  

Throughout the two-day event, members of the energy industry repeated the country’s need to continue to improve natural gas and hydrocarbon storage, as its scarcity continues to make Mexico’s electricity supply vulnerable.  

“We have a problem at a national stage that represents a national security issue, which is that we don’t have storage,” said Tamaulipas State Energy Commission member José Ramón Silva Arizabalo. “In Tamaulipas, and above all in the municipalities of Matamoros, we have fields that have the capacity and all of the geological structures required to store gas. This would create an infrastructure that would be focused solely on gas storage, which could guarantee energy sovereignty and improve national security, which has been a repeated goal of the current administration.”