U.S. natural gas exports to Mexico via West Texas are once again heading upward this year, according to analysis by the U.S. Energy Information Administration (EIA).

Mexico production

Exports from West Texas “have grown steadily in recent years, doubling from 0.6 Bcf/d in 2019 to 1.2 Bcf/d in 2021 as more connecting pipelines in Central and Southwest Mexico have been placed in service in the past three years,” said EIA analysts led by James Easton and Victoria Zaretskaya.

In May, West Texas exports into Mexico averaged a record high of 1.6 Bcf/d, researchers said.

The downstream pipelines include Grup Carso’s 472 MMcf/d Samalayuca-Sásabe pipeline and Fermaca’s Waha-to-Guadalajara, aka Wahalajara, system. Wahalajara allows molecules from the Permian Basin to reach Guadalajara, Mexico’s’ second-most populous city, researchers noted.

Exports from West Texas on Samalayuca-Sásabe, meanwhile, have displaced some pipeline exports from Arizona this year, according to EIA.

West Texas exports rose by 12% during the first five months of the year versus the same span in 2021, while exports from South Texas fell by 5% to average 3.8 Bcf/d. Combined exports from California and Arizona fell by 24% to average 0.5 Bcf/d, researchers said. Total U.S. natural gas pipeline exports to Mexico fell 4% year/year in the same time span.

NGI flow data corroborate the EIA findings. 

“The West Texas natural gas pipeline capacity averaged 12-15% of the total daily U.S. natural gas exports for January 2021 to May 2022,” said NGI’s Josiah Clinedinst, markets analyst. “It has gone from being overshadowed by Arizona and California exports to equaling or outpacing that combined section every day.  

Clinedinst added, “The two biggest pipeline connections on the West Texas border (Comanche Trail-San Isidro and Trans Pecos-Ojinaga – El Encino) have a total capacity of around 2.9 Bcf/d.  There is plenty of room for exports to grow from the Permian to Mexico via the West Texas connections if the need is ever there.”

Domestic Production Rebounding

Mexico’s power sector, and to a slightly lesser extent its industrial sector, have driven growth in the country’s natural gas consumption in recent years, the EIA team noted, with much of this growth being met by increased pipeline flows from the United States.

“The share of Mexico’s natural gas supply met by pipeline imports from the United States grew from 61% in 2019 to 72% in 2021, but it has declined to 69% in the first seven months of this year as a result of rising U.S. natural gas spot prices, according to Wood Mackenzie,” researchers said.

Mexico’s domestic gas production, meanwhile, grew by 15% during the first seven months of 2022 versus the same period in 2021, the EIA analysts said. 

The recent growth “was driven primarily by the Quesqui and Ixachi production fields, which produce a higher proportion of dry natural gas,” the EIA team said. “Recent improvements in drilling rigs’ operating efficiency have also contributed to rising natural gas production.” 

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Quesqui and Ixachi are operated by state oil company Petróleos Mexicanos (Pemex).

As a result of the pipeline buildout on each side of the border, Mexico now has less of a need for LNG, though it remains a vital backstop for pipeline supply shocks like the one that occurred after Winter Storm Uri in February 2021.

Liquefied natural gas has accounted for less than 1% Mexico’s supply so far in 2022, versus 7% in 2019, EIA researchers said. 

South Texas Supply Crunch?

Meanwhile, the South Texas region “could become short gas within the next five years without new pipeline infrastructure,” said BTU Analytics analyst Connor McLean in a recent post.

He cited multiple LNG and pipeline projects on both sides of the U.S.-Mexico border that are expected to draw on South Texas gas supply over the coming years.

On the Mexico side, these include a floating LNG export hub planned by New Fortress Energy Inc. and Mexico’s Comisión Federal de Electricidad (CFE), along with a recently announced 1.3 Bcf/d pipeline planned by CFE and TC Energy Corp.

On the U.S. Gulf Coast, meanwhile, Cheniere Energy Inc.’s 1.51 Bcf/d Corpus Christi LNG Stage 3 Expansion, along with the 0.72 Bcf/d Texas LNG and 3.56 Bcf/d Rio Grande LNG projects, also could contribute to a tight supply picture in South Texas, according to McLean.

“Crucially, this level of demand growth far outpaces new sources of inbound supply,” he said.