Since taking office in 2018, Mexico’s President Andrés Manuel López Obrador has reiterated that his government would prioritize energy security and reduce the country’s dependency on foreign fuel imports, such as natural gas and gasoline.
While López Obrador’s government has built a $19 billion refinery in the southern state of Tabasco in hopes to reduce gasoline imports, Mexico is further from its goal of energy security than it was at the start of the current administration, according to information from the World Energy Council (WEC).
In a presentation given to commemorate the 15th anniversary of Sempra’s Energía Costa Azul (ECA) LNG import terminal, Francisco Xavier Salazar Diez de Sollano, former chairman of Mexico’s Comisión Reguladora de Energía (CRE), said the country must rely on natural gas in the short and medium terms to come closer to achieving its goals of energy security.
ECA is slated to begin exporting liquefied natural gas in 2025. Plans are to import feed gas via pipeline from the United States.
Salazar, a founding partner at the consulting and regulatory firms Gadex, Enix and Trust Mexico, said when inspecting Mexico’s “energy trilemma” – which includes energy security, energy sustainability and energy affordability – the country has fallen in its global ranking, according to WEC. Of the 127 countries that the agency evaluates within the Energy Trilemma classification, in 2022, Mexico ranked 46th, largely because of a lower grade in the energy security category.
According to graphics presented by Salazar, during the López Obrador administration, Mexico’s energy affordability ranking remained steady, energy sustainability slightly declined and energy security – the primary goal for the sector between 2018-2024 – plummeted. When compared to other countries of the region, Mexico’s energy trilemma grade was considered to be in a worse standing than Uruguay, Chile, Argentina, Brazil, Costa Rica, Ecuador, Panama, Peru, Colombia and El Salvador.
Natural Gas: Energy Security Solution
In his presentation, Salazar explained that natural gas would be imperative for Mexico to improve its global standing in the sector and provide solutions to the energy trilemma.
“Natural gas is fundamental for the reliability of the electricity sector that continues to be operated by more variable sources,” Salazar explained in his comments regarding energy security. He said natural gas would be needed in Mexico to “resist and quickly recover from disruptions in the system and assure a minimal interruption in supply.”
Salazar also said that, in order to assure both energy affordability and continue to reduce the country’s carbon emissions, natural gas would provide Mexico with a fuel that is “abundant and highly competitive” in terms of price and is “the cleanest fossil fuel…”
A consistent and growing complaint of environmental groups and credit rating agencies is that Mexico state power company Comisión Federal de Electricidad (CFE) is burning excessive amounts of fuel oil at its power plants while national oil company Petróleos Mexicanos (Pemex) is flaring too much natural gas.
Pemex did, however, improve its gas capture rate to 93.2% in the fourth quarter of 2023 from 89.8% in 4Q2022, and is aiming to eliminate routine flaring by 2030.
Salazar explained that by relying more on natural gas, the national electricity system would be more efficient, produce less contaminating emissions and provide firm capacity supply, allowing for the incorporation of more renewable sources and more affordable electricity.
While Salazar largely highlighted the benefits of natural gas, he also outlined the drawbacks of the fuel, which include carbon dioxide and methane emissions. He explained that methane, after carbon dioxide, is the second-biggest contributor to global warming worldwide. While methane has a shorter half-life prior to being absorbed by the atmosphere, according to the International Energy Agency, the global energy industry represents 36.8% of methane emissions worldwide.
Global Energy Transition, Energy Security
Salazar concluded his presentation by re-emphasizing the importance of natural gas in a global context and the value of the fuel for electricity generation across the world, which has been on display for European markets following the Russian invasion of the Ukraine. He said the continued diversification of LNG supply options, as well as the development of more infrastructure and export terminals, are “key elements to be able to strengthen the security of the supply of this fuel.”
He also emphasized that, to better assure and guarantee the supply and availability of natural gas, more local development of the fuel must be implemented. There also is a need for more strategic storage options, which has been a long-standing issue in the Mexican market.
“Natural gas represents a bridge energy to allow for a reliable transition to an energy matrix that is cleaner, quicker and less expensive,” Salazar said. “While new technologies such as storage and hydrogen continue to be developed, natural gas will continue to represent an alternative to reduce greenhouse gas and other contaminating emissions, as well as substitute other fossil fuels that are more harmful and allow for further penetration of clean energies.”
