Mexico is poised to play an increasingly prominent role in the global natural gas market, driven by internal demand and the LNG export projects planned for the country’s Pacific and Atlantic coasts.
During a joint webinar on Thursday, experts from NGI and the London Stock Exchange Group plc (LSEG) described the market dynamics that are boosting Mexico’s profile as a consumer and potential exporter of the fuel.
Mexico already is the largest natural gas market in Latin America and the eighth-largest in the world, with demand currently averaging around 8.5 Bcf/d, said NGI’s Christopher Lenton, senior editor for Mexico and Latin America.
“To put that into perspective the United States is the biggest natural gas market in the world and Canada is the fifth, so really North America is a natural gas powerhouse,” Lenton said.
Since state oil company Petróleos Mexicanos (Pemex) consumes most of its gas production, and since President Andrés Manuel López Obrador has mostly eschewed foreign investment in exploration and production, Mexico relies on piped gas from the United States to meet most of its internal needs.
Pemex “can’t do it on its own,” Lenton said. “Another important point is that even though we’ve seen growing natural gas production out of Mexico this last year, imports have actually increased and so it’s hard to see the import trend changing…”
The power sector currently accounts for about 5 Bcf/d of Mexico’s gas demand, with roughly 60% of the country’s power generation coming from gas-fired plants.
New combined-cycle plants could add another 1 Bcf/d of demand by 2025 as state power company Comisión Federal de Electricidad (CFE) continues to expand its generation fleet in areas such as the Yucatán and Baja California peninsulas, Lenton said.
Meanwhile, more than 6 Bcf/d of liquefied natural gas projects are in varying stages of development in Mexico, with developers planning to re-export feed gas sourced via pipeline from the Permian Basin.
Of these projects, Sempra’s Energía Costa Azul (ECA) Phase 1 (0.4 Bcf/d) and New Fortress Energy Inc.’s Altamira FLNG (0.2 Bcf/d) are the only ones under construction.
ECA is on the West Coast, which would allow Permian gas to bypass the Panama Canal and more easily reach fast-growing demand in the Asia Pacific region.
Asia is expected to account for 80% of global LNG demand growth from 2023-2030, said LSEG’s Olumide Ajayi, who shared the virtual stage with Lenton. China alone is expected to account for 29% of the total, he said.
Other LNG projects proposed for Mexico’s Pacific Coast include the 1.8 Bcf/d Saguaro Energía and 0.5 Bcf/d Vista Pacifico.
NGI’s Jamison Cocklin, senior LNG editor, joined Lenton and Ajayi on the webinar. He noted there are nearly 30 Bcf/d of liquefaction projects either under construction or operating in North America. Global supply concerns triggered by Russia’s invasion of Ukraine provided a shot in the arm for LNG developers in 2022, according to Cocklin.
Last year “was a record year for long-term U.S. LNG contracting,” he said. “Buyers sought cover from volatility on the spot market, and this was a market shift from previous years…”
He added, “All the term contracts that have been signed have helped projects advance in North America and elsewhere.”
Buyers across the world signed up for about 77 million metric tons/year (mmty) of LNG last year.
“That’s well above the 51 million tons that they took in 2021,” Cocklin said.
Henry Hub-indexed deals drove the contracting activity, accounting for 70% of all the contracts signed globally last year. “And those are largely U.S. projects,” Cocklin said.
This year, meanwhile, about 26 mmty of Henry Hub-linked offtake agreements have been signed as well, “and there’s still a lot of momentum in the market and a lot of contracting that’s going on,” he added.
