It’s Time to Keep Track of Mexico’s NatGas Market – Here’s How
For some time now, MDN has had its eye on Mexico. No, not for a vacation (although that would be sweet), but because of the natural gas market, which is undergoing a dramatic change. Mexico passed landmark energy sector structural reform in 2013 and 2014, freeing up Mexico's oil and gas markets from strict government control. The reforms abolished the state monopolies administered by state-owned companies Pemex and the Federal Electricity Commission with the aim of creating competitive markets in the oil and gas industry AND in the power industry. Why? To attract private investment with the ultimate aim of dramatically improving Mexico's energy markets. While renewable energy grabbed much of the attention in mainstream media, the core of the energy reform effort lies in the expansion of Mexico's natural gas market. Not only is power generation heavily focused on increasing capacity through gas-fired combined cycle power plants, but also consumption by industrial users is expected to rise at a steady pace in the coming decades. Mexico is going through a rapid expansion of its natural gas pipeline infrastructure--with a number of projects either under construction or planned. This expansion has opened numerous opportunities for the private sector, with more on the way. So how does Mexico affect the Marcellus/Utica? (1) Some of our gas may end up flowing across the border--eventually. Maybe not today or tomorrow, but there are pipeline projects that already are, or soon will, carry our gas to the Gulf Coast. From there, it's a short trip over the border. Mexico may become an important future market for our gas. (2) Even if our gas never flows across the border, gas from Texas, Louisiana and Oklahoma will. As that gas goes south, it doesn't go north to compete with Marcellus/Utica gas and opens up more markets for our gas in the Midwest and South. (3) As more American gas flows south--from whichever source--prices at the Henry Hub (and everywhere else, including the Marcellus/Utica) will go higher. It's simple economics: less supply, same demand, equal higher prices. Mexico's natgas market bears watching, and watching closely. How can you keep track of it? The same way we do. NGI (Natural Gas Intelligence) recently introduced a news service that tracks what's happening in the Mexico natgas market--and for the next few months you can get it for FREE...
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