Mexico —which imports nearly all of thenatural gas it burns —has laid out a somewhat surprising mission: to become one of the world’s top exporters of the fuel, and fast.
Although natural gas exports from Mexico are today non-existent, seeing as it produces too little of thepower-plant fuelto supply even its own domestic needs, the country’s physical proximity to booming US reserves positions it well to supply American gas to hungry buyers in Europe and Asia. With US shale in mind, atotal of eight liquified natural gas export projects have been proposed south of the border boasting annual combined capacity of 50.2million tons.Some of the operations aim to comeonline as soon as next year.
If they’re all completed, the Latin American newcomer would join a very small club ofnations that ship abroad the superchilled fuel — commonly called LNG —clocking in at No. 4 behindonlythe US, Australia and Qatar. And unlike those other three export heavyweights, Mexico would mostly be shipping out gas that it imported in the first place.
Mexico’s big plansto enter the export market come at a time when natural gas demand is soaring globally. Gas was already gaining in popularity versusdirtier fossil fuels like coal due to its comparatively lower carbonfootprint whenthe war in Ukraine propelled demand to an entirely new level. Forty-four marketsimportedLNG last year, almost twice as many as a decade ago, theInternational Group of Liquefied Natural Gas Importers said, and theworld has been racing to boost both import and export capacity in the months since.Asia has been thedestinationfor nearly half of US LNG cargoes over the past two years, though Europe’s efforts to diversify away from Moscow means buyers in all regions are competing for a limited supply of the fuel.
“Mexico is set to become an exporter of US-produced natural gas and this is mostly driven by market dynamics that are taking place globally — especially those in Asia — not precisely due to Mexico’s policies,” said Adrian Duhalt, a scholar at the Baker Institute’s Center for the United States and Mexico at Rice University.
To be sure, there’s no guarantee all the proposed projects will be built, or that they’ll be constructed on time. Some of them will stillneed last-mile pipeline connections, too.
But the main gas pipeline capacitythey’ll need to operate is already there. US gas can be shipped in via more than a dozen cross-border pipelines builtduring former President Enrique Peña-Nieto’s single term in office between 2012 and 2018. Those conduits cost billions of dollars and have a combined capacity of nearly 14 billion cubic feet a day, federal figuresshow. So far this year, Mexico hasimportedan average of 6.7 billion cubic feet per day from the US, meaning the lines could move more than double the current volumes. That’s on top of the roughly 2.6billion cubic feet of naturalgasper day Mexico produces.
Mexico’s current president, Andres Manuel Lopez Obrador, was a vocal critic of his predecessor’s policies, including thecross-border pipeline projects, which requiredMexico to signlong-term take-or-pay contracts that forced it to pay for full capacity whether it was being used or not. That imported gas was supposed to supply Mexico’s internal needs, but aftermore than a dozen natural gas power plants got derailed before they were built, Mexico found itself paying for a lot of spare pipeline capacity it wasn’t using.
Early in his term, AMLO, as the current president is known,negotiated a dealwith three pipeline operators to save the nation $4.5 billion.His administration has also pledged to build more in-country pipelines to get sufficient fuel to demand centers in central and southern Mexico that still face occasional natural gas shortages due to infrastructure issues. The rest of the imported gas would go toward making Mexico anexport hub.
It’s certainly well positioned: Six of the eight LNG projects proposed in Mexico are along the Pacific Coast where cargoes can be shipped to destinations in Asia without having to go through the Panama Canal. With the exception of one offshore project in Veracruz, all of the gas for the plants would come from the US via cross-border pipelines.
Mexico’s government didn’t reply to requests for comment.
So far, the only one under construction is the first phase oftheSempra Energy-owned Energia Costa Azul export terminal along the Pacific Coast in the Mexican state of Baja California. The other projects are still on the drawing board but have seen momentum in the months following Russia’s invasion of Ukraine.New York-based LNG company New Fortress Energy Inc. signed a pair of deals in July to develop offshore LNG export projects off the coasts of Tamaulipas and Veracruzthat could potentially supply Europe. Mexico’s-state owned Federal Electricity Commission said the same month that it’s looking to develop LNG export terminals in the states of Sinaloa and Oaxaca in atie-up with Sempra. Once approval and permitting gothrough, most LNGprojects can begin exports in roughly four years.
So if the gas getting shipped out of Mexico will be produced in the US, why not just ship it from American ports? Blame opposition at the local and state levels. Several of the proposed projects in Mexico moved forward only after Canadian pipeline operator Pembina Pipeline Corp.canceled its proposed Jordan Cove LNG export terminal in Oregon due to heavypushback in the US.
“This speaks more about how difficult it is to build export terminals in California and Oregonthat developers are trying to set up projects in Mexico,” Duhalt said.
