Investor Point
Big NatGas Exports to Mexico in 2015 is a Pipe Dream

Thursday, September 25, 2014

North Vancouver, BC / ACCESSWIRE / Sept 25, 2014 / Natural gas bulls point to fast increasing exports of cheap US natgas to Mexico to bolster their thesis. Even I was guilty of this last year, when I ran a two part series on this in July 2013. But now I’ve learned this is simply not going to happen—at least until mid-2016, simply because the Mexican side of the big pipeline push is not ready for Big Exports until 2016.

I found it odd that I hadn’t heard much recently about Net Midstream’s huge 2.1 bcf/d (billion cubic feet per day) natural gas pipeline from Texas into Mexico—which is supposed to start December 2014.

A google search showed no new news since December 2013. That’s odd for the biggest cross border pipeline into Mexico in years. This pipeline should be big news in the US and Mexico.

But no news on this made me suspicious, so I started digging into some research. And what I found was:

1. Natgas imports into Mexico are still increasing, but at only 8% so far this year, vs. 30% a year from 2010 to 2013.

2. The Big Mexican Gas Pipe to central Mexico—Los Ramones Phase II—won’t be ready until mid-2016. That’s when the bulls can start to really get excited.

3. In fact, only 30% of the current cross-border natgas export capacity is being used because of internal pipeline constraints.

4. Expensive LNG imports have been filling Mexican demand, though that should peak this year or next. Much cheaper American gas will displace that—but not for a few years, until enough internal pipelines are built in the country.

In fact, energy experts Bentek out of Denver Colorado think US natgas exports to Mexico will only rise 1.5 bcf/d over the next five years—a far cry from the natgas bulls thinking 2.1 bcf/d is going over the border this December.

“The infrastructure on the Mexican side to get to demand areas isn’t in place,” says Bentek energy analyst Kaitlin Meese. Bentek, owned by Platts, is one of the top analytical firms specializing in natural gas pipelines and gas flows.

For the complete article, click here.