The war in Ukraine coupled with supply chain rebalancing brought on by the coronavirus pandemic is creating unique economic opportunities in Mexico, according to energy industry professionals who spoke Wednesday at the Mexico Gas Summit in San Antonio, TX.
“It’s a historic opportunity,” said Francisco Acuña, president of Sonora State’s sustainable development committee. But, he said, “this opening is not going to last forever.” The opportunity, according to Acuña, was in the next year and a half.
The executive said projects in Sonora were being developed, and natural gas is a key part of competitiveness. Sonora is home to Mexico Pacific Ltd.’s (MPL) planned liquefaction project envisioned for Puerto Libertad. “All the regions in Mexico that have developed economically have access to natural gas,” he said.
Bank of America Merrill Lynch Director of Commodities Alfonso Martín said natural gas remains the cheapest molecule of energy globally, even at $9.00/MMBtu. This “creates a lot of opportunities” for Mexico. In Monterrey, in Nuevo Leon, “everyone is growing, everyone is building,” he said.
He called manufacturing the “regal engine of growth in Mexico.” Manufacturing is energy intensive and benefits from natural gas across the border. He cited the squeeze industries in Europe were facing with natural gas prices many times higher than in Mexico.
Vulnerable to Supply Shocks
Participants expressed the need to develop Mexico’s natural gas resources, particularly its unconventional deposits in the north. Mexico imports as much as 90% of the natural gas it consumes.
The Energy Commision of Tamaulipas’ Fernanda Alemán Alcocer, director of projects, said 67% of imported gas in Mexico runs through her state. She said natural gas generates jobs and “there haven’t been negative consequences from developing natural gas infrastructure – the opposite.”
But, she said, Winter Storm Uri last year “exposed our vulnerability.” Mexico “is consuming gas that we have beneath our soil… Natural gas is about national security, and we need to pay attention.”
Alemán cited the unconventional Round 3.3 that was scrapped by the government of Andrés Manuel López Obrador.
The head of the Energy Commission of Tamaulipas, Anotonieta Gómez, said “natural gas lets us grow. We’ve seen economic development in the state. We are convinced that natural gas is the fuel of the energy transition.”
Fuel Of The Future
Gómez said natural gas demand was growing by about 3% each year, and “the worry is there is no policy to start new rounds. We need to get back to it. We also need natural gas for hydrogen.”
Gómez cited Comisión Federal de Electricidad (CFE) plans to build six combined cycle plants worth 4GW of power. “Along with the export plants, we need natural gas. It’s a need for the country.”
Tamaulipas contains the largest portion of the Burgos Basin, Mexico’s most prolific natural gas producing basin not tied to oil production, i.e. non-associated gas.
The Burgos is the southern extension of the Western Gulf Basin in Texas, which encompasses the Eagle Ford Shale, the U.S. Energy Information Administration (EIA) said in 2017. “High levels of production” in the Eagle Ford “could indicate similar production levels in the Burgos Basin region.”
On Winter Storm Uri, Gómez said, “Imagine the impotence we felt, we have one of the biggest resources of natural gas, and we couldn’t get it.”
Duncan Wood of Washington DC’s Wilson Center think tank said that despite institutional deterioration, the energy sector would “survive” the current Mexico administration. He said Mexico’s long-term prospects, demographics, economics and supply chain advantages still give it a leg up on competition.
“Now it’s more about ensuring a steady supply of oil and gas to global markets, but we’re not there yet,” Wood said. He said the “focus on friendly and secure producers will only grow post-Ukraine. Mexico has a possibility there.”
Wood said the fruits of the energy reform were being seen in increasing private sector production. But, he said, looking ahead to a post-López Obrador world, “the tough task will be the rebuilding of institutions.”
Source: naturalgasintel.com
