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Another article about the recent conference. 25 years and nothing yet!

Mexico Natural Gas Market Growth Said Challenged by Lack of Storage, Uneven Regulation

BY ADAM WILLIAMS
January 30, 2024


Representatives from some of Mexico’s most important natural gas supply, transport and storage companies are optimistic that the national industry is poised to continue to grow.

Mexico natural gas demand is set to expand 4.6% annually during the next decade, according to forecasts by national pipeline system operator Cenagas.

Mexico has a number of liquefied natural gas export projects planned. They would all use U.S. natural gas.

Covarrubias added that the Mexican natural gas market is “very solid” and “very strong.”

Raul Puente, general director of Mexico’s Grupo Cydsa, highlighted the cost-competitiveness of natural gas and Mexico’s proximity to some of the world’s most prolific basins including a robust pipeline network interconnected with the United States.

“Mexico has an enormous demand and need for natural gas that will continue growing as the country seeks to further gasify more regions,” Puente said. “It’s also a clean fuel that is going to be part of our energy matrix as we continue evolving our model towards cleaner sources.”

Challenges Remain

One principal challenge that continues to be unresolved in the Mexican natural gas industry is the lack of underground storage capacity, the panelists agreed.

Despite repeated calls by sector leaders to expand natural gas storage in the country to bolster energy security, Mexico still lacks sufficient inventory to cover the country’s gas needs for more than a day or two in the event of an emergency or dramatic spike in demand.

Line packing and LNG import terminals account for all the nation’s storage options. Mexico is seen as particularly vulnerable as it imports 70-80% of its natural gas needs via pipeline from the United States.

“We’ve been talking for 25 years about the subject of storage and, as of today, the development and implementation of large-scale storage in the country still hasn’t materialized,” Puente said.

Authorities have identified the depleted Jaf dry gas field in Veracruz as one potential option. Officials at Cenagas said in a first phase the field could hold a potential 11 Bcf of gas, or equivalent to a little over a day’s demand.

The depleted Brasil oil and gas field in northeastern Tamaulipas is another option. The government of Tamaulipas has said the project would be in conjunction with Comisión Federal de Electricidad (CFE) and a consortium of national and international companies.

The Brasil project would grow from 5 Bcf in an initial phase to 31.5 Bcf by its third year in operation. It would allow for 32 days of regional demand, or three days of national demand.

Covarrubias added that, to develop natural gas storage facilities and inventory in the country, private-public partnerships are required for such projects, and require significant capital.

“These are very complex projects that require a very important investment of capital and the government can’t do them alone,” she said. “It has to be a joint effort between the private sector and the government that focuses specifically on improving natural gas storage, which will be key to our future economic growth.”

Martínez explained that regulatory certainty and clarity is also a significant challenge facing the industry currently and must be improved to facilitate the economic boom.

“I think that what we need more than anything is a regulatory model that is the most efficient and most integrated as possible,” he said. “With more efficiency, permits could be processed within the time frames required by law. In terms of more integration, Mexico’s energy model should be seen more as an integrated value chain, which would improve some current disconnections that exist among different parts of the value chain.”

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https://www.naturalgasintel.com/mexico-natural-gas-market-growth-said-challenged-by-lack-of-storage-uneven-regulation/